A couple of days ago in Open Mic, Mark Hodgson posted this news story:
“‘Reckless’: G20 states subsidised fossil fuels by $3tn since 2015, says report
Support for coal, oil and gas remains high despite pledges to tackle climate crisis”
The Guardian is renowned for its typos, but to let one slip into the weblink?
The report was by BloombergNEF and Bloomberg Philanthropies. Here’s what they had to say about their own progeny:
New Report Finds G-20 Member Countries Support Fossil Fuels at Levels Untenable to Achieve Paris Agreement Goals
I’m not sure what species of English that is. That word does not mean what you think it means, etc. Anyhow, the presently wealthy-ish countries are spending too much on support for fossil fuels.
This was the Guardian’s take, as reported by Mark:
“The UK’s subsidies fell by 18% over that time but still stood at $17bn in 2019, according to the report.”
I replied to the effect that such “subsidies” usually turn out to be nothing of the kind. The classic method adopted by the slippery sly to find a subsidy where one doesn’t exist is to calculate the VAT foregone by charging the reduced rate for domestic energy. (Note to non-UK readers: VAT in the UK is charged at 20%, except there is a lower rate of 5% for some goods and services. In order to save the poor a few bob on their energy bills, gas and electricity are taxed at the lower rate. The reason this is a generally good idea is that everyone has to heat and light their houses etc, so that the poor spend a higher proportion of their income on energy than brown ricers.)
Anyway, as I say, I replied dismissively because I know the shenanigans that folk with a certain agenda are wont to get up to. But later I realised how unfair I was being. I thought I should not take the number ($17,000,000,000) at face value, but nor should I reject it out of hand. We all have a tendency to react emotionally to data that opposes our worldview, and it is important to me that I am open to the possibility that new data could cause me to change my mind. And so as a first step, I found the actual report*, Climate Policy Factbook, prefaced by the great Michael Bloomberg himself:
“Of course, each country’s plans for rebuilding their economies [after Wuflu] will be different. But two things are clear:
One: We need to work together to build a resilient global economy capable of withstanding the next worldwide crisis.
And two: that crisis is already here. It’s called climate change.
By integrating climate change into their economic recovery, countries have a chance to spur job growth — while also building stronger and more resilient economies for the future.”
Yeah, great, Michael, thanks for dropping by. Sorry, did you say something? I zoned out. Platitudes have that effect on me.
Anyway, in the Climate Policy Factbook it is written that UK actually spends $17.5 bn on “fossil-fuel support” not $17 billion. I’m surprised that The Guardian didn’t round it up to 18. However. BNEF (that’s Bloomberg New Energy Future or summin’, not British Nazi Encouragement Forum) did not provide a breakdown of the numbers as I had hoped. Instead the report pointed me to a range of places where they had obtained source data:
Direct budget transfers and tax breaks: OECD Inventory of Support Measures for Fossil Fuels
Support to consumer energy prices: IEA Energy Subsidies Database
Support from public finance institutions: Oil Change International’s ‘Shift the Subsidies’ Database
Investment by state-owned enterprises: Overseas Development Institute, International Institute for Sustainable Development and OCI
All right, all right. Make it easy for me why dontcha (no hyperlinks were given). I began with the IEA Energy Subsidies Database, which turned up a big fat zero for the UK. This metric is direct subsidies at the point of sale, for example on petrol. Most of the countries that operate such systems are basket cases. However, you could argue that subsidising fuel benefits the poorest in society the most. Just as you could argue that the duty etc on petrol in the UK is highly regressive, even if by some definitions it is fair.
From IEA I went to the OECD and found where and how most of the obscene quantities of dosh spent on fossil-fuel support is being disposed. Now, there are a lot of items listed in the OECD data. But I’m not going to bother with discussing the chump change. I’m only interested in items of a billion or more. So below, in reverse order, are the big ticket items – the top 4 ways that the UK supported fossil fuels in 2019:
(Note the change in currency. OECD entries tot up to £12 and a bit bn, almost $17 bn.)
4
At 4, coming in with a cool £1,505,000,000, we have…
Tied oils scheme (Industrial Relief Scheme).
What is this, you cry? You can’t tie oil. Well, yes you can. OECD helpfully explains:
“Under the Tied Oils or Industrial Relief Scheme, any light oils or heavy oils that fall into the definition of fuel oil, gas oil or kerosene are delivered conditionally relieved of excise duty when put to an eligible use. Eligible use includes any use except fuel for any engine, motor or other machinery or heating fuel.”
Aha! Got you, you swine. OIL THAT IS NOT USED AS FUEL DOES NOT ATTRACT DUTY. So it is not technically a “fossil fuel”. It’s a “fossil lubricant” or a “fossil wannabe plastic.” Verdict: this is not in any way a subsidy for fossil fuel. It is duty foregone on non-fuel oil.
3
At 3, weighing in at £2,155,000,000…………..
Ring-fence oil and gas trade corporate income tax relief, first-year capital allowances for plant and machinery.
That’s a bit of a mouthful. What is it?
“The United Kingdom offers a 100% first-year capital allowance for ring-fence capital expenditure.”
The ring fence in this circumstance means that profits from oil and gas cannot be offset by losses elsewhere. The 100% first-year allowance means that companies can offset the entire value of new plant and machinery against tax. So it is, fairly and squarely, a subsidy for fossil fuel, especially as such benefits are not available in any other sector. Ahem. Koff.
From gov.uk:
Current FYA schemes
Currently, FYA is available at the 100% rate for expenditure incurred:
on environmentally beneficial CA23135 and energy-saving CA23140 technologies, including by energy services providers CA23150 (until 1/6 April 2020);
on zero-emission goods vehicles CA23145;
on plant and machinery for use in a designated assisted area;
on cars with low CO2 emissions CA23153;
on new plant and machinery installed at a gas refuelling station to refuel vehicles with natural gas, biogas or hydrogen fuel CA23155;
on plant or machinery for an electric vehicle charge point CA23156; and
on plant or machinery for use wholly in a North Sea ring fence trade CA23157.
Do you like the way they seem somewhat embarrassed to mention the last item, saving it to last when most people have already given up reading?
Verdict: this really is a subsidy for fossil fuel production. But since similar subsidies are available for a host of green investments, I really can’t get that excited about it.
2
At 2, worth £2,460,000,000, almost enough for Bill Gates to bother answering the phone over, we have……..
Reduced Rate of Excise for Red Diesel / Rebated rate for gas oil (“red diesel”).
Farm vehicles, construction vehicles and others benefit from reduced duty on their fuel. Generally diesel is hit with duty of £0.5795 per litre. Red diesel (for non-UK readers, this is diesel that has been dyed in order to discourage people from using it in road vehicles to avoid the higher duty rates of normal diesel) has duty applied of £0.1114 per litre. If you take the difference between these two duty rates and multiply it by the number of litres of red diesel used, you wind up with the 2 and a half billion worth of fossil-fuel support.
Verdict: this is not a fossil-fuel subsidy. If I punch Fred 5 times, I don’t benefit George by only punching him once. I just punish him less. Personally I think the duty on fuel is obscene, and it is a cruel joke that the combined value of fuel + duty is then subject to 20% VAT. The government like it because it makes them a lot of dosh.
From the Office for Budget Responsibility:
“In 2019-20 fuel duty raised £28 billion. That represented 3.3 per cent of all receipts and was equivalent to £1,000 per household and 1.2 per cent of national income.”
Just to repeat that:
£1000 per household
I suppose by elementary maths the government are getting another £6 billion on top from the VAT on the duty. Not to mention another £6 billion ish from VAT on the actual cost of the fuel.
Let us not dwell either on the fact that cars running on petrol and diesel pay vehicle excise duty, whereas electric vehicles do not. (The OBR value VED at £6.5 billion per year.)
1
And at number one in the fossil-fuel subsidy charts, where it has been since 2016 when it overtook the first-year allowances on oil and gas production…………………….
………worth £3,576,569,704, or about £125 per household…….
……is……..
Reduced Rate of VAT for Domestic Fuel and Power
Our energy bills are subject to 5% VAT, rather than 20%, and this is described by the wise minds of the world as a fossil-fuel support. Well, it is a support for energy, but it is surely blind to wherever that energy comes from. Obviously the copious quantities of juice made by the whirligigs of the Saudi Arabia of Wind – or should that be the Saudi Arabia of Rice Puddings? – benefit just as much as does the gas piped into our homes or the gas that is used to hold everything together when we are in the collective doldrums. So long as any fossil fuel generator is plugged into the grid, there is an automatic fossil-fuel subsidy.
That being the case, one could easily count this “subsidy” as yet another subsidy for wind “power” and all the other useless twigs we are trying to build into a wolf-proof electricity grid.
Verdict: not a fossil-fuel subsidy. Not even a case of reduced punishment for some fossil fuels, since no green alternatives attract the 20% rate. Now that would be a subsidy.
Conclusion
Come on, Bloomberg, give me a break. And I look forward to your forthcoming report analysing all the obscene ways that governments around the world are subsidising rice puddings, I mean wind turbines.
Climate Scepticism 
Jit, thanks for doing the heavy lifting here.
I have always been annoyed by climate worriers saying that fossil fuels are subsidised just because they enjoy some tax reliefs. I used to disagree with Phil Clarke at Bishop Hill about this quite a lot some years ago.
My Oxford English Dictionary has its primary definition of subsidy (the one obviously intended in the article) as being:
“a sum of money granted from public funds to help an industry or business keep the price of a commodity or service low; a sum of money granted to support an undertaking held to be in the public interest; a grant or contribution of money”.
There is no basis for calling tax reliefs “subsidies”, especially when, as in the UK, fossil fuels bear huge amounts of tax and make a significant contribution to the Exchequer. We are back in the Alice Through the Looking Glass World where words no longer bear their normal meaning, but mean whatever the climate worriers want them to mean.
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Mark, the heavy lifting would be the follow-up article “The UK’s obscene renewables subsidies.”
While the OECD carefully tabulates all the fossil-fuel “subsidies”, it is not so helpful re: renewables. These values would have to be compiled manually. We have the obvious:
CfDs
ROCs
FiTs
Presumably too the reduced VAT on energy enjoyed by electric cars counts. We also have to apply this reduced VAT to all energy produced by renewables (some double counting here?). Subsidies for EV purchases, home charging kits, zero VED on EVs (presumably none of these reach a billion).
Er, constraint payments.
Fuel duty: by punishing fossil fuel users, we can call this a de facto renewable subsidy if we twist the meaning of the word subsidy in a similar way to our friends at the OECD……
Oh, indirect subsidies via costs imposed on the grid by the infestation of renewables – stability, long distance connections…
…any more? Answers on a postcard.
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Well, not so much a subsidy, but a cost linked to the whole renewables madness, and which does no good for consumers but which is ultimately paid for by them – smart meters. Was it £18Bn at the last count?
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Thanks for your laborious detective work.
It takes the mental gymnastics of an Olympic Gold Medal winner to deem a reduced VAT rate on even *renewables*-generated electricity is a “fossil fuel subsidy”.
Paul Homewood in his post “UK Hiding £11bn Of Fossil Fuel Subsidies–New Report Claims”, pointed out a claim “Zero VAT on passenger transport – annual cost £4.6bn” was also deemed a “fossil fuel subsidy”
https://notalotofpeopleknowthat.wordpress.com/2018/06/23/uk-hiding-11bn-of-fossil-fuel-subsidies-new-report-claims/
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Today (20th October), the day after the release of the government’s Net Zero stupidity – I mean strategy – the front pages of the national newspapers have suddenly noticed that fossil fuels are not subsidised after all.
FT: “New taxes needed to pay for net zero transition as £37 billion car levies shrink”
Telegraph: “The £37 billion a year raised in taxes linked to driving polluting vehicles will disappear over the next 29 years, meaning other “motoring taxes” must help fill the black hole in public finances.”
Guardian: “The Treasury also warned, separately, that taxes might need to rise to support the move, as the £30 billion a year in tax revenues from fossil fuel duties would decline rapidly.”
So the fossil fuel subsidies are phantoms after all. Otherwise, getting rid of fossil fuels would net billions, not cost billions.
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“UK tax breaks for oil and gas under scrutiny from climate activists
High court hearing puts UK financial support for the fossil fuel industry in the spotlight”
https://www.theguardian.com/business/2021/dec/08/uk-tax-breaks-for-oil-and-gas-under-scrutiny-from-climate-activists
“The UK government failed to account for the billions of pounds in financial support it provides to the fossil fuel industry when deciding how much oil and gas to extract from the North Sea, climate campaigners have argued.
A high court hearing that began on Wednesday has put the economics of the fossil fuel industry under the spotlight and raised questions about the compatibility of oil and gas production with a net zero goal.
The UK’s Oil and Gas Authority (OGA) has a legal duty to “maximise economic recovery” from domestic oil and gas resources and adopted a new corporate strategy to achieve this in February. But campaigners say this does not benefit the UK as a whole.
The three plaintiffs in the case – climate activist Mikaela Loach, thinktank director Kairin van Sweeden, and a former oil refinery worker, Jeremy Cox – say tax relief for new oil and gas exploration, as well as financial support provided for decommissioning costs, effectively amounts to a subsidy – a description the government denies.
These “negative tax flows” totalled £2m in 2015-16 and £359m the following year – more than oil and gas firms paid the UK in tax.
Representing the plaintiffs in court, David Wolfe QC claimed it was wrong for the OGA to exclude tax relief from its economic calculations and said the body could not claim to be acting in the national interest if it did not distinguish between money going to the Treasury or to the fossil fuel industry.
The lawsuit also notes that many of the petroleum companies extracting North Sea oil and gas are foreign-owned, so much of the money spent supporting the industry flows outside the UK….”.
Er, a bit like solar farms and wind farms then? But with the difference that they DO receive subsidies from the UK taxpayer, whereas a tax relief is NOT a subsidy.
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Here we go again:
“Sunak’s UK oil subsidy could have insulated 2m homes, says thinktank
The billions now going to fossil fuel exploitation could have funded efficiency measures that cut energy bills for good”
https://www.theguardian.com/environment/2022/may/31/sunak-uk-oil-subsidy-could-have-insulated-2m-homes-says-thinktank
“Billions of pounds given away in a tax break for UK oil and gas exploitation could have permanently cut the energy bills of 2m homes by £342 a year if invested in insulation measures, according to a green thinktank.
Rishi Sunak announced the 91% tax break alongside a windfall tax on the huge profits of oil and gas companies last week. The E3G thinktank calculated that the tax break would hand between £2.5bn and £5.7bn back to the oil companies over three years, while an energy efficiency programme of £3bn over the same period would upgrade 2.1m homes making them less reliant on gas.”
Let’s just remind ourselves, shall we Mr Carrington, that oil and gas companies already pay corporation tax at much higher rates than companies generally in the UK, and have just been hit with a windfall tax. Partial tax relief against a punitive windfall tax is not a subsidy according to any dictionary definition that I have seen.
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Jit, this one’s for you. 🙂
“Global fossil fuel subsidies almost doubled in 2021, analysis finds
Support amid huge industry profits is a ‘roadblock’ to tackling climate crisis, says International Energy Agency”
https://www.theguardian.com/environment/2022/aug/31/fossil-fuel-subsidies-almost-doubled-in-2021-analysis-finds
The “analysis” is here:
https://www.oecd.org/newsroom/support-for-fossil-fuels-almost-doubled-in-2021-slowing-progress-toward-international-climate-goals-according-to-new-analysis-from-oecd-and-iea.htm
Fill your boots!
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The debate between Alex De Koning of Just Stop Oil and Alex Epstein tonight on GB News, in a nutshell:
De Koning: The UK’s obscene fossil fuel subsidies
Epstein: You should be in prison.
My particular nutshell. But Epstein is good. See Open Mic for the whole thing.
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I take this with a large pinch of salt:
“Fossil fuels received £20bn more UK support than renewables since 2015
Exclusive: One-fifth of money given directly to fossil fuel industry was to support new extraction and mining”
https://www.theguardian.com/environment/2023/mar/09/fossil-fuels-more-support-uk-than-renewables-since-2015
The pinch of salt got bigger when I followed the only links the article offers up, and neither took me to the “research”, nor does the Lib Dems’ own website appear to mention it, nor does an internet search throw up anything other than the Guardian article. I would like to see the research to see what it says, but the folks at the Guardian apparently don’t want me to see it (or at least, they have certainly done nothing to help me see it).
My mantra, since university days, has always been to check the original source, where possible, and not blindly to accept someone’s summary of it, not least when that someone is pushing an agenda.
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Haven’t found it yet. But I did find this:
“Stop subsidising energy companies that burn trees for electricity, climate advisers tell government”
https://news.sky.com/story/stop-subsidising-energy-companies-that-burn-trees-for-electricity-climate-advisers-tell-government-12828790
Unlike me to agree with anything the CCC says, but let’s hope it continues.
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Jit; from past experience I strongly suspect that those “subsidies” to the fossil fuel industry are actually tax breaks, which are not the same thing at all, as we all know.
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Apologies: I should have read the post before commenting – you covered the point comprehensively.
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