Who Will Be Hurt Most By Chile’s Carbon Tax?

As part of the tax reform put into law last month, Chile now has the “honor” of calling itself the first South American country to impose a carbon tax. Starting in 2018 Michelle Bachelet’s center-left government will attach a price tag of $5 to every ton of carbon emissions produced by the country’s large electricity generators. The law will apply to any thermal generators with a capacity of at least 50 megawatts – though biomass plants are exempt – and will reportedly extract $160 million out of the economy.

Coincidentally the year the new carbon tax takes effect is the same year Chile is expected to officially become the first developed nation on the continent. The adoption of free market policies in recent decades – the Fraser Institute now ranks the Chilean economy as the 10th freest in the world – has made Chile a model for other South American nations to emulate. Squarely in line with her socialist philosophy, though, Bachelet aims to mold Chilean society according to her wishes. Unfortunately for Chilean citizens, especially the poor whose lots Bachelet claims to want to improve, this includes taxing electricity.KONICA MINOLTA DIGITAL CAMERA

Considering that some 30 percent of the country’s energy production stands to be affected, the carbon tax will likely have a serious impact on prices. Naturally those hit hardest by such price hikes are those spending the highest share of their income on energy, i.e. the poor. Enter the schizophrenia of left-environmentalism: advocating for forced wealth transfers to help the needy while simultaneously adopting policies that raise the prices those same people pay for some of the most basic necessities.

Besides the obvious truth that a tax levied on any product or service raises its price, there is empirical evidence on environmental taxes we can point to and learn lessons from. Studies estimate that the carbon tax burden may be as high as 3.5% for low-income households compared to less than 1 percent for the highest income range. In the UK, for instance, a carbon price floor introduced last year added $8 to household bills, and official estimates predict that surcharge rising to as much as $80 by 2020. More uplifting news comes from Australia, where the recent repeal of the carbon tax is estimated to save households on average between $175 and $230.

In addition, it is worth asking ourselves where this $5 number comes from. The same ton of carbon dioxide is taxed at some $9 in British Columbia, $15 in Britain, nearly $20 in Australia, and as much as $150 in Sweden. Such a wide range seems hardly scientific, and it begs the question if perhaps politicians are just making it up as they go along, hoping to strike the right balance between satisfying special interests while keeping their cushy government jobs. In the Chilean context it is worth noting that the mining industry, a vital part of the Chilean economy, represents approximately one third of the nation’s energy consumption.

Whether one subscribes to the theory of anthropogenic global warming or not, climate policies’ impact on our daily lives is undeniable. As with any kind of government intervention it is imperative for us honest skeptics of centralized power to represent the voices of reason, especially in a highly politicized debate. Chilean households have yet to see the likely devastating effects of such (over)ambitious policies, but there are still a few years left to stop it in its tracks.


Saving the Amazon from Socialism

As reported by the BBC last week, Brazilian authorities have dismantled a criminal organization believed to be the “biggest destroyer” of the Amazon rainforest. The gang stands accused of invading, logging and burning large areas of public land to put up for sale for farming and grazing. Their crimes, said to be worth more than $220 million, could land them up to 50 years of jail time if found guilty on all charges of invading public land, theft, environmental crimes, forgery, conspiracy, tax evasion and money laundering.

AmazonRepresenting more than half of the world’s rainforests the Amazon is the largest and most biologically diverse tropical rainforest on the planet. Its millions of square miles are home to the largest collection of living plants and animal species in the world. While the Amazon is largely contained within Brazil, its 2.1 million miles span a total of nine countries from Peru on the Pacific side of the continent to French Guiana on the east coast. Given the vast size of the area it is little wonder that some (illicit) activity goes unnoticed. In the case of the Amazon, however, there is a major contributing factor.

One of the aforementioned charges likely to catch a libertarian’s eye is invasion of public land. The real underlying problem, then, becomes readily apparent: no one owns the Amazon! Even the BBC’s correspondent in Brazil is quick to point out that political and police corruption coupled with the federal government’s ineptitude allows loggers and illegal miners “to operate with impunity”. So here we have a situation in which a lack of real ownership of land predictably leads to poor conservation of the area and its natural beauty. The solution, then, should be equally obvious. And it is.

Contrary to mainstream environmentalist thinking examples of successful private management of nature reserves abound. A recent National Geographic article for instance, details how the Lapa Rios private reserve in Costa Rica plays a critical role in sustaining a connected and healthy population of large cats. Funded by low-impact ecotourism these reserves are not dependent on the whims of politicians and offer more reliable protection from illegal hunting and forest degradation.

Much closer to the Amazon region is an area known as the Pantanal, the world’s largest tropical wetland area. Located mostly in the Brazilian state of Mato Grosso do Sul it is almost entirely in private hands, namely those of indigenous cattle herders. Though much less famous than the Amazon the Pantanal is known as a must for any and all who like to see wildlife up close – better than the Amazon according to many a traveler. The same sort of ecotourism commonly seen in Costa Rica enables the highly successful preservation of natural flora and fauna.

The objections commonly voiced against the private ownership of parks and reserves can be easily refuted using basic economic laws of supply and demand and the profit motive. In addition we can point to plenty of successful real-world examples to build a convincing pro-liberty case. Besides, if everyone is so worried about preserving the environment and maintaining biodiversity, how much more successful will voluntary action aimed at doing just those things be?

The key to proper management and preservation of our beautiful planet is nothing more or less than good old-fashioned property rights. Absent the recognition of those rights and the incentives inherent therein we can only expect environmental degradation.

5 Ways Environmentalism Harms the Environment

Friends of the Earth, Earthwatch, Environmental Defense Fund, Green Cross International, The Climate Project, World Resources Institute, WWF, and of course the inevitable Greenpeace.

These are just some of tEnvironmentalismhe environmental organizations that have for decades been pushing for – and in many cases outright lobbying for – ever more stringent environmental regulations to save the Earth and humanity from supposed catastrophe. Undoubtedly the majority of the people involved with these and other organizations are well-intentioned individuals that sincerely believe in their cause. That is not to say, however, that they are absolved from scrutiny as to the consequences of their (political) actions; you judge a tree by its fruits.

As it turns out, it can be quite convincingly argued that the very people and organizations purportedly fighting for protection of the environment are achieving much different outcomes, and one does not have to dig very deep at all to discover what those outcomes really are. As you read this, understand that this is not a ringing endorsement of a throw-away society, but rather an honest attempt at dissecting the arguments made for increasingly strict environmental policies and examining the results thereof.

1. Tilting the balance in favor of large corporations
“Green” regulations, like any and all forms of regulation, disproportionally hurt small and medium-sized businesses. After all, large (multinational) corporations have the financial resources and manpower that their smaller competitors lack to deal with the regulatory burden. As such each and every new law passed further threatens the very existence of mom-and-pop stores in your neighborhood. And unlike multinationals they don’t have the lobbying power to turn the regulatory tide, either. The result? Fewer local stores in your area, forcing you to drive farther away for your groceries. True, you will likely plan ahead to avoid having to go to the store every day, but that means you now need a car to transport all those groceries in. You might not have needed that car to begin with if you could just stop by your local grocer that’s now gone out of business.

2. Increasing pollution with “green” energy
Wind turbines don’t come falling from the sky. They require vast amounts of steel produced in steel mills and the fiber composite that make up the blades is manufactured in a chemical plant. Then there is the issue of rare earth metals (or rare earths), used in everything from electric car batteries to wind turbines to solar panels. Nearly all production today takes place in China, where both people and the environment suffer due to the hazardous and radioactive byproducts released in the process. Mines and processing plants are struggling to keep up with the demand artificially pushed up by governments in the form of tax incentives and massive subsidies.

3. Impoverishing people
Speaking of subsidies, one of the major recipients has been the “green jobs” industry. In an attempt to appeal to a broader audience, the argument is that specific policies would lead not only to a better environment, but also boost the economy through the creation of “good jobs”. Though the proponents of green jobs have yet to find agreement on what defines such a job, what has become clear is that the net effect on employment is actually negative. In the UK 3.7 jobs are lost for every green job while in Spain the ratio stands at 2.2 jobs lost per green job. Poof!

To make matters worse, prominent green jobs reports such as the UNEP report even go so far as to rail against high-productivity jobs lest they “pose the dual challenge of environmental impact and unemployment”[1]. Apparently the report’s authors are totally oblivious to the fact that increased productivity is what makes a society wealthier, and that the inefficient use of resources for the sake of “spreading the work” will inevitably make everyone poorer.

It goes without saying that poor people will naturally care less about the environment and more about where their next meal is going to come from. While rich people have the luxury of worrying about the environment, poor people do not. So the wealthier a society, the more likely it is to take good care of the environment.

4. Wasting resources mandating recycling
I know this is going to sound counterintuitive – as it did to me – but recycling does not always save energy or money. The latter makes sense considering the top-down approach that has dominated environmental initiatives; if there was any money in recycling, force would not have been necessary to bring it about. New York City’s recycling program, for instance, costs the taxpayer almost double what it would cost to just throw glass, metal, and plastic away.

Still, it would be one thing to spend all that taxpayer money on recycling if it actually saved resources. Unfortunately even that is not necessarily the case. Trees are planted and grown on tree farms specifically to make paper and as such do not contribute to deforestation. Other materials such as glass and aluminum can be effectively recycled, benefitting both the environment and the economy. However, businesses involved with the production of these materials have an inherent incentive to recycle anyway, so there is no need for regulatory requirements there.

5. Carbon taxes
Carbon taxes help funnel money into wind and solar power, which also come with environmental problems even in addition to the aforementioned. Solar thermal technology, for instance, consumes huge quantities of water – you know, the substance that is generally already lacking in areas where solar panels are the preferred “renewable energy” source (e.g. California, southern Spain).

Solar panel fields and wind farms are also very land-intensive, and wind farms negatively impact animals in the form of habitat loss and fragmentation. Besides, few people find wind turbines scattered over the countryside to be of benefit to the landscape. Some even suffer negative health effects that have been linked to living near a wind farm.

Finally, carbon taxes aggravate the aforementioned problems of favoring large over small businesses and impoverishing people.

Given these issues it would behoove environmentalists to consider the unintended consequences of their push for continued “climate action”, even aside from the debate over whether or not climate change is man-made to begin with. Having blind faith in politicians and special interest groups that try to greenwash their agenda to appeal to your sense of justice may not be the best strategy if you really care about the environment.

[1] Green Jobs: Towards decent work in a sustainable, low-carbon world. United Nations Environment Program (UNEP). (2008). p.6.



The Oil Spills That Went Largely Unreported

On October 11 of this year, four Nigerian farmers sat in court in The Hague, The Netherlands alongside fellow plaintiff, the environmental group Friends of the Earth, after having sued Shell to demand clean-up of and compensation for pollution in the Niger Delta. Though it was the first time a European company was brought to court in Europe for damages caused abroad, it was hardly the first time a major multinational oil company was caught severely polluting the Niger Delta. 

According to an independent team of experts from Nigeria, the UK and the United States convened by the Nigerian Conservation Foundation, at least9 to 13 million barrels of crude oil spilled in the Niger Delta between 1956 and 2006[1]. To put this figure into perspective, the much more publicized 2010 BP oil spill in the Gulf of Mexico and the 1989 Exxon Valdez spill off the coast of Alaska released into the ocean approximately 4.9 million and 257,000 barrels, respectively. The financial cost of the environmental damage caused by oil and gas activities in the Delta region is estimated to run in the tens of billions of dollars.

Since 2006 there have been several new incidents, further polluting the area that is already one of the five most severely petroleum damaged eco systems in the world[2] due to the detrimental effects on water ways and marine systems, residents, fishing, forests and agricultural lands.. Just last August, an oil spill near an Exxon Mobil oilfield spread along the shore killing fish the locals rely upon for their survival. The National Oil Spill Detection and Response Agency, installed by the Nigerian government, recorded 2,405 incidents between 2006 and 2010, an average of about 600 per year. That number fits with the long-term trend of ever increasing oil spill incidents in the West-African country[3].

Besides the obvious environmental degradation, the ongoing disaster has taken its toll on the health of Nigerians living in the Delta region too, cutting their average life spans short by twenty years and destroying the fish industry. The crisis, therefore, is not only an environmental but also a human rights issue. However, the culprits are not taking their responsibility, claiming sabotage and theft by locals are causing the devastating spills. One would think that if the locals were causing an average of 600 spills a year – or a new spill every 14 hours – it would be hard for the big oil companies to make a profit, though.

It remains to be seen whether or not justice will be done for those who are witnessing the ongoing devastation of their habitat, their health and their livelihoods. What has become painfully clear so far is that despite the magnitude of the disaster, mainstream (Western) media have not been willing to give the crisis the kind of coverage it deserves. Moreover, the Nigerian government has done little to protect the Nigerian people from the negative consequences of oil and gas extraction. Needless to say, the people of the largest oil producer in Africa are not getting much, if any, of the $140 billion in estimated annual oil revenues either. In fact, Nigeria’s GDP per capita ranks 178th in the world while the human development index puts the country in 156th place, only two places above poverty stricken Haiti and thirteen places above Sudan, notorious for its continuing human rights crisis. Estimates say seventy percent of the Nigerian population fall below the poverty line. The court in The Hague is expected to deliver a verdict late this year or early in 2013. Hopefully the outcome will prove to be the first step toward bringing the region more than pollution, conflict and poverty from its oil reserves.

[1] Federal Ministry of Environment Abuja, Nigerian Conservation Foundation Lagos, WWF UK and CEESP-IUCN Commission on Environmental, Economic, and Social Policy, May 31, (2006). Niger Delta Resource Damage Assessment and Restoration Project. p.3.

[2] Federal Ministry of Environment Abuja, Nigerian Conservation Foundation Lagos, WWF UK and CEESP-IUCN Commission on Environmental, Economic, and Social Policy, May 31, (2006). Niger Delta Resource Damage Assessment and Restoration Project. p.5.

[3] (2012). Petroleum Technology Development Journal. Oil Spill Control and Management. January 2012, Vol. 1. p.2. Retrieved from http://ptdjournal.com/2012/sylvester_egwu_jan2012.pdf.  p.3.