We know that renewables attract preposterous subsidies. The per-kWh subsidy I get for my small domestic solar PV system is about five times the cost of producing the same kWh in a proper grown-up power station. Wind farms attract massive subsidies. David Cameron’s father-in-law, Sir Reginald Sheffield, reportedly earns as much as £350,000 a year from eight turbines on his estate at Bagmoor in Lincolnshire.
Yet as soon as we advance these arguments, the Greenies come back with the assertion that “fossil fuels attract more subsidies than renewables”. And they seem to have considerable backing for this view, as well.
The IMF, no less, in a recent report, states that subsidies for petroleum products, electricity, natural gas and coal reached $480 billion in 2011. That’s a mighty big number by anyone’s standards.
Yet somehow it just doesn’t feel right. Every time I fill up my car, 60% or so goes straight to the government. That’s not subsidised. That’s taxed, and very heavily taxed, too.
So it’s worth looking at quite how the IMF defines subsidies. For a start, they include subsidies in oil-producing states like Saudi Arabia and Nigeria. Now it may be true that some of these oil-producing states decide to allow their citizens cheap petrol. But in terms of any comparison between renewables and fossil fuels in Britain or Europe, that’s wholly irrelevant.
Secondly, where a country allows a lower rate of tax, for example (as in the UK) on domestic fuel at 5% compared to standard rate of 20%, they count the 15% difference as a subsidy. A subsidy! It sounds more like a tax to me. And of course it is a tax, and not a subsidy at all.
But it gets worse. The IMF argues that governments should be charging a further tax to cover the “externalities” — a posh word meaning the damage that carbon dioxide emissions are presumed to do to the planet. They estimate this to be $25 per ton of CO2. And on this basis, they conclude that the implied subsidy on fossil fuels amounts to an eye-watering $1.4 trillion (yes, that’s Trillion with a T). $1.4 million million.
But the “damage” that’s done by CO2 emissions is entirely speculative. There is no evidence that it actually does any harm at all — but abundant evidence that it does a great deal of good in increasing crop yields and bio-mass formation. As I wrote recently, in the UK far more deaths are caused by cold than by heat, so if — IF — CO2 were increasing temperatures, it would also be saving lives. And anyway there’s been no global warming for seventeen years. As I put it to a school party in Brussels recently, “There’s been no global warming in your lifetime”.
So, let’s strip out the Saudi policy of cheap petrol for citizens. Strip out the mis-classification of a lower tax rate as a “subsidy”. And strip out the entirely speculative “externalities”. And you get to the truth.
Renewables are subsidised at levels that are practically obscene. They are driving up energy prices, jeopardising our economy and competitiveness, costing jobs and prosperity, forcing households and pensioners into fuel poverty. Meantime fossil fuels aren’t subsidised at all, outside a few oil-producing countries. They’re taxed. And taxed punitively, too.