Monday
Sep172012
by 
Bishop Hill
Bishop Hill Jo Nova on the fossil fuel "subsidies"
Sep 17, 2012 Economics Energy: gas Energy: oil Tax Jo Nova has done an indepth analysis of the "fossil fuels are subsidised" argument, knowingly and misleadingly promoted by environmentalists and their political friends around the world.
Groups like Greenpeace and The Australian Conservation Foundation argue that really, Governments are helping fossil fuel companies far more than green ones. But while governments rewrite national economies to help “green” companies, about half of the help for fossil fuels is simply that the government didn’t take as much off them as it could. The net flow of money is still from Big-Fossil-Energy towards Big-Government. It takes a special kind of grand entitlement to call that a subsidy.
A must-read.
Reader Comments (34)
Yep, that's what I needed at exactly this moment. Thanks Jo Nova.
What's Gardiner been doing in the past few days...is he going for the "ignorant" defence strategy against being called a liar?
My marginal tax rate is 52% and in 2011 I paid 100 currency units in income tax. In offset I am allowed to claim a tax deduction for the mortgage interest on my main residence, which amounted to a rebate of 12 currency units in the same period. According to the ridiculous Green argument, I am a disgusting parasite who is in receipt of a "subsidy"!
A fair definition ?
A subsidy for a defined activity is paid by a Government and represents a net outflow of central funds
So a reduced net inflow as in my simple example above is not a subsidy.
I moved my comment to 'Unthreaded' since it's a bit OT, it is about 'renewables' (wind farms) but not about the controversy over whether oil and gas companies get a 'subsidy' via tax rates....
Big Green is highly skilled in the use of loaded language. The expression "Climate Change" has planted within it the idea of some past golden age when it didn't change, and therefore recent change is unprecedented.
Other jewels of Newspeak would be "The science is settled" and "The Hockey Stick". How about "Silent Spring". And "Hole in the Ozone Layer". Such alarmism may be wicked, but we should acknowledge that it is clever.
Dellers does a good demolition job too.
Jo Nova's piece opens with "Like chinese-whispers, the truth gets turned 180 degrees. It takes a string of half truths stacked in a series to come up with something which is so completely counter to reality it is meaningless."
OT I know, but it reminds me of the George Osborne Olympic-sized booing story. What happened was that a few (relative to the total number present) people booed GO when he was presented. It's since been blown up into a massive vote of no confidence, "80000 people booed the Chancellor ..." by repetition and addition.
Collecting tin economics: suitable for those needing to be weaned off pocket money.
He left the country on Saturday. He's got quite a lot of people to meet and is back in a week. This I know because he emailed me before he left. We have quite a lot to catch up on after 37 years. Not all about the subject matter of Jo's post but I am very glad to have it.
"Dellers does a good demolition job too." Sep 17, 2012 at 8:57 AM | Phillip Bratby
Philip, I listened to Dellers yesterday when Ian Dale of LBC wheeled him out for a discussion on renewables against a LibDem (Minister at Defra, I believe) and a WWF spokesman (name escaped me). Now, as much as I read Dellers and find he makes good arguments - not to mention that he puts up with a lot of trollery - I find that when he is speaking off the cuff he is not so articulate.
That said, Ian Dale never allowed him to get into his stride and didn't allow him to repudiate any of the points raised by the WWF rep. The two glaring points were these:
1. Wind turbines are always generating power somewhere in the UK so they are good for us. In fact they constantly contribute 10% of our power needs.
2. (And this is why I'm commenting on this thread) That fossil fuel is subsidised by £3.6B a year!!!
That last one had me shouting at the radio, but Dale did not challenge it nor did he get Dellers back on to speak to the claim (he was 'down the line').
So I came up with this conclusion. As I receive a state and private pension now I no longer have to pay NI at 11%. That means that for an overall pension income of (say) £20k a year, the government are subsidising me to the tune of around £2k against those still in work. This subsidy lark is a great game, isn't it?
Arguing about the semantics of subsidy obscures the real issues. There are three kinds of Government income reduction (low tax rates, grants etc) involved, with different effects:
1. Lowering the price of current energy supplies through favourable tax rates, financial transfers, protection etc. This will tend to increase demand and therefore environmental impacts (which, even as a lukewarmer, I consider to be bad as they are considerable and cause great local damage in production areas and cities, and at least some very mild global warming through CO2 and methane ie without taking feedback effects into account).
2. Influencing future supply through support for R&D by tax breaks, grants etc - this does not necessarily increase demand (it may just maintain supply, or lead to different production methods). In the case of oil and gas this can also be seen as an investment that will be repaid through future tax revenues, either through direct levies as in the UK or through more general impacts. This would seem to be the case with shale gas, whose effects on prices seems to be leading to large scale reshoring of manufacturing to the US and therefore larger corporate tax revenues for the Government. I think that the real argument re wind is not that it wasn't worth trying on a significant scale - we need all the options we can in an insecure and unknowable future - but that the evidence base has increased to the point that it is clear that only some applications are potentially viable, and that blanket targets are ludicrously expensive.
3. Favouring production in one area rather than another by tax breaks, grants etc. This is the case with UK 'subsidies' for production in the North Sea, which is focused on high cost resources which arguably are not sufficiently large to have a significant effect on world prices or demand, but can have considerable employment, energy security etc benefits.These are not so much a 'subsidy' to energy, as to employment.
Mathematics never was a strong point of Greenpeace, which is why they resort to semantics.
If there were no taxes and no subsidies, and no laws restricting energy supplies, fossil fuels would still see a similar level of use and investment. Wind power would not. That's why windmills and watermills fell out of favour. It is also why Greenpeace et al work so hard at trying to redefine standard economics with large 'environmental negatives' that they pick and choose at will.
Love 'em or loathe 'em, oil and gas companies make large profits because they sell a product everybody wants/needs to buy.
And that product isn't just energy. Petrochemicals also go into most physical materials we use [unless you maybe live in a cave, paint your face with woad, and wear the skin of bear you ate after killing it with a sharp stick].
So is Mr Gardiner trying to imply that I get a subsidy to work if the government cuts my income tax by say 1%?
Personally I think that would be the snivelling politicians giving me my money back.
Here is Jonathon Porritt, speaking at Wind Power: The Great Debate at the Royal Academy of Engineering on June 13th this year, transcribed here:
https://sites.google.com/site/mytranscriptbox/home/20120613_wp
If you engage in an exercise of extreme wordsmithing (as Jo Nova eloquently puts it) and set out to give a false impression, it's often wise to sprinkle a modicum of truth into the mix. Note that Mr Porritt actually does say: hydrocarbon subsidies are "largely via arrangements around VAT". But of course he doesn't expand on that. The audience would repeatedly hear the word "subsidy", however, and what they'd take away is this: "in excess of 6 billion, that's what the subsidies look like for hydrocarbons. 1.4 billion for renewables, relatively small by comparison." They would probably be left with the impression that it's a case of comparing apples and apples, and that we are paying out over four times as much in direct subsidies for coal, oil and gas as we are paying out for renewables.
Sep 17, 2012 at 12:06 PM | michael hart
"Love 'em or loathe 'em, oil and gas companies make large profits because they sell a product everybody wants/needs to buy.
And that product isn't just energy. Petrochemicals also go into most physical materials we use [unless you maybe live in a cave, paint your face with woad, and wear the skin of bear you ate after killing it with a sharp stick]."
Good points that warmists prefer to ignore.
Let's keep it simple. A company is subsidised when it hands over less to the taxman than it receives from the exchequer.
A company can be favoured by a government when tarrifs, taxes, and regulations make the output of its competitors more expensive than its own. Most green energy producers are both subsidised and favoured by a partial governments.
Brent Hargreaves (8:57am), mentions "The Hole in the Ozone Layer" as another of the "Jewels of Newspeak". (I agree, btw.) Take note, they seem to be warming this one up again at the mo, as the Telegraph reported (or should I say, "reported") on Friday:
http://www.telegraph.co.uk/earth/environment/globalwarming/9543605/Global-warming-the-heats-back-on.html
You can't relax for a minute.
Bob Layson
Excellent, 2 paragraphs, 3 sentences and covered all bases. Can I use this in future please?
Sandy
Alex Cull, quoting Jonathan Porrit: "So let me just give you the authoritative source here, which is DECC itself, of course, which we've all come to see as the most authoritative source in these matters."
Well, of course they come to see DECC as 'the most authoritative source', when one considers that once GreenPeace, WWF and FOE have briefed the DECC researchers as to what they should be saying - and those self-same researchers compare what they are told with Wikipedia where our old friend Connelly sits in place. It's a completely circular reference and shows how much these three lobby groups have corrupted government to their own ends.
Got to hand it to the Watermelons- they are alot better at dissembling than the skeptics.
"That's in excess of 6 billion, that's what the subsidies look like for hydrocarbons."
With figures stated such as this are things like fuel duty collected included in their calculations. A quick look (via a recentish Daily Mail article) states fuel duty is about 27 billion pounds a year. Obviously fuel duty is very heavily targeted at the hydrocarbon industry.
I find it hard to believe that most people would think that the oil and gas industry are subsidised when looking at the rapidly escalating energy and fuel bills.
Basically the Tax from Fossil Fuels is subsidising Renewables.
So why bother with the Renewables?
If you really insist on calculating subsidies this way (paid price relative to some benchmark price), then you really need to consider the "negative subsidy" that OPEC extracts by colluding on supply.
If indeed a competitive price for oil is the hypothetical benchmark, then this worldwide negative subsidy is enormous, likely swamping all other considerations IMO.
James
This is an astonishing period in the Great Carbon Scam. The carbon traders who mask themselves as lefties use phoney economics whilst windmill makers are facing the end of the good times because the technology has been shown to have failed; unless you use it with hydro, it doesn't reduce emissions.
On top of this, the mistakes in the IPCC science are in the wild; there is no significant CO2-AGW. We now have the blame game. Big Energy like Shell, which wanted to become a bank, are having to go back to the day job now fracking has developed new oil and gas. Politicians whose careers developed on the back of Marxist windmill ideology are bleating the latest mantra to try to stop the inevitable.
Watch out for the Israel-Iran War and the price spike to get carbon trading back on track.
Whilst this study by PricewaterhouseCoopers is a few years old now, it is probably still relevant and may of be interest, particularly for comparative purposes:
http://www.pwc.com/gx/en/energy-utilities-mining/pdf/global-energy-effective-tax-rate.pdf
Sep 17, 2012 at 4:07 PM | Rob Burton
Driving a Nissan Leaf means that you're using subsidised fuel, as this is an electric only vehicle the taxation on the electricity is paid as if it were for domestic purposes rather than travel. That cannot be right, especially when the glorious day arrives when this technology can get you from Sunderland to Leeds and back with the heater on.
Older Australians will recall that the reason that mining companies and farmers got a "subsidy" is that the fuel excise was originally designed to fund the development and maintenance of the roads network. To the extent that the fuel mining companies and farmers are not charged the excise, it is because the don't use the roads. An early application of the user pays principle. Is that a subsidy?
http://www.oilandgasuk.co.uk/2012economic_report.cfm
Anyone make any sense from this.
They only mention Corporation Tax not VAT at the Petrol pumps.
I think it about 40 billion per year
So how much Corporation Tax are the Wind Farmers paying ?
They make and sell Electricity so they must have to pay Tax on the profits they make and their company Share Dividends.
Has anybody actually been to Companys House and asked to see the Wind Farm owners published accounts ?
If they are making a loss the Government must be writting it off.
'Fossil Fuel Subsidy' is pure blatant unadulterated sophistry. As infests most of the contrived climate agenda. We seem to be doomed to endlessly have to deflate the latest over-inflated panel of the flatulent climate-alarm airbed when rises the next.
It is arguable that a segment of industry gets a subsidy (just!) if it receives more favourable tax treatment than its competitors do. The argument runs - all buggy-whip manufacturers pay a 20% company tax, except for Yorkshire buggy-whip manufacturers, because their whips are kinder to horses. Therefore, the general revenue is eschewing that extra 10% while also disadvantaging their competitors, for a social objective.
It's a thin argument, but such as it is it rests on all buggy-whip manufacturers being treated the same apart from the tax issue. That diverges so wildly from the facts when it comes to planning laws, mandatory use of Yorkshire buggy whips, overall consideration of horse welfare, and manure generally - well, there is a lot of manure.
Rigorous economists prefer overt subsidies to sleights of hand like hidden charges to consumers, differential tax regimes and fiddles through planning laws. They have the great merit of being transparent.
SandyS
Feel free to use my two para's worth anytime.
Bob Layson
johanna,
You saw that movie with Danny Devito, didn't you? :)
michael, I don't think so, but you have piqued my interest!
I have a friend who is into restoration of horse-drawn carriages and so on. He tells me that the best and cheapest source of replica buggy whips (and similar leather items) is in the XX rated world ...
Johanna, he played a character who used a buggy-whip analogy at a [failing] company AGM, to illustrate the futility of commanding an increasing share of a declining market.
It was a persuasive argument, but not that exciting. I need to get out more.