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Petrol taxes won’t hurt the poor

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

I admit, I stole that headline from a news article about a Swedish professor of delusional idiocy who spoke in Cape Town this weekend. It seemed too outrageous to pass up. It is not the most alarming claim the prof made, but it is worthy of study.

“Higher petrol taxes don’t hurt the poor but the use of fossil fuels should be made a crime against humanity as the world has only 50 years in which to mitigate the effects of climate change, says Thomas Sterner, a professor of environmental economics at Sweden’s Gothenburg University.” Thus declares a news article on Monday on TimesLIVE.

Clearly the fellow is distraught about the supposed negative consequences of the internal combustion engine.

Liberation from slow, arduous travel has contributed in large degree to the astonishing rise in living standards in much of the world during the 20th century. It greatly expanded trade, and made labour more mobile than ever, presenting people with unprecedented choice and opportunity. It even permits professors from the world’s richest countries – like, say, Sweden – to present workshops at universities in deepest Africa, to instruct us about our failings.

Consistent with his status as a revered oracle from a far-distant civilised kingdom over the seas, he preached terrifying numbers, as if the devil himself was hard on his heels.

He appears to have made them up out of whole cloth. Here’s how you do that. Pick a number, any number, like the UN Intergovernmental Panel on Climate Change’s scary century-scale temperature predictions. Multiply the prediction by five, and halve the time scale. Hey presto! You now have a number that is ten times scarier.

For example, instead of two degrees in hundred years, as some climate models predict, Sterner says some regions will warm by as much as 10 degrees in 50 years.

If you’re not scared witless yet, try the next bit, about crimes against humanity. It is idle to speculate how he proposes to charge and punish the owners of the world’s one billion vehicles, all of whom are really little Hitlers by Sterner’s standards. Maybe we can turn some barren waste, like Australia or the Karoo, into a penal colony for Sterner Criminals.

Although such a Gulag seems a chilling thought, the upside is it will only affect the world’s rich people. Because you see, poor people don’t drive cars.

No, seriously, this is his claim. His research has led him to believe that raising taxes on petrol won’t hurt the poor, because poor people don’t own cars. Instead, they use public transport.

Superficially – very superficially indeed – this is true. Monaco, with 863 vehicles per 1,000 population, is undoubtedly wealthier than Togo or Bangladesh, with two. The United States, with its 828 vehicles per 1,000 people, is probably better off on average than, say, Somalia or Liberia, with three. In South Africa, we have 159 vehicles per 1,000 people (or 108, according to our own data. The global average is 148, largely thanks to the fact that China and India, with almost 2.5 billion people, own relatively few cars per capita.

So, poor people don’t own cars, rounding to the nearest hundred million who do. They rely on public transport.

If we concede this point, we must conclude that Sterner’s research shows that over here in Africa we all ride mag-lev transport pods that can run for years on a thimbleful of powdered Kryptonite.

See, a third of South Africa’s commuters use a mode of transport called “taxis”. Let us assume for the sake of this argument, and with no more stereotypical prejudice than his claims about vehicle ownership, that all taxi passengers are poor, and all the poor use taxis.

It would prove more than a little injurious to his claim if higher petrol prices made taxis more expensive to operate because they burn petrol. This would cause taxi owners to raise fares, which would have to be paid for by the poor, and remember, the poor aren’t supposed to be hurt by taxes on fuel. So taxis can’t be fuelled by petrol.

Besides, the truly poor, the 22.4% of South Africans with a household income of less than R500, spend a great deal of it on transport. Half spend more than 20% of their income on it, according to the 2003 National Household Travel Survey. As people get richer, the share of people who spend this much on transport declines, until by R6,000 a month, nobody spends more than 20% of their income on transport, and two thirds spends 5% or less. On average, 18% of South Africans spend more than 20% of their household income on transport. If Prof Sterner reckons that a fuel tax wouldn’t hurt the poor, we must assume that poor people’s transport is not fuelled by petrol.

Perhaps he thinks South Africa’s public transport runs (or can run) on electricity or natural gas, like it does in his native Sweden. Even if this were true, it would undermine his claim that a tax on fossil fuels wouldn’t hurt the poor. You see, two thirds of the world’s electricity is generated by burning fossil fuels. Admittedly, once you’ve built the concentration camps to incarcerate car owners for their “crimes against humanity”, it can’t be that hard to find the additional space for the teeming throngs who use electricity.

One must further assume not just that the poor eat significantly less than Prof Sterner’s Swedish comrades, but that they eat nothing at all. Unfortunately, the production of food, its distribution, its cold storage and its retail sale, all require a non-zero amount of energy, both of the fuel-powered truck variety and the coal-fired electricity type.

The exact contribution of the fuel price to the cost of food varies widely, but the only way the poor would not be hurt by the impact of a fuel tax on food prices is if they ate nothing. Therefore, his research must contradict data from the National Agricultural Marketing Council, which says the poorest 30% of South Africans not only do eat, but spend fully a third of their income on food. For the richest 30%, by contrast, food accounts for less than 3% of income.

The same goes for any other commodity that the poor buy. All are affected, to a greater or lesser degree, by the price of fuel. Therefore, one can only conclude that Sterner thinks the poor are born, do nothing for a while, and promptly die. Of starvation. Swedish newspaper pictures of fly-specked black babies with bloated bellies, skeletal limbs and rheumy eyes, must feature prominently in his research.

What Sterner may have meant to say is “the higher the dependence on motoring among the (electorate) population the more dif?cult it is politically to raise fuel taxes.” This is how he puts it in a 2007 Energy Policy paper advocating fuel tax as “an important instrument for climate policy”.

In a way, this is an even worse claim. Instead of saying fuel taxes won’t hurt the poor, it says the poor may not notice a fuel tax, because they buy little fuel directly, and will see the effects only indirectly in the prices of things of which fuel is merely a component cost. The former is a comforting lie, but the latter is a cynical argument that says authoritarian politicians may be able to fool the poor without great risk of sparking an angry revolution.

Either way, the truth is the exact opposite of what Sterner claims: higher fuel prices as a result of taxes will harm the poor disproportionately more than they will harm the rich.
Amusingly, my browser warned me of an untrusted connection when I tried to download his paper, and if Sterner is travelling the world telling poor people that fuel taxes won’t harm them, I can see why. He promotes his alarmist climate delusions by means of outright dishonesty. This is the sort of deceit to which one has to resort to justify the abuse of tax as an authoritarian policy instrument, instead of a means to raise revenue to fund the protection of life, liberty and property. This is, indeed, not a man to be trusted.

While we’re on the subject of Professor Sterner, perhaps he should be asked to turn himself in to the International Criminal Court. One assumes that in order to lecture us, he flew from his rich-world ivory tower to our distant shores, burning more fossil fuels in order to do so than most Africans burn in a year. That, by his own admission, is a crime against humanity.

Let him set an example for us poor Africans, and report to a work camp in the Kryptonite mines for re-education. DM


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