Carbon tax breaks for low-particulate fuel

We have learned a few lessons over the years. Monetary policy and market regulation are better done at arm’s length of the government. The generalists in the Dail set the broad goals, but leave the details to quasi-independent technocrats. Macro-prudence is now being added to those broad goals.

Micro is another matter. Policy-makers instinctively reach for the second-best. Sometimes that is the best feasible regulation. Sometimes that creates rents for their clients. And sometimes it is just the force of habit.

The Examiner reports that Minister Hogan suggested that smokeless fuels be given a break on the carbon tax. Really? The carbon tax regulates carbon dioxide emissions. Smokeless fuels and smoky fuels differ in their particulate emissions. A carbon tax break may reduce particulate emissions but would increase carbon dioxide emissions.

A carbon tax break would make climate policy more expensive. Emission reduction is cheapest when there is a uniform price. At the moment, there are three carbon prices: EU ETS, carbon tax, and zero. Hogan proposes there’d be four: EU ETS, carbon tax, reduced carbon tax, and zero. The reduced carbon tax would hold for coal and peat, the fuels that emit most carbon dioxide per unit of energy.

A carbon tax break would also make particulate policy more expensive. At the moment, there is a range of regulations including technical standards (e.g., in transport) and local bans (e.g., on selling smoky fuels in cities). A tax break would add yet another layer of regulation. The impact on costs is predictable: They will rise as any move away from first-best regulation does (Tinbergen 1952).

The impact on emissions is unknown. There are two substitution effects: (1) smoky -> smokeless coal and peat; and (2) oil and gas -> coal and peat. The carbon tax break would apply to all smokeless fuel, not just to smokeless fuel sold in places where smoky fuels are banned. Smokeless fuel use may increase more that smoky fuel use falls.

Recall that smokeless fuels are not particulate-less. There are no visible emissions. Invisible particulates, the ones that do real damage, are emitted nonetheless.

If Minister Hogan wants to reduce particulate emissions, he should impose a particulate tax (and abolish the ineffective sales ban) or extend the sales ban to the entire country.

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12 thoughts on “Carbon tax breaks for low-particulate fuel”

  1. Banning particulate emissions could be extended to Diesel oil as well.

    Diesel powered cars may consume less fuel / Km but they have higher particulate emissions, as well as a higher Nox count.

    To reduce Co2 emissions in Ireland (or anywhere else) will require a combined approach of several strategies, not just one silver bullet.

    The standard for new housing / commercial buildings would have to be increased substantially, perhaps to Passive house standards.

    The long term goal should be housing with zero to almost zero energy requirements i.e. carbon neutral in use.

    Perhaps the only way to prompt this change is to increase carbon tax dramatically over the next 10 years.

  2. Hiding the pea again Richard?

    If this is an emissions tax you have to consider the effects of emissions. Particulates have particularly nasty health effects. Health effects have costs. Cost benefit analyses show that the improvements in health are always greater than the costs of getting rid of the particulate emissions. Naturally you consider improved health a rent, but the ministers might think it a benefit for their clients, people.

    The real issue here is Peter Stapleton’s, coal and peat cannot be considered smokeless on any rational basis.

    Chewing gum and walking at the same time is a useful skill.

  3. Amuse yourselves all you like with taxes etc., but all economies (of whatever shade) need to burn something, anything – and when push comes to shove, everything. The handiest things to hand are oil, gas and coal. Wood is good, but its energy output is too low – except for pre-1400s economies.

    If the health of folk and their environment get in the way of economic ‘growth’ – then just trash the folk and the environment. Works each time. Just look at the evidence (of lost civilizations!). Next!

    Those passive homes. They need a substantial amount of energy to fabricate and erect. Now where would that energy come from – I wonder?

  4. @ Brian Snr,

    Re Passive Homes,

    I can’t say I would agree with you. Homes are long term objects… 50 60 100 year lifespans, perhaps more.

    A passive home may require more materials initially… but in comparison to the emissions of a normal home for 50 years… there is no contest. A passive home will outperform.

    For example… 1 Kg of coal produces approximately 2.75 Kg of Co2.

    A normal fire place over the course of an evening… would burn about 8 to 10 Kg of coal a night.

    A cast iron stove with a back boiler would consume 10kg / day approximate figures. That’s 27.5 kg CO2 / day / household which equates to over 10 tons co2 per year… assuming the stove is lit 70% of the year.. that’s 7 tons / year. Now that’s only for water heating and space heating… not electricity use.

    Start multiplying 7 tons by the number of houses in the country….

    Of course these calculations are rough “back of a packet of fags” numbers… but one can see a rough picture… and its not pretty.

    To avert from our present course of “Global Suicide” carbon is just too cheap… it has to be made much much more expensive. Only then will builders change.

    Perhaps Passive house standard should become mandatory in Ireland, a bit like the car industry… where standards are increased .i.e. ABS, seat belts, fog lights, bonnet safety for pedestrians, crumple zones, soft interiors, collapsible steering columns etc.

    Builders have been allowed to produce any old rubbish for far too long in this country.

  5. @ Sporthog: Thanks for that reply.

    I was being very ‘tongue-in-cheek’. Yes, any old rubbish will do. Its dreadful. But the construction lobby groups are local and are pretty vocal and persuasive. I expect no real change.

    Notice how the ‘usual cockroaches’ magically appear once they smell their privileges being eroded (even the suggestion of any erosion is sufficient). Its all -“There are no alternatives.”, or “Our industry will be destroyed!”., or similar sh*te.

    On the energy issue itself. Our industrialized, developed economies are 101% dependent of ‘cheap energy sources’. If these falter, the current economic and financial mess will look like a Sunday afternoon picnic.

    Fortunately, the current global downturn has reduced the strain on supply. Imagine what will happen when – “We all grow together – now!”. Folk had better be careful what they wish – and hope, for.

    And make no mistake on this. Folk will trash their environment, especially if the actual costs (human and pecuniary) are ‘outsourced’. Look what Katherina and Sandy did to a small segment of the world’s greatest (?) economy. And then observe what the local, state and federal authorities DID NOT do by way of recovery. That should make folk sit up and take note. But will it?

  6. How many weeks late was spring in Ireland this year? By how many weeks will the grass growing season be shortened this year? And is it all random? Or something to do with the Sun ?

  7. @ Seafoid,

    As Brian W Snr asks above “will folks sit up and take note”

    There is a growing awareness among the developed world that climate change is coming, and it appears to be coming at a much faster pace than originally expected.

    Depending on who you ask… there are approximately 350,000 babies born every day.. and 140,000 deaths.. giving a total of 210,000 extra souls on the planet every day.

    And they all want Ipads, a smart phone, a broadband router, a fridge and a car.

    I thought Europe had a chance with Co2 reduction when the “Desertec” plan was being developed.

    However for this to happen, Europe requires closer diplomatic ties with these countries, Libya, Algeria, Egypt etc.

    Somehow I don’t see Desertec happening for a very long time to come.

    http://en.wikipedia.org/wiki/Desertec

  8. @ Seafóid: It is v-important to distinguish between weather patterns and climate cycles. The former are an inherent part of the latter – not the reverse. Its the weather we experience and sorting out normal cyclical activity from an actual long-term trend is almost impossible. Folk can make guesses, but that’s it. Though their guess may be somewhat more reliable than an economist’s model! The real predicament with climatic change is that once it passes a tipping point, that’s it. It runs to its conclusion. The scientific evidence is suggestive of specific tipping points and when we might pass one. But when we do find out – its too late to take anything other that evasive action. Greenhouse gasses are acknowledged as trouble, though they vary considerably in their effects. carbondioxide is bad, but trails methane by a long distance. Folk may be staring fixedly at the wrong gas. We’ll see.

    @Sporthog: Try a little math. Suppose (I know!) that each person on the earth is to have access to 2 litres of liquid hydrocarbon fuel – per day. (Note: we in Irl use between 5-7 l per day).

    A 40 US gal barrel = 160 l. Global daily production of liquid fuels is 90 mill b/day. And there are 7 bill folk? Do we have enough fuel?

    [The US + CND use 1600 l/day per person. Malawi uses 0.5 l/day per person!]

    If there was a greater appreciation of the wafer-thin supply margin (of liquid fuels) we enjoy some folk might be a tad more sober.

  9. @ Sporthog: I just noticed several errors (half-asleep) above. I mixed up litres and barrels.

    US + CND consumption is 10 l/person/day not 1600! Apologies for the confusion.

  10. @ BW Snr,

    Anybody can be out a decimal point, well at least that’s what my husband tells me!!

  11. Just reading Minister Hogan’s press release, it talks about reducing the carbon tax liability for smokeless low carbon solid fuels. The way the carbon tax is currently framed it applies to coal and peat and their products, so manufactured coal or peat products that contain a significant amount of biomass (making them ‘low carbon’ or more correctly ‘low fossil carbon’ for the pedantic ones) pay the same rate as regular coal/peat. I think the Minister might wish to correct this and incentivise these innovative products. Better again if they’re smokeless!

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