Skip to content

Tim Worstall: Are The Green Energy Lobbyists Lying About Their Tax Breaks, Or Just Ignorant?

“Lies, damned lies and statistics” may or may not have been said by either Disraeli or Twain but it’s certainly lived on: half the time as an instruction manual in how to fool the public, the other half as a description of what is being done.

My example today is a remarkable claim that despite the billions sprayed at anyone who can even say “green energy” it’s true that fossil fuels get greater subsidies than renewables. But only on a global level: in the UK it’s entirely false.

Globally, yes, fossil fuels get $400-$500 billion of subsidies a year and renewables perhaps $50-$60 billion. Not a good idea, I agree, and the International Energy Authority thinks that we could make a very decent dent in emissions if the fossil subsidies were stopped. Great, go and tell that to Iran, Saudi, Russia and so on: for these are the countries making those subsidies. Damn all to do with us in the UK, and in the absence of a bit of well-timed colonialism will remain so. The renewables subsidies are in places like Germany, the US and here: that is the bit that we control and yes we are shelling out to the yurt dwellers and lentil-knitters.

It’s the second claim that caught my eye, that here in the UK the subsidies to fossil fuels are greater than they are to renewables. I was directed to this piece by Damian Carrington at The Guardian which is taken to be the Ur expression of this idiocy. Allowing an earth sciences PhD to play with taxes and economics is going to turn out as badly as allowing me to play with physics. At best you’ll get something messy and misleading, at worst something positively dangerous.

The claim is:

Public subsidies for the development of wind power in the UK are dwarfed by the tax breaks enjoyed by fossil fuels, a new Guardian analysis has revealed. Financial support for fledgling renewable energy industries has increasingly come under attack in recent months, but the new data shows that the older industries benefit to a far greater extent.

Gas, oil and coal prices were subsidised by £3.63bn in 2010, according to data from the Organisation for Economic Co-operation and Development , whereas offshore and onshore wind received £0.7bn in the year from April 2010. All renewables in the UK benefited from £1.4bn over the same period, according to data from the Department of Energy and Climate Change (Decc).

Quite remakable: and how is this feat performed?

Almost 90% of the fossil fuel subsidy comes from the reduced rate of VAT paid by households.

Oh dear. Snigger, in fact. It is true that domestic energy supplies pay a five per cent rate of VAT instead of the 20 per cent that applies to most other things. And Carrington’s merry band wish to claim that this is a subsidy. Once they’ve done that then, given that renewables domestic energy supply is tiny compared to fossil, we can see that most of this subsidy goes to fossil fuels.

Except, look at what they have done in theory. They have claimed that a preferential tax rate is a subsidy. You can do this, although we usually refer to it as a tax expenditure rather than a subsidy. But if you do do this, then you’ve got to look at all taxes to see exactly who is getting the preferential treatment. Which is where our greenies come unstuck for – whether through ignorance or mendacity – they fail to do so.

Something of a pity for their source document is this from the OECD, where the necessary calculations are laid out for them. You need just the four paras at the bottom of page 2. Yes, there is that preferential VAT rate for domestic energy. So we’ll give them that one. But the other paras tell us that there is Petroleum Revenue Tax, some horrible Brownian complexity over the taxation of the extraction companies, fuel duty and excise taxes on petrol and derv plus VAT, and then the Climate Change Levy. None of these taxes applies to renewables: thus renewables have a preferential tax treatment to fossil fuels and are subsidised because, recall, their whole case rests on the idea that a preferential tax rate is a subsidy.

It’s a fairly hefty subsidy, too. PRT raised £11,250 million lat year. Excise taxes on oil products plus VAT were £29 billion a couple of years ago. CCL was £666 million which seems like a fun number. There’s also something called the gas levy out there, but even I can’t be bothered to track that down. I make that £41 billion in taxation on fossil fuels – taxation which renewables do not have to pay in any manner whatsoever.

If preferential tax treatment is a subsidy, then renewables are subsidised by £41 billion by that tax preference. If tax preference is not a subsidy, then their original point is still incorrect. This is one of those “either or” moments: you cannot claim that tax preference is a subsidy then claim it isn’t.

Just because I’m a nice guy I’ll assume that this little error is in fact statistics. The ignorant getting lost in taxation theory and not being able to Google tax revenues. Rather than, you know, lying to make some obscure political point. Because we all know that the environmentalists are pure as the driven snow…