Energy use and taxation

Post by **clv101** » 18 Nov 2015, 20:14

I attended a seminar with Simon Buckle (Head of Climate Change, Biodiversity and Water Division, Environment Directorate, OECD) yesterday... a fairly bland affair describing what the OECD has done in the run up to COP21. However, he did show one chart I'd never seen before and which struck me as being important:

http://www.keepeek.com/Digital-Asset-Ma ... -en#page45

It looks at how we tax energy. Basically we tax transport / oil hugely and tax heating & electricity / gas & coal very little. I think this situation has arisen because the tax regime exists to raise revenue and oil based transport is extremely price inelastic.

However it has the unfortunate side effect preventing renewables (which are good for electricity and a lesser extent heat but hopeless for oil transport substitution) from being cheaper than gas and coal. If some of that taxation currently levied on oil was shifted onto gas and coal - high carbon electricity would become a lot more expensive and renewables a lot more attractive.

What would the impact be of making oil based transport much cheaper and gas & coal much more expensive?

PS_RalphW · Post by **PS_RalphW** » 18 Nov 2015, 21:45

You would kill off the electric car.

US oil is taxed very little. This makes US cars very big, powerful, heavy and inefficient. This makes the US economy very sensitive to the price of oil, as the price at the pump is much more sensitive to the cost per barrel, and US consumers burn more fuel per mile (and drive further). This makes the US government extremely belligerent when it comes to protecting 'their' oil supply. This has caused a lot of trouble the last 40 years.

Electricity and heating oil and gas are taxed at 5%. Originally it was planned to increase all energy taxes, but the government of the day got cold feet, when they realised how many people would be throen into fuel poverty.

Post by **clv101** » 18 Nov 2015, 22:37

PS_RalphW wrote:You would kill off the electric car.

As the current regime has killed off (for decades) the low-carbon electricity supply. The fact that the electric car is STILL so challenging despite the huge tax on oil highlights the fundamental unsuitability of the technology.

PS_RalphW wrote:US oil is taxed very little. This makes US cars very big, powerful, heavy and inefficient. This makes the US economy very sensitive to the price of oil, as the price at the pump is much more sensitive to the cost per barrel, and US consumers burn more fuel per mile (and drive further). This makes the US government extremely belligerent when it comes to protecting 'their' oil supply. This has caused a lot of trouble the last 40 years.

You could say that in Europe electricity is taxed very little, which makes our consumption inefficient and our economy sensitive the price of coal and gas...

PS_RalphW wrote:Electricity and heating oil and gas are taxed at 5%. Originally it was planned to increase all energy taxes, but the government of the day got cold feet, when they realised how many people would be throen into fuel poverty.

I'm not suggesting any extra tax take, just a shift from oil to coal and gas. This would make transport cheaper (and transport costs are a factor in most goods we buy) but make electricity more expensive. Sure - any change will produce individual winners and losers but I think the bigger point is what impact the currently hugely skewed regime is having.

Looking at the chart, only a modest shift of tax from oil to coal and gas could increase the cost of their electricity to make renewables clearly economic.

Back to the electric car, I would quite happy sacrifice the electric car if it meant we decarbonised the electricity grid and a lot of heat.

Post by **adam2** » 19 Nov 2015, 11:29

I would prefer to keep the tax on road fuels at about the present rate, AND to increase the tax on FF used for heating and electricity generation.

I am not in favour of increasing the overall tax burden and hope that the money raised by increased taxes on FF would be used to reduce income tax and VAT.

I would remove the present 5% VAT on electricity, which is a tax on ALL electricity, even if produced renewably. Instead I would levy an excise duty on natural gas, coal and oil used for electricity generation.
Initially at a modest rate such that the end user pays the same total price as now, but increasing a little each year so as to gradually shift more and more electricity generation to renewables.

emordnilap · Post by **emordnilap** » 19 Nov 2015, 13:33

TEQs.

Post by **kenneal - lagger** » 19 Nov 2015, 18:03

If all houses were insulated to "PassivHaus standards" our national energy use could drop by over 35%. This would be mainly gas but some electricity used for heating would also be reduced.

I don't like using the term "PassivHaus Standards" but there is nothing else to quickly denote the level of performance since the government has dropped the Zero Carbon requirement for next year.

Post by **clv101** » 19 Nov 2015, 19:14

kenneal - lagger wrote:If all houses were insulated to "PassivHaus standards" our national energy use could drop by over 35%. This would be mainly gas but some electricity used for heating would also be reduced.

Indeed, see the chart above for just how much gas is used for heat, and how little tax there is on it. If we taxed gas anywhere close to oil - well insulated buildings would be essential and gas use greatly reduced.

johnhemming2 · Post by **johnhemming2** » 19 Nov 2015, 19:53

I think the world is now moving too far away from rationality to handle TEQs, much that they are a good idea. However, if we simply try to tax domestic energy to a greater extent (other than transport) this will cause masses of stress. I am not sure it is something any political party will argue for.