A contest of externalities

The Greens and the Warmists regularly assert, as if it were undisputed and self-evident, that “fossil fuel subsidies greatly exceed renewables subsidies”.  Like Goebbels, they seem to think that if you repeat a big enough lie often enough, people will believe it – and they may be right!  When you ask them about it, they point to countries like Saudi Arabia and Nigeria, which allow their citizens to buy petrol at subsidised prices.  These indeed are genuine subsidies, but hardly relevant to climate policy in the West.

Then they point to the low VAT rate on domestic oil in the UK (5% versus the normal 20%), or the tax breaks that George Osborne has offered to the North Sea Oil industry, and argue that these represent fossil fuel subsidies.  But of course they don’t, and to suggest otherwise is an abuse of language, of arithmetic and of economics.  If I buy a litre of petrol today, it costs me £1.  But around 60p of that is tax and duty.  If the tax and duty were scrapped (some hope!), I’d pay 40p.  If the government subsidised petrol, I’d pay less than 40p.  A lower tax rate is not a subsidy. It’s a lower tax rate.

I have written about these matters from time to time.  But as Ian Wragg points out in a comment on my recent blog on the economics of wind power (thanks Ian), there is a third factor in the Warmist calculus, and this is the “externality” of CO₂ emissions.  Now externality is a perfectly respectable economic concept, and it refers to the external cost which some product or activity imposes on third parties, but which is not normally accounted for.  So yes, if you believe that CO₂ emissions are likely to raise mean global temperatures significantly, and that the rise in temperature is going to cause costs, then the externality exists in this case.  It is stretching language and meaning to the limit, but I suppose you could call our failure to charge CO₂ emitters for this externality a “subsidy” of sorts, or perhaps an implied subsidy.

However there are some problems with this approach.  First of all, while no one doubts that CO₂ is a greenhouse gas, there are still plenty of scientists (a great deal more than the 3% implied by the Warmists’ “97% of scientists” canard) who believe that CO₂ is a minor factor, and that global temperatures are driven more by solar and astronomical factors than anything else.  After all, the earth’s climate is a vast, complex and chaotic system, and the idea that it can be reduced to, and predicted by, a single variable is somewhere between naïve and foolish.

In any case the observed correlation between atmospheric CO₂ levels and global temperature (what little there is of it) is so diffuse and patchy that it is simply risible to believe that we can predict global temperatures to one place of decimals based on CO₂ projections, as COP21 tried to do in Paris last month.

Even if there is a significant climate effect from CO₂, it is not possible to quantify it accurately, and therefore to assess the “externality” cost of a ton of CO₂ in a meaningful way, and Warmists have every incentive to set their guesstimate at the highest conceivable level, to promote their alarmist agenda.

But it gets worse.  The Green Blob postulates a negative externality for CO₂ emissions, but it never considers the positive externalities.  For example:

• Elevated atmospheric CO₂ levels enhance plant growth, biomass formation and crop yields.  They are quite literally greening the planet.  They are also helping us feed a hungry world  This is an enormous positive externality.

• A slightly warmer climate has many positive benefits.  Currently for example there are far more deaths from cold than from heat in the UK.  A slightly higher temperature will save lives.

• If the past is any guide to the future, and the pattern of the last two million years continues, we should expect the end of the current Interglacial any time soon.  Expect a mile of ice over Chicago.  And Edinburgh.  And Helsinki.  That should give the Warmist Whingers an idea of what really catastrophic climate change looks like.  If an elevated level of atmospheric CO₂ has a warming effect, we may well be very glad of it.

Then again, what about the negative externalities of renewables?  There are a number associated with wind turbines.

• Massive visual intrusion and the desecration of historic landscapes

• The despoliation of large areas of China associated with the mining of rare earths for turbines

• The vast carnage of millions of birds and bats

• Negative effects on the mental and physical health of neighbouring residents from low-frequency sound, and depression of local property prices.

The “negative externalities” of CO₂ emissions are scarcely subsidies at all.  They are guesswork and propaganda – mere finger-in-the-air stuff.  And best ignored.