Green steering charges

Posted by Thersites on  UTC 2019-10-04 14:09 Updated on UTC 2019-10-05

This article applies in particular to Switzerland, but most of its points will apply equally to other countries infested by the green climate fungus.

Squaring the Swiss energy circle

The person currently in charge of the Swiss government department of energy is a lifetime socialist with low-level qualifications and an ability to play the piano. She didn't bother to complete her degree in English and Romance studies.

This is the person, supported by her enthusiastically green advisors, who is now required to carry out two completely contradictory tasks:

  1. She is supposed to put into effect the long-standing political goal of opening the electricity market to full-scale competition. Theory indicates and practice has shown that such liberalisation in the direction of free markets increases efficiency and reduces prices. We all want cheaper energy, don't we?
  2. She is also supposed to be forcing the use of energy from renewable sources. The date for the completion of this process, which will result in 'carbon neutrality', keeps being brought closer by the climate crisis enthusiasts: is it still 2050?

Put concisely: 1– make energy (that boon to mankind) more affordable or 2– make energy (that curse of mankind) more unaffordable.

These irreconcilable tasks reflect the schizophrenic state of Swiss politics and its inability to grasp and come to terms with technological issues, let alone to manage them. Putting a socialist pianist with half an education in charge of the process will not end well.

Subsidies: the crutch for the incapable

In a truly open market, traditional energy technologies (including internal combustion engines powered by fossil fuels) will always beat renewables on cost and convenience, whether for production or consumption. Is anyone surprised at this? They have at least a century of exploitation, development, optimisation and price competition behind them. A truly open market would kill off all forms of renewable energy the day after it was introduced, if not already the day it was announced.

There is plenty of evidence that as soon as the life-support subsidy machine for any particular green unicorn is switched off, the creature settles down on the greensward, rolls over, legs in the air, and expires.

Electric cars are the prime example of this dependence on subsidies. For the user, electric vehicles offer no intrinsic advantages over conventional vehicles – only disadvantages in fact: high price, limited range, lack of easy access to charging, cost of battery replacement and so on and so on.

The only positive thing about them is their quietness, but even this is a drawback, since these vehicles then need to be equipped with noise making devices to warn pedestrians of their approach. Even their carbon neutrality is a matter of debate. With all these disadvantages, even if the purchase prices for a conventional vehicle and an electric vehicle were the same, a rational buyer would not buy an electric vehicle.

The only things that can persuade someone to buy an electric car – aside from an innate green psychosis, of which there is plenty about – are large subsidised benefits such as reduced or no road tax, subsidised purchase price, free electricity etc.

Similar arguments can be made about domestic solar installations: no rational person would have one unless palms had been crossed with serious quantities of silver, both for the consumer and all the way down the supply chain.

A skewed market is just as much a requirement on the energy supply side as it is on the consumption side.

In themselves, wind and solar technologies bring no advantages over conventional power generation. They bring only disadvantages, because they are intermittent and hugely expensive to install and run and do a lot more damage to the environment than their supporters care to admit.

To the simple-minded, wind and sunlight may be free, but their exploitation for the sake of some unpredictably intermittent bursts of electricity is shockingly expensive. Without enormous, guaranteed, longterm subsidies, no sane capitalist would touch these technologies. Without the deranged panic over carbon dioxide, not a single one of these devices would ever have been installed.

The true price of fluctuating renewables such as wind and solar must also include the cost of maintaining dispatchable generation from fossil and nuclear fuels. Renewables can never replace dispatchable generation, only supplement it – and unpredictably at that.

From time to time there is much green shouting and punching of the air because at a particular minute of a particular day all electrical energy came from renewables. The claim is bogus: a short while before and a short while later the conventional dispatchable energy sources were fortunately still there, filling in the gaps.

The cost of renewables should also reflect the substantially higher network and distribution costs required to handle these unpredictable energy sources. It is becoming clear even to the slow-witted greens that just introducing more and more erratic power generation in the pursuit of that magic 100% generation target is going to result in such instability that the distribution network will give up the ghost – and that probably sooner rather than later.

What to do? How to square this circle?

The lifetime socialist and her green cohorts have no compunction: rig the market. 'Open' it, but in such a way that it shows all the worst features of mercantilist market fixing. In fact the market will not be opened, it will be closed. The days of cheap energy are gone.

Renewables will continue to be subsidised in various creative ways and traditional power sources will continue to be economically crippled in various creative ways. Subsidies for solar generation in Switzerland were supposed to run out soon. The government has had to extend them just to keep the implementation plan alive. No amount of this kind of 'opening' will make anything cheaper or more efficient.

No pain, no gain

There are limits to the extent that even a red-green, ill-educated pianist can cheapen renewable energy with subsidies. Another thumb has to be pressed down on the scale in order to make conventional energy more expensive for consumers. These are the so-called Lenkungsabgaben, 'steering charges', which are being thought up for all kinds of non-renewable power use.

Unlike a tax, which just removes money from workers and companies who are earning or spending money, these financial instruments raise the price of a commodity in order to discourage its use whilst allegedly returning most of the money raised to the people. The result is supposed to be 'fiscally neutral'.

The use of such steering charges will make the price of the petrol or diesel used by trucks and motor vehicles, for example, massively more expensive. In the cause of fiscal neutrality, a proportion of the income derived from this will be handed back in various forms: reduction of health insurance premiums, payments into the state pension system and contributions to whatever is the good cause of the moment.

But since all transport will become expensive, all consumers will pay through increased prices for the distribution of goods. In other words, the steering not only affects those directly steered but also the many other people who will be affected by higher costs but without any possibility of reacting to that steering. Increased costs for the transport of goods will have to be passed on to every consumer.

Since every transport user is affected in the same way, this is not a cost that can be optimised away by competition. Thus the impact of steering charges spreads throughout the economy – they are only fiscally neutral within the narrow scope of their application – most of the additional costs they cause go uncompensated.

And finally, just in case the passengers in the steerage class of the ship of state don't get the steering message and change their behaviour as intended, outright bans on the use of fossil fuels for heating are close to implementation. Others will follow.

Leave it to Miss Whiplash

Let us use clear language. A steering charge works by causing pain; if it isn't causing pain, it isn't working. Energy has to be made so expensive that consumers become neurotic about its use. The ideal consumer will end up consulting 'smart meters' every ten minutes and worrying whether a smartphone charger has been left plugged in.

This pain is necessary, because even the greenest Swiss fantasist has realised that Switzerland will never be able to produce enough power using renewable technologies to meet even today's needs. Consumption has to be reduced.

Sticking it to the poor

Steering charges are highly regressive: the behaviour of the poor is steered, that of the rich hardly at all – making it an interesting system for a socialist to be introducing. Still, in the war against carbon dioxide, all means are justified by the noble end.

It is an iron rule: the poor are the ones who have the least control over the details of their own economic destiny, who are able to influence or affect their economic condition. They cannot pay for new home heating systems, heat pumps and solar systems. Most of them will be tenants and have no say at all in their energy use for heating, for example.

The poor cannot buy the new technology vehicles that will allow them to escape punitive steering charges. The market in used cars will be their only alternative for personal mobility for decades to come. These vehicles will continue to be progressively punished for their fuel consumption and emissions.

At a time when systems of taxation attempt to be transparently fair for all taxpayers, steering charges are anything but fair. The person who lives in a village and who is dependent on road transport will be financially punished, although receiving a very small health insurance compensation. In contrast, the person who lives in the town and can travel by bike or bus will pay nothing, yet still receive the same level of health insurance subsidy as the rustic.

Letting the stone roll down the hill

There is a worse problem that no green advocate mentions when the talk turns to reducing energy consumption and the emission of carbon dioxide: transport and consumption have to be throttled to 'save the planet' – but what are the economics of this throttled brave new world? Can one just scale back these detested technologies? Can one dump the motor vehicle but leave the smartphone untouched?

That the green mind does not understand economics is shown by the attempt to reduce the amount of supposedly climate-killing air travel by applying hefty steering charges on flight tickets.

If the charges are useless – that is they do not cause enough pain to substantially influence behaviour – then those charges just introduce a degree of economic inefficiency in the system. If, on the other hand, they are sufficiently painful and therefore do work, the reduction in passenger movements will reduce the number of flights, reduce airport use and all the associated processes.

In order to have an effect, the reduction in passenger numbers must go beyond just reducing the number of passengers on any particular flight, that is, a reduction in the load factors of individual aircraft; passenger numbers have to be reduced sufficiently to reduce the number of flights overall. This will only happen when particular flights and routes become uneconomic. This is, after all, the whole point of the green exercise. Anything less will be completely ineffectual.

However, this shrinkage will raise the cost of flying even further, leading to a further decline in passenger movements until some inelastic limit is reached, leaving the only users as a few rich people and companies to whom price does not matter. The effect on international goods transport will be equally dramatic. Ultimately aircraft production will also be throttled and the price of aeroplanes will also rise.

Airports with reduced traffic will have to shrink and charge more for those airlines and passengers who remain. If fewer passengers are passing through an airport then even the income from shops, catering and duty-free will fall appreciably. Reduce passenger numbers, reduce the number of flights, reduce the number of airports, reduce aircraft production – unit costs and prices will increase dramatically and force further reductions. It is an iron law of economics: when volume is reduced, prices increase. When prices increase, volume is reduced.

Most of the efficiencies in air transport have occurred as a result of technological innovation and economies of scale. Wide-bodied aircraft, for example, that can carry a large number of passengers efficiently. Their fate will be sealed when passenger numbers fall.

That business so hated by greens, international mass tourism, will collapse. It has brought jobs and well-being to so many otherwise impoverished parts of the globe. It arose out of cheap, mass air travel and its infrastructure will no longer be able to be supported by the reduced number of tourists.

The idea that the worldwide job losses that this simultaneous winding down of so many sectors will cause will somehow be compensated by the growth of 'green jobs' (to be defined) is utterly delusional.

All the economic progress of the last two centuries has been built on free-market enterprise. All the setbacks during that time have been caused by mercantilist or socialist/communist attempts to rig the market. Over those two centuries we have become used to the benefits of material progress only moving in one direction: towards an ever increasing variety of better and cheaper products. What will happen when that direction is reversed?

Sisyphus, through entrepreneurial effort and the application of capital, can roll the stone up the hill, giving us all better and cheaper products and more choice from high-volume consumption. Ultimately this has led to everyone enjoying healthier, longer and more comfortable lives.

When he is forced to stand aside, the stone rolls back down the slope and the market created with such effort collapses. This will be the real 'climate tipping point', for the stone will roll down with ever increasing momentum. Rigging the market to reduce energy consumption will be the trigger.

Ultimately all technologies will contract or collapse, since they all hang together in subtle ways. The next time you get an injection with one of those ultra-fine needles that can scarcely be felt, consider the huge network of innovation, testing, manufacture, packaging, marketing and distribution that makes them possible. They and innumerable other products in every segment of modern life are part of the rolling stone just as much as wide-bodied aircraft. A technological level cannot be divided up and selectively decommissioned: when the stone rolls down, it all rolls down.

How far will the stone roll down the hill? Who knows? No green propagandist has told us to which economic era we have to return – the 1950s? the 1900s? the 1800s? The popular phrase specifying the basis for all comparisons of carbon dioxide emissions, 'pre-industrial levels', may be the clue. We have yet to hear how they intend to provoke a controlled descent of the stone to some still particular point that represents some still undefined economic optimum for the world. Let the ill-educated pianist tell us now.

Update 05.10.2019

This article nearly didn't get published. Its crime: it was a longwinded, boring, statement of the obvious.

So obvious it cannot have been, however, for today Mathias Binswanger, a Swiss economics professor, publishes a useful article in the Zurich Tages-Anzeiger summarising the 'Climate Crisis' recipes of the main Swiss political parties in the run up to the next elections. Here are some excerpts:

FDP [Free Democratic Party]: The party has realised that there is a climate problem and therefore has said Yes to measures such as increased CO2 taxes and steering charges on airline tickets. These charges should, however, be as small as possible, in order not to damage the economy and ideally not even be noticed.

FDP: Die Partei hat erkannt, dass es ein Klimaproblem gibt und sagt deshalb Ja zu Massnahmen wie höheren CO2-Steuern und Flugticketabgabe. Diese Abgaben sollen aber möglichst gering sein, sodass sie die Wirtschaft nicht stören und im Idealfall gar nicht bemerkt werden.

Professor Binswanger does not comment directly on the utter stupidity of this position, but from his comments elsewhere it is clear he considers the FDP manifesto as ineffectual.

After a brief review of the mad ramblings of the Green party, he comments:

Quite utopian, but one can be that as long as there is no danger of ever having to put the plan into effect.

Ziemlich utopisch, aber das kann man sein, solange keine Gefahr besteht, dass es wirklich umgesetzt wird.

The programme of the GLP – that contradiction in terms, the 'Green Liberals' – gets a hammering from Binswanger:

The goals are similar to those of the Greens, but one puts more emphasis on steering charges than bans and there will be climate repayments for climate-friendly behaviour. And they prefer to call subisidies 'investments into the fields of research and innovation in Switzerland'.

Die Ziele sind ähnlich wie bei den Grünen, aber man setzt mehr auf Abgaben statt auf Verbote, und es gibt auch Klimarückzahlungen für klimafreundliches Verhalten. Und Subventionen nennt man lieber Investitionen in den Forschungs- und Innovationsplatz Schweiz.

So much lunacy! So much entertainment for us helpless spectators! Our position is reminiscent of the cheerful tours of lunatic asylums that were held in previous centuries to entertain the sane, a function now unwittingly taken over by the media. Even Professor Binswanger allows himself a professorial chuckle:

What will triumph in reality? That depends only in a small measure on the results of the 2019 elections. The probability is great that the programme of the FDP comes closest to reality. Switzerland will take a series of measures, but always so that the economy is not seriously endangered. The target of climate neutrality by 2050 will be missed, but greenhouse gas emissions will be reduced to a modest extent. The 'concordance democracy' will ensure that!

Was wird sich in der Realität durchsetzen? Das hängt nur wenig vom Ausgang der Wahlen 2019 ab. Die Wahrscheinlichkeit ist gross, dass die FDP mit ihrem Programm der Realität am nächsten kommt. Die Schweiz wird eine Reihe von Massnahmen ergreifen, aber stets so, dass sie die Wirtschaft nicht ernsthaft gefährden. Das Ziel der Klimaneutralität 2050 werden wir verfehlen, aber die Treibhausgasemissionen trotzdem in etwas bescheidenerem Ausmass senken. Dafür sorgt die Konkordanzdemokratie!

So our article was not completely otiose.

If we were to criticise Professor Binswanger's conclusion, it would be on the grounds that his cool-headed view of the future neglects the malign and continuing effects of the green blob, that nexus of academics, civil-servants and the educated classes that will keep on going relentlessly.

In the last ten years the green blob has shifted the culture of Swiss 'official' life from being the bleatings of the odd green eccentric to an unopposable consensus on 'climate action' which no political party can ignore. Whether the torpidity of the Swiss political system can resist that assault – well, we shall see. It hasn't done very well so far, though.