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Last Updated: Thursday, 9 February 2006, 21:47 GMT
Carbon addicts and climate debt
Andrew Simms.  Image: Nef
VIEWPOINT
Andrew Simms

The fossil fuel industry is a major source of tax revenue for western nations, which is a disincentive to cutting greenhouse gas emissions, says Andrew Simms in this week's Green Room. But while some of that taxation depends on the huge profits reported by companies like BP and Shell, he argues they would be bankrupt if the taxes they paid reflected the social costs of their emissions.

Gordon Brown and Tony Blair.  Image: AFP/Getty
The UK appears to be in denial as it becomes more deeply addicted to oil and its profits

The last week has raised a new problem of substance abuse in Britain.

In a world of growing climate chaos and oil scarcity, at least US President George Bush admitted his country's "serious problem" of fossil-fuel addiction.

But the UK appears to be in denial as it becomes more deeply addicted to oil and its profits, raising the real danger that growing oil revenues could become a big disincentive to cut oil use and tackle global poverty.

Oil magnate J Paul Getty set the template for 20th Century inequality when he declared: "The meek shall inherit the Earth, but not its mineral rights."

Based on statistics from the International Energy Agency (IEA), an average US citizen will in a single day generate as much of the chief greenhouse gas, carbon dioxide, as someone in China does in more than a week.

For someone in Tanzania to generate the same amount would take a staggering seven months.

Such inequality is a major barrier to agreement on international environmental action.

Shell logo at petrol station.  Image: AFP/Getty
Shell: In profit only because of 'fantasy economics'?
The UK and the US became rich by burning more than their fair share of a finite inheritance of fossil fuels.

Now the profits of oil companies like Exxon, Shell and BP are breaking records and worsening the addiction.

The consequence is a creeping climate chaos that disproportionately affects some of the world's poorest and most vulnerable places like Bangladesh, the South Pacific islands and sub-Saharan Africa.

To halt this climate chaos, we must reduce burning of fossil fuels; yet our global economy depends on them for about 80% of its primary energy.

Rising growth, increasing demand for fossil fuels, climate concerns; the outcome will be higher prices. The poor, already deprived of their equitable share of the world's energy, are likely to see their share shrink even further, just as they bear the biggest burden of climate change.

In a carbon-constrained world, the energy pie can only shrink; who gets what becomes the crucial question.

Trickle down, flood up

Virtually all conventional economists say economic growth is the answer to poverty.

But more growth means more greenhouse gas emissions, and in turn more rapid climate change which then hurts the poorest most.

If growth brought other benefits to the poorest, this might still be a path with merit. But our latest research at Nef, the New Economics Foundation, shows that wealth is not trickling down, it is flooding up.

Between 1990 and 2001, just 60 cents of every $100 of extra global income from growth went to reduce poverty for those living on less than $1 a day.

In the previous decade, the figure was $2.20 per $100.

In the 1990s, then, it took an extra $166 of production and consumption - with all its associated environmental damage - to generate each $1 of poverty reduction.

In environmental terms, it is a suicidally low level of economic efficiency, as the world's poor miss the benefits of growth but pay its costs.

Climate change becomes an ecological debt.

Tax and burn

So what are the chances of western governments such as Britain's, which have standing commitments on eradicating poverty, linking their programmes in this arena to their policies on curbing greenhouse gas emissions?

Not good, it would appear; not only do our homes, transport, and food system rely on fossil fuels, but so does the public purse.

Women in rural Africa.  Image: AFP/Getty
For someone in Tanzania to generate the same amount of CO2 as the average American generates in a day would take a staggering seven months
Our new calculations from research in progress with WWF, based on Treasury statistics, show that UK government income from the fossil fuel sector - conservatively estimated at 34.9bn ($61bn) - is greater than revenue from council tax, stamp duty, capital gains and inheritance tax combined.

Policies aimed at reducing carbon emissions could therefore have a major impact on the government coffers; a serious disincentive to action.

But even this level of revenue from the fossil fuel sector does not reflect the true cost of its environmental impact.

Treasury estimates suggest that the environmental damage per tonne of carbon dioxide could be around 20 ($35).

Combining the emissions that stem from BP's direct activities and the sale of its products leads to 1,458m tonnes of CO2-equivalent entering the atmosphere, with a damage bill of 29bn ($51bn).

Subtracting that from the 11bn ($19bn) annual profit it has just reported puts it 18bn ($31bn) in the red; effectively bankrupt.

The same calculation puts Shell 4.5bn ($8bn) in the red, even as it reports an annual profit of 13bn ($23bn).

That is how unsustainable the economy has become.

Fossil-fuelled fantasy

The way we view economic success in the UK has become a fossil-fuelled fantasy.

No accounting system with a hint of common sense would view profiting from the liquidation of a never-to-be-repeated natural asset as a good thing, even less so when it leads to global warming.

Oil rig at sunset.  Image: Eyewire

Yet the UK's economic addiction to oil is set to deepen. There is talk of a windfall tax; and in his pre-Budget report, Chancellor Gordon Brown announced measures that will increase revenues from North Sea oil by 3.9bn ($6.8bn) during this financial year, and a further 2.6bn ($4.5bn) next year.

The only possible justification will be if these amounts go towards a major economic detox diet to cure the UK of its fossil fuel habit, following Sweden's recent lead.

This would pay for a huge roll-out of clean renewable energy technologies, and to redesign the UK's hopelessly inefficient energy system and national grid in favour of a more decentralised power supply.

We could also pay up our shamefully overdue contributions to special funds set up to help poor countries adapt to climate change.

The economic detox diet would mean Gordon Brown and Tony Blair delivering on three key issues:

  • putting human well-being at the heart of the political agenda instead of growth
  • implementing aggressive plans to cut our own emissions
  • pushing for the next phase of the Kyoto Protocol to cap global emissions at a safe level, and give developing countries their fair and equal share of the greenhouse gas emissions pie.

Anything less will mean the UK as an addict slipping into potentially fatal decline.

Andrew Simms is policy director of the New Economics Foundation (Nef) and author of Ecological Debt: the Health of the Planet and the Wealth of Nations

The Green Room is a series of environmental opinion articles running weekly on the BBC News website


Do you agree with Andrew Simms? Are we addicted to fossil fuels? Should oil companies be taxed more? Do we need to invest more in green energy?




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