It’s time for an installment of Myths, Half-Truths and Misinformation, an occasional series for The Free Market Speculator in which I expose an oft-repeated economic myth and explain, in the simplest terms possible, why it’s untrue, misleading or dangerous.
This week I’ll focus on a statistic that’s been making the rounds in the mainstream media and on X (formerly known as Twitter) since late August regarding $7 trillion in annual subsidies paid to the fossil fuel industry.
The usual implication of these posts and “news” reports is that governments the world over are heavily subsidizing fuels like coal, gasoline, diesel and natural gas, rendering these energy sources artificially cheap. Allegedly, these subsidies discourage the rapid development of renewable energy sources like solar and wind while acting as a sort of regressive tax that helps the wealthy and harms most consumers.
Here are some examples from just the past few weeks.
Source: Mike Hudema X (Twitter)
Imagine that: The global fossil fuel industry receives some $11 million in subsidies every single minute of the day and, if we believe posts like this, taxpayers are literally funding the destruction of our planet!
Or how about this gem of a headline from the New York Times:
“Why Are Taxpayers Propping Up the Fossil Fuel Industry?”
This article included the provocative subheading:
Worldwide, government subsidies for oil and gas are at a record high. Global financial institutions have been trying for years to get them phased out.
And, just last week, thousands of protestors in the Netherlands took to the streets demanding the government stop using public funds to subsidize the oil and gas industry.
Reuters reported on that protest as follows:
Source: Reuters September 9, 2023
As with all narratives in the mainstream and social media these days, it always pays to dig a little deeper to uncover the real story. So, let’s start with this basic question:
Define Subsidies
Virtually all the articles and posts you’ll see regarding government subsidies for the fossil fuel industry reference a single source, an International Monetary Fund (IMF) working paper titled rather unimaginatively “IMF Fossil Fuels Subsidy Data: 2023 Update.”
It’s available for free download as a PDF file on the IMF website.
The IMF publishes a detailed update on global fossil fuel subsidies as an ongoing series with the most recent report published in late August reporting fossil fuel subsidies in 2022.
Specifically, IMF calculates total global subsidies for the fossil fuel industry at $7 trillion last year, equivalent to around 7.1 percent of global Gross Domestic Product (GDP). The report also breaks out subsidies for various countries and regions of the world and provides a handy spreadsheet showing their calculations broken down by individual fossil fuel type.
The timing of this report’s release helps explain the flurry or articles, and associated climate protests, regarding fossil fuel subsidies over the past two weeks. News organizations and activist groups regurgitate the specific subsidy figures presented in the IMF report for various countries and regions with little or no regard for the underlying data, methodologies and calculations.
So, the real question here is how IMF defines and calculates subsidies. In this case, IMF breaks down subsidies into two main pieces, “explicit” subsidies and “implicit” subsidies.
Take a look:
Source: IMF Working Papers 2021 Update and 2023 Update
This chart shows IMF calculations for fossil fuel subsidies in 2020 and 2022 broken down into these two categories; as you can see, explicit subsidies are by far the smaller component of the total for both years.
Indeed, in 2020 IMF calculates explicit subsidies at just 7.8% of total world subsidies and last year (2022) it was about 18.9%.
I’ll cover both types of subsidy in this post, but let’s start with the more familiar and straightforward explicit subsidies:
Explicit Subsidies
The Oxford English Dictionary defines subsidy as follows:
A sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.
That’s a good definition of how I think of subsidies — it’s a government payment that benefits a particular industry, in this case fossil fuels. The word “subsidy” can also have a negative connotation in that such payments are funded, in one way or another, by our taxes, so we’re paying for these government giveaways.
This definition corresponds roughly to the IMF definition of explicit subsidy — in the report, explicit subsidies are defined as undercharging for the supply costs of a fuel.
Let’s take a look at the geographic breakdown of explicit subsidies over the past two years based on data from the IMF’s 2023 working paper and related spreadsheet:
Source: IMF Fossil Fuel Subsidies 2023
Historically, the most important regions of the world in terms of explicit subsidies are East Asia & Pacific and Middle East and North Africa (MENA), which accounted for more than 60% of total explicit subsidies in both years in my chart
China and Saudi Arabia have the highest explicit subsidies in the world running at $269.7 billion and $129.3 billion respectively last year; these two countries alone accounted for almost one-third of the world total.
Let’s drill down a bit more — here’s a league table of the top 10 countries ranked by explicit subsidies in both 2021 and 2022:
Source: IMF Fossil Fuel Subsidies 2023
Three glaring points jump out.
First, two broad categories dominate this league table: energy-rich countries and emerging markets.
For example, in Saudi Arabia last year the IMF estimates it cost about $0.65 to produce oil and refine that crude into a liter of gasoline and about $0.73 to supply a liter of diesel. That’s equivalent to a supply cost of $2.46 per gallon for gasoline and $2.76 for diesel.
Yet, the national oil company, Saudi Aramco, sold gasoline and diesel to Saudi consumers at subsidized prices of $2.08 and just $0.49 per gallon respectively. For diesel that’s a massive 82% discount to the fair market price, which cost the Saudi government a whopping $17.3 billion in 2022 alone, about 1.8% of the national GDP.
If we total explicit Saudi subsidies for all fossil fuels as well as electricity for both residential and industrial customers, the total is an eye-popping $129 billion, equivalent to about 14% of the nation’s GDP in 2022. With a population of around 36 million that works out to an annual subsidy of almost $3,600 per capita.
So, why is Saudi Arabia consistently one of the world’s largest subsidizers of fossil fuels?
The more charitable way to look at Saudi subsidies is that it’s the government’s way of giving the population a tangible benefit from the nation’s resource wealth.
The more cynical interpretation is the Saudi royal family uses fuel subsidies, and fiscal largesse more generally, as a means of keeping the population happy and discouraging civil unrest.
As an example, back in 2011 so-called “Arab Spring” protests broke out in Saudi Arabia, particularly in the oil-rich Eastern Province. Sunni Muslims account for around 85% of the Saudi population and dominate in terms of political power and wealth; however, the oil-rich Eastern Province is home to a sizable, relatively low-income minority Shia Muslim population.
One of the ways the Saudi government responded to protests was to announce a $130 billion fiscal spending plan focused on building housing, infrastructure and boosting salaries. So, there’s precedent for the Saudi monarchy to maintain power through subsidies that help keep the population content.
Russia, Indonesia and Iran, all in the top 10 countries in my table above, subsidize fuel and electricity prices for a similar range of reasons. Simply put, these are all energy-rich countries that use subsidies to distribute national resource wealth and quell unrest in lower income segments of the population.
Much the same can be said for China. The nation’s huge population and rapid economic development in recent years led to a surge in energy demand; yet, China is still an emerging market, home to a vast low-income population. The Chinese government’s decision to subsidize natural gas prices is aimed at sheltering consumers from rising global energy prices in recent years.
Second, if the goal of the IMF’s Fossil Fuel Subsidy report is to encourage countries to reduce their explicit subsidies to the industry, they’re likely to have limited success with the energy-rich countries and emerging markets I just outlined. Obviously, countries like Russia and Iran have chilly or openly hostile relations with the US and other developed, Western powers.
And, the Saudi royal family is unlikely to be willing to eliminate explicit subsidies; to do so would threaten their power.
Third, the US does NOT provide significant explicit subsidies to the fossil fuel industry.
According the IMF report, total US explicit subsidies for fossil fuels in 2022 came to just $3 billion, an insignificant sum compared to US GDP of $23.61 trillion in the same year. Like the US, total explicit subsidies for the industry in Canada come to just $300 million compared to a GDP in the $1.95 trillion range.
So, despite the outrage from some environmental groups, US taxpayers aren’t providing explicit subsidies to US energy companies. Indeed, according to the IMF’s own data, the US energy industry more than covers the supply cost of fuel without the government’s help. Similarly, US consumers are already paying more than the supply cost of fuel, due to existing taxes paid on gasoline and diesel.
And that brings me to this:
Surging European Subsidies
There is one major region, home to several of the world’s largest developed countries, that has experienced a notable surge in explicit subsidies over the past few years — Europe.
Germany, Europe’s largest economy, didn’t even rank in the top 10 fossil fuel subsidizers in 2021 only to soar to ninth on the list last year with more than $43 billion in subsidies, equivalent to about 1% of national GDP.
Let’s take a look:
Source: IMF Fossil Fuel Subsidies 2023
This chart shows explicit subsidies for three EU countries — Germany, France and Italy — as well as for the United Kingdom.
As you can see, every one of these countries, led by Germany, saw a notable surge in explicit subsidies last year (see the grey bars) compared to the levels in 2015 and 2020.
Between 2021 and 2022 alone, explicit subsidies in the Europe and Central Asia region surged by more than 90%, the fastest pace of growth of any region of the world.
The surge in explicit subsidies last year is a direct result of the region’s energy crisis. For example, the German government announced a series of subsidies targeting both consumers and businesses, which capped electricity and natural gas prices at below-market rates.
And, of course, prior to last year Europe was heavily reliant on imported Russian natural gas for its energy needs, imports that were hit hard following Russia’s invasion of Ukraine and the subsequent sabotage of the key Nord Stream gas pipeline in September of last year.
However, as I explained in the July 6th issue of FMS, “Europe’s Renewable Energy Crisis,” Europe’s real energy crisis started long before Russia’s aggression in Ukraine. It’s a direct result of the region’s energy transition plan and increased reliance on intermittent renewable sources of electricity including wind and solar.
In the interest of brevity (never my strong suit), I won’t repeat all the arguments I made in the July 6th FMS or my February 19th issue, “The False Triumph of Alternative Energy.” Suffice it to say that both wind and solar are intermittent and weather-dependent sources of electricity generation — when wind velocities drop, for example, so does generation, forcing reliance on other sources to balance the grid.
The grid must be balanced on an ongoing basis — power supply must be balanced with demand — or you risk grid failure, blackouts and even damage to related infrastructure. .
With large-scale storage still expensive and limited, most countries rely on so-called shadow capacity — this is idle generation capacity that can be started quickly to feed power into the grid and offset the peaks and lulls in renewable energy generation.
Since natural gas is the most environmentally friendly fossil fuel — producing half or less the emissions of carbon compared to coal — Germany and many other European countries relied heavily on shadow gas capacity to balance their grids. Over the past two years, rising gas prices, and a desire to maintain adequate storage through ongoing supply disruptions, have forced countries like Germany to turn to coal.
Let’s look at German power demand and supply over the past month as an example:
Source: Bloomberg
This chart looks complex at first glance, so let me explain.
The black like shows net German power demand each hour of the day over the past month (August 11 to September 11). Net demand is defined as total German domestic electricity demand less generation from wind and solar facilities, which have priority on the German grid, meaning they’re fully utilized before turning to other sources of energy.
So, two main forces drive that net demand line — actual German electricity demand from consumers at any given time and renewable (wind and solar) generation. The latter is, of course, dependent on average wind velocities in Germany and light levels (i.e. at night, there’s no solar).
Each of the colored bars on my chart shows a different source of power. So, when net demand is relatively low or renewable generation high, Germany uses renewables for most of its power generation. However, when net demand rises — often due to a drop in average wind velocities — Germany needs to turn to other sources of power.
That list would include hydroelectric power (light blue bars), waste (pink bars), biomass (grey), then lignite coal (dark brown), hard coal (light brown/tan) and natural gas (green bars). If net power demand is high enough, Germany could then turn to its (small) available energy storage capacity and crude oil to balance the grid.
So, in a nutshell, this is why you’ll hear or read statistics like “Germany generated 99% of its electricity using renewable energy yesterday.” That happens frequently when wind velocities are high and/or weather conditions are ideal, reducing demand for power. The problem is that the weather isn’t always perfect, and there are periods — sometimes long periods — where the German grid must rely on fossil fuels like coal and natural gas to balance the grid.
The key point about all this is that regardless of how much solar and wind power capacity a country like Germany builds, it can’t truly replace fossil fuel generation at this time. That’s because if wind velocities are low enough, capacity factors — the ratio of power generation to rated capacity — will drop precipitously, forcing increased reliance on shadow capacity to balance the grid.
For example, last summer (June-August 2022) German wind power generation was LESS than in the summer of 2017 despite 19.3% growth in total German onshore and offshore wind turbine capacity in the intervening years.
Europe’s overreliance on intermittent sources of electric generation capacity led to a growing dependence on Russian gas supply to offset peaks and lulls in generation. That, in turn, led to a spike in gas and electricity prices in 2021-22 that forced Germany, France, Italy, the UK and other regional economies to ramp up subsidies to forestall an even more severe hit to consumer spending and the health of their economies.
Simply put, soaring European subsidies for fossil fuels last year don’t reflect a desire to provide financial help for the regions fossil fuel producers nor are they a legitimate rationale for accelerating the transition in favor of renewable energy.
Quite the opposite: Soaring explicit subsidies in Europe are a direct consequence of a disastrous policy of expanding intermittent renewable capacity too quickly while retiring too much conventional capacity. Particularly tragic in that regard is Germany’s decision to shut down its last remaining nuclear reactors, once a reliable, zero-emission source of 20% of the nation’s electricity supply.
So, let’s move beyond the more familiar explicit subsidies — actual government support for the fossil fuel industry and consumers of these fuels — to what IMF calls implicit subsidies:
Implicit Subsidies and Externalities
There’s an old concept in economics called the externality, let me explain with a simple, hypothetical example.
Businesses respond to price signals. So, let’s suppose you have a factory located on a river adjacent to small town. That factory produces liquid waste at part of the manufacturing process; storing and disposing of the waste in a landfill is expensive, so the factory chooses the cheaper option and dumps the waste in the river.
Now, from the factory’s standpoint this decision reduces costs and increases profit.
However, that liquid waste pollutes the local river and drinking water for the neighboring town. In effect, the factory is imposing a cost on the town that it does not experience directly — this cost is an externality because it’s not part of the factory’s economic equation of cost, supply, demand and price. It’s an indirect/implicit cost that’s “external” to the market.
So, one common prescription for dealing with this is to impose a fine or tax on the factory to reflect the cost of pollution to the neighboring town; if that tax/fine is high enough, it would increase the cost of dumping liquid waste and incentive the factory to dispose of their waste properly.
Externalities are a simple concept though, as I’ll explain in a moment, the devil is in the details, particularly when it comes to the fallout of imposing a tax to incorporate these implicit costs.
As I explained earlier, implicit subsidies are far and away the largest component of the IMF fossil fuel subsidies calculation. In 2022, implicit subsidies accounted for more than 80% of the $7 trillion in total subsidies the IMF calculates for the fossil fuel industry. And, before the big surge in European explicit subsidies in 2022, implicit subsidies were even more dominant — in 2020, for example, the IMF calculates that implicit subsidies accounted for more than 90% of the total.
Including implicit subsidies also dramatically changes the subsidy calculation for some of the world’s largest economies including the US. As I noted earlier, the US provided an insignificant explicit subsidy to the fossil fuel industry in 2022; however, the IMF calculates that implicit subsidies totaled a whopping $755 billion in 2022, equivalent to about 3% of US GDP.
That moves the US from near the bottom of the league table in explicit subsidies to near the top of the list for total fossil fuel subsidies.
The IMF’s implicit subsidies fit into 3 broad categories:
Congestion, Accidents and Road Damage
When you drive a car, or when a large freight truck moves down the highway, that creates some wear and tear on the roads. For example potholes need to be filled, lines repainted and roadway waste such as shredded tires picked up and disposed.
That’s a cost typically borne by the government — such as state highway departments in the US — that’s not a direct cost imposed on the individual consumer. Of course, consumers do pay for some of these costs via taxes and road tolls, but it’s not, at least in all cases, a direct cost for the individual.
Auto accidents impose costs on local emergency services along with wasted fuel for other motorists.
Traffic can be expensive in terms of wasted fuel or lost hours of work. While that’s certainly annoying for the individual motorist and can be expensive, it’s also a broader societal cost, an “externality,” rather than a simple direct cost.
Local Air Pollution
This would include particulate matter released by vehicles or power plants, sulfur dioxide, nitrogen oxide and mercury contamination.
Poor air quality imposes a cost on society that’s not directly borne by the individual motorist or business. This is a classic economic externality.
Global Warming/Climate Change Cost
IMF implicit subsidies include a sizable implicit subsidy that attempts to quantify the environmental damage from emitting carbon dioxide and the consequent impact on the climate globally.
As I’ll outline in a moment, this third implicit “cost” is likely the most controversial.
Let’s look at the breakdown of implicit subsidies for five of the largest economies in the world into these 3 categories:
Source: IMF Fossil Fuel Subsidies 2023
The IMF report also includes a small fourth category of implicit subsidy to account for lost consumption tax revenue from government’s underpricing fuels relative to cost estimates. I’ve excluded that from this chart to focus on the three larger categories.
As you can see, environmental subsidies — climate change and local air pollution — are a huge chunk of the total, ranging from about 54% of implicit subsidies in the US to more than 91.6% in China and around 84.6% in India.
Problems with Implicit Subsidies
In my view, there are several issues and challenges with the IMF concept of implicit subsidies.
First is quantifying these “subsidies.” It’s a relatively simple matter to calculate the cost of supplying a fuel like diesel or gasoline and then weighing that supply cost against retail prices accounting for consumption taxes.
Thus, calculating explicit subsidies is, at the very least, a straightforward exercise — these prices and taxes can be directly observed in the market.
It’s far harder to quantify externalities like local air pollution and, even more so, the cost of climate change because you can’t observe these costs directly and, unlike explicit subsidies, the government isn’t providing a direct monetary subsidy to the industry or consumers.
Diving into the exact estimation techniques the IMF uses to derive these implicit subsidy costs is beyond the scope of this (already lengthy) issue.
However, let’s consider these estimates qualitatively. The IMF report describes the cost of local air pollution as follows:
The main component of local air pollution costs, and therefore the focus here, is increased mortality and morbidity risk for people exposed to outdoor, fine particulate concentrations. According to the last assessment of the Global Burden of Disease (GBD), outdoor air pollution resulted in 4.5 million premature fatalities in 2019.
Source: IMF Fossil Fuel Subsidies 2023
I have no doubt that some people die prematurely due to excess air pollution each year and there are legitimate costs associated with loss of life and strain on the healthcare system.
However, I have even less doubt that’s a difficult number to quantify with any degree of precision. Just look at the debate over the exact number of COVID mortalities in recent years and what exactly constitutes a death from COVID -19. And, theoretically, using hospital records to compute a COVID mortality count should be a good deal easier than calculating deaths from various types of air pollution.
Second, according to the Energy Institute Statistical Review of World Energy, between 1981 and 2017 global oil consumption jumped 61.9%, natural gas consumption soared 153.7% and coal consumption rose 103.9%.
Yet, the World Bank reports that over the same time period, the percentage of the world’s population living in extreme poverty has plummeted from 42% to just 10%. Per the UN, global life expectancy stood at about 61 years in 1980 compared to more than 73 years today, a gain of about 20%.
Indeed, some of the biggest gains of all have come in emerging markets like China and India. These are both countries to which the IMF assigns a huge implicit subsidy from local air pollution; yet, average life expectancy is up 21% for China and 30.8% for India alone since 1980.
In short, there’s little doubt the cheap, plentiful energy provided by fossil fuels, which still dominate the global energy mix, have helped foster a prolonged era of global prosperity and economic development across the world. That’s helped improve nutrition, reduce fatalities from heat and cold and prolonged global life expectancy.
So, in light of these facts, it seems a stretch to calculate a massive implicit cost and subsidy based on premature deaths for the very fuels that have done so much to lengthen global life expectancy.
And that brings me to this:
Taxation, Inflation and $6.74 Gasoline
The abstract for the IMF’s working paper includes this passage:
Differences between efficient prices and retail fuel prices remain large and pervasive. For example, 80 percent of global coal consumption was priced at below half of its efficient level in 2022. Full fossil fuel price reform would reduce global carbon dioxide emissions to an estimated 43% below baseline levels by 2030 (in line with keeping global warming at 1.5 to 2 degrees Celsius), raise revenues worth 3.6 percent of global GDP and prevent 1.6 million local air pollution deaths per year.
Source: IMF Fossil Fuel Subsidies 2023
This offers a good summary of the solutions the authors propose in this report — imposing what they call “corrective taxes” such as a global carbon tax. As I noted earlier, that’s historically the standard means of internalizing economic externalities, imposing taxes or fees to ensure that companies face the full societal and environmental costs of their activities.
However, let’s bring these proposed solutions home and examine the US market for gasoline and diesel:
Source: IMF Fossil Fuel Subsidies 2023
This chart presents IMF estimates for the “efficient” consumer/retail price for gasoline after factoring in all the implicit subsidies I outlined earlier. IMF quotes all prices in liters, so I’ve converted those prices to $/gallon, the standard in the US market.
The weekly average price of a gallon of regular unleaded gasoline per AAA was about $3.96/gallon in 2022, but the IMF proposes an efficient price that’s more than 70% higher at $6.74/gallon.
For diesel, the gap is only slightly smaller — AAA reports the average consumer price of $4.96/gallon in 2022 and the IMF-proposed efficient price is about 60% higher at $7.91/gallon.
Step back for a moment and let that “solution” sink in. Can you imagine the outcry from the US electorate if the government were to tax gasoline prices up to $6.74/gallon to offset these calculated implicit subsidies? To say that’s impractical and political suicide is the understatement of the century.
And then there’s the economic impact. Consumer Confidence and energy costs are closely related:
Source: Bloomberg
In the US, consumer spending accounts for around 70% of economic activity and the US consumer has been the main factor accounting for economic resilience this year. Rising gasoline prices sap confidence and crowd out discretionary spending from the consumer’s budget.
In short, rising gasoline prices — or a steep rising in taxes — has a real economic cost in the form of recession, rising unemployment and falling confidence that’s more tangible that the IMF’s calculated implicit subsidies. And it’s not energy companies, or even the US government, that would ultimately pick up the tab for all this. Inflation has always been the most pernicious and regressive tax a government can impose on the people.
And it’s not just the US that suffers:
Source: Bloomberg
The European energy crisis has already taken an economic toll on the region’s largest economy. In July 2023 alone, German factor orders plunged 11.3%, the largest decline in more than two decades, save a brief stretch in early 2020 where output was interrupted by COVID-era economic lockdowns.
In my view, the IMF Fossil Fuel Subsidy report is more about activism — an effort to promote a rapid renewable energy transition and a global carbon tax — than a legitimate attempt to quantify subsidies to the energy industry. For many of us, a “subsidy” is a direct payment made by government in support of an industry — what the IMF calls explicit subsidies — and, for the most part, this familiar form of subsidy is rare globally, particularly in the US and the rest of the developed world.
That scary $7 trillion figure endlessly quoted in the mainstream media is derived through a complex calculation of environmental externalities; in most years these “implicit” subsidies account for 80% to 90% of the total global figure quoted in the IMF report.
Meanwhile, while the IMF report heaps trillions in phantom subsidies on the fossil fuel industry, it’s silent on the trillions in real government subsidies and tax benefits paid to promote alternative energy. The report also ignores the immense economic cost of rapid transition from fossil fuel and nuclear power to intermittent renewables such as we’ve seen in Germany over the past two years.
I have no problem with renewable energy and I do believe we’ll continue to see an expansion and improvement of these technologies in coming years. However, to argue the fossil fuel industry is receiving trillions in subsidies from the government annually is disingenuous. And the idea a rapid transition away from fossil fuels will be quick and painless is downright dangerous.
DISCLAIMER: This article is not investment advice and represents the opinions of its author, Elliott Gue. The Free Market Speculator is NOT a securities broker/dealer or an investment advisor. You are responsible for your own investment decisions. All information contained in our newsletters and posts should be independently verified with the companies mentioned, and readers should always conduct their own research and due diligence and consider obtaining professional advice before making any investment decision.
Hi Elliot. Thanks for an excellent article. I agree with a lot of what you say here. But I would also emphasise that, while it may be somewhat misleading to refer to externalities as "subsidies", they are nevertheless real costs that are borne by someone. Some of them may be non-monetary costs (such as reduced quality of life). Others may be future costs (such as effects on the future climate). But they are all real costs nonetheless, and it seems appropriate to apply the "polluter pays" principle, both from a moral point of view and for the sake of disincentivising the damaging behaviour, in this case the use of fossil fuels.
At the same time, we should recognise that the polluters here are not just the fossil fuel companies. We are all fossil fuel users, and therefore all polluters. Green movements have a tendency to want to put all the blame on the fossil fuel companies. Hence slogans like "just stop oil". But reducing supply without a corresponding reduction in demand will mean people being unable to consume as much as they want. Consumption would be forced down by higher prices, probably much higher given the inelasticity of demand.
As far as I can see, there is no way to prevent the impending climate catastrophe that does not involve higher prices for fossil fuels. (Well, rationing is an alternative, but I won't consider that.) If we're going to have higher prices, it would be better that they are imposed in the form of green taxes, which can help to pay for externalised costs and green solutions, rather than have excess profits going to the fossil fuel companies. You say that much higher prices are politically unacceptable. Indeed, I've been thinking for some time that, although it may still be theoretically possible to prevent a climate catastrophe, I doubt that it is politically possible. However, I'm a natural born pessimist, and perhaps I'm being too pessimistic. The human race is capable of remarkable things, and we may yet be able to save ourselves. Here I think of the South Korean people, who were among the poorest in the world after the Korean War, and who made enormous sacrifices to develop their country for the sake of their children. I believe that solving the climate crisis will require a similar attitude, something akin to a war footing. Of course it will be particularly difficult to motivate such an attitude when so much of the US population--and one of its two main parties--either deny the existence of the problem altogether, or else downplay its seriousness. Even the Democrats, I think, are understating the difficulty, when they suggest that we can have our cake and eat it too: save the planet, have lots of new well-paid green jobs, and no downside. Of course, they probably have to say that to get elected, but that thought just brings me back to pessimism. Hmm...