A Benchmark for the Carbon Tax, no Benchmark for cheap electricity
As part of a comprehensive policy package, carbon taxes will have a central role in guiding the energy transition by providing the economic incentive to switch from high-carbon to low- or zero-carbon technologies and products. In Ireland, the Climate Change Advisory Council has recommended a phased increase in the carbon tax from the current €20 per tonne to €80 per tonne by 2030. In terms of benchmarking, it is worth noting that some countries already have carbon taxes at the upper end or even in excess of this range, with the Swedish carbon tax currently at $139 (e112) and Switzerland at $101 (e81).
The Central Bank have now thrown their weight behind the sudden political push for an increase of the carbon tax in Ireland. Their recent report about climate change and it's alleged impacts on the economy fail to address the issue of the unsustainable levels of government and private debt in Ireland, which allow us to live far beyond our means and consume resources at a far greater rate than previous generations. There is no mention of unsustainable government spending and the bloated welfare state (The cost for a new hospital in Dublin has risen from €400m to nearly €2bn, welfare spending still stands at €20bn despite lowest unemployment for over a decade).
The Central Bank fails to understand that emissions are coupled with economic growth so that if climate change were really having an impact on the economy, we would be seeing economic decline right now, followed by a consequent reduction in emissions. They make the observation that 1991-2016 temperatures were higher than the period for 1960-1990, which actually supports the natural cyclical theory of climate change rather than the man made theory. They also claim that insurance payouts due to extreme weather events are up. The 1940s were perhaps the worst decade for flooding and crop devastation in recent history but I can find no evidence that there were any insurance payouts at all. But I want to focus on one particular part of their report, the carbon tax.
The purpose of the Central Bank presentation on climate change appears to be to groom Irish people for more taxes, specifically carbon taxes.
They present Sweden and Switzerland as models for Ireland to follow in this regard. What they fail to state is that Sweden has electricity prices at least 25% less than Ireland. But more importantly, Switzerland, which has a carbon tax equal to that proposed by Irish politicians, has had one of the lowest electricity prices in the world for many years, roughly half that of Ireland, which now ranks as one of the most expensive countries for electricity in the world. Switzerland generates most of it's electricity from hydro and nuclear (as does Sweden). How is it that Ireland's indigenous wind industry cannot compete with Swiss hydro, an indigenous renewable source that does not lead to high Swiss electricity bills ?
The examples of Sweden and Switzerland actually undermine the central banks case for more carbon taxes in Ireland as it shows that we are already paying comparatively much higher for energy. A carbon tax similar to what was introduced into these countries could make Ireland the most uncompetitive country in the world for energy with actual knock on impacts for our economy far worse than "climate change".
One could have perhaps made a better case for the carbon tax if wind energy had led to the cheap energy revolution that Irish people were promised. But as we all know that never materialized.
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| https://ec.europa.eu/eurostat/web/products-eurostat-news/-/DDN-20180807-1 |
How is taxation policy within the remit of the Central Bank of Ireland? I understand that Mark Carney, the Governor of the Bank of England, has been criticised in the UK for similar intervention in the climate change debate. Where is the critical analysis in Ireland? Is it just a coincidence that this report appears just as the Irish Central Bank Governor is going for a top job at the ECB?
ReplyDeleteThe problem with wind energy is that its capital investment costs per megawatt is probably 30 times the cost of combined cycle gas plant. These big multi megawatt wind turbines have pretty short operational lives. Just the other day I was going through the latest Danish Data. I located a 3 megawatt 101 meter hub diameter Siemens.( No prizes for guessing who bought these) It was decommissioned after just less than 8 years.At that sort of life you would have to replace the wind turbine 5 times before the combined cycle gas plant came to the end of its operational life. Also a lot of independent research proves that there is massive capacitor factor drops as wind turbines age. So it's not surprising that these wind farm find it pretty nigh impossible to make a profit. They stay in business by writing down asset valuations on paper at a snails pace. Most commercial MNC capital investment is written off over 5 years. But some Irish wind farms are being written off over as much as up to 50 years. Even that august body The IWEA use a 20+ wind turbine operational life when writing their Hans Christian Andersen type fairy tales that wind energy can supply 70% of our electricity requirements. It is therefore entirely idiotic to enforce a carbon tax that the Government seems to be proposing. The government should be more honest about their stupid wind program and tell the truth. It is highly likely that taxpayers bill be billed for the massive losses when it is obvious that asset valuations in accounts are up to 90% greater than actual in the field valuations.When rust is obvious at a kilometre or so. The Governor of The Central should be more concerned at the reckless lending that is funding wind farm development.
ReplyDeleteIn Ireland the idea of assessing and costing capital plans and programmes is alien to government. The SEA Directive is being ignored on all the industries specified in Article 3(2). There should be an environmental report with public participation and the right to challenge the findings through Judicial Review. This is a legal requirement before work starts. The EU failed to enforce it.
ReplyDeleteIn its absence, there is no assessment of the cost and no cost benefit analysis carried out. The idea of having a quantity surveyor examine the capital cost did not occur to anyone in government.
There are three noteworthy government backed initiatives proceeding blindly. The privately built wind energy programme has already cost 7 billion Euros which when cabling and more turbines is added may cost 25 Billion. It is loosing 220 million Euros annually. Next is a mix of public funded internet broadband in rural areas which is proceeding with no assessment of cost at all. Private installers are employed for most of the work. Massive cost overruns are predicted.
The only one to make a stir in the news is the National Children's hospital proposed for central Dublin where there is inadequate car parking facilities. The site is too small to build a maternity unit at a future date to compliment the children's unit. It is now estimated to cost three times as much as originally estimated. The way our dysfunctional government works is this:
They put a large public project out to tender, they receive many tenders from construction companies. They pick the lowest tender. Abuse can happen in some tendering processes where a builder just picks a figure off the top of his head and cuts it in half. Government picks the lowest tender which is not a true reflection of the actual cost. Half way through the project the money runs out and the builder demands more money. Government pays it.
It can be seen that the process eliminates cautious decent builders giving the work and profit to buccaneers who undercut them.
Ireland is a long way off the model of government found in Switzerland and likely to stay that way. There is frustration among citizens, but I don't see it change anytime soon.
The Irish electoral system cannot recognize the need to connect the real world of engineers and accountants with the theoretical world of established politicians. The problems are only recognized after the event, giving us government by Judicial Tribunal which identifies the failures and makes recommendations. Government can understand these recommendations in hindsight but cannot apply them for the next project.
Efforts by politically groups who try to present alternative politicians to the people are set upon by the Irish Media as "populist" a s the establishment tries desperately to hold one to the status quo. It is indeed a sad state of affairs.