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Saudi Arabia produces oil, which is consumed in Ireland. The carbon emissions are counted as part of the Irish total. Ireland produces dairy products which it sells to Saudi Arabia.
The carbon emissions, you would imagine, count as part of the Saudi total.
You would be wrong – they also count as part of the Irish total. Since there are national ceilings on emissions for EU countries, and possible fines for exceeding them, there is pressure to constrain the dairy industry in Ireland.
It would be insane to count the carbon emissions from oil products as part of the Saudi total, demanding reductions in Saudi output.
Saudi Arabia is just about the cheapest place there is to produce oil and it would be nuts to constrain production there, diverting it to places where the costs are higher.
Oil products for road transport and some other purposes are taxed heavily in Europe, although some non-European countries have much lower taxes, even subsidies
The same goes for Irish dairy farming: if you really believe that Ireland is a low-cost producer, it makes no sense to divert output to places where costs, including carbon costs, will be higher.
The European system of national ceilings for carbon emissions, a relic of the 1995 Kyoto approach to managing climate change, is about to get serious, in a world where there are no enforceable emission ceilings outside Europe.
Ireland is not the only EU country which may be in breach and it will be interesting to see whether actual fines will ever be imposed.
Oil products for road transport and some other purposes are taxed heavily in Europe, although some non-European countries have much lower taxes, even subsidies.
As a result, the volume of emissions from these heavily-taxed oil products is kept down in Europe.
If taxes on auto-fuel were as low here as they are in the US, a litre of petrol would cost only about 61c, less than half the actual price, recently around €1.35.
People would drive bigger and less fuel-efficient cars and would clock up higher mileage.
If there were no taxes or subsidies on petrol, the price would be about 53c, so the US has a tax mark-up, a mixture of federal excise and local sales taxes, which works out at about 15%. In Ireland, the mark-up is far higher, about 150%.
There are worse offenders than the US: the forecourt price in Saudi Arabia is just 48c, so there is a retail subsidy.
Motoring taxes pay for road upkeep, not just for carbon emissions, so it does not follow that taxes in Europe are excessive.
It does follow that Saudi is not doing its bit for climate change though and the other offenders include oil-producing countries like Nigeria and Russia.
Ireland’s livestock-based farm sector is acknowledged to be a substantial source of carbon emissions and there is pressure to constrain output
The policy in Europe on emissions from auto-fuels makes sense: a steep consumer-level tax keeps usage down and provides the incentive for improved efficiency and for alternatives like public transport and electric cars.
But the policy is not universally applied: there are no taxes on aviation or marine fuel, for example, even though their emissions are similar to those from auto-fuel.
Ireland’s livestock-based farm sector is acknowledged to be a substantial source of carbon emissions and there is pressure to constrain output.
The most economically efficient way to do this is to ensure that consumers, wherever located, face the full costs, including carbon levies.
That means that products from the livestock sector, including beef and dairy products, would cost more. The levies should ideally differentiate to favour produce from countries where the emissions per unit of output are lowest.
But just as with oil and Saudi Arabia, the low-cost producer is not first in the firing line under a policy of this type.
The least efficient, including the least carbon-efficient, producer will lose most. Unfortunately, the worldwide policy regime which would be most efficient, a universal carbon tax at the consumer level, is not the way that climate policy has been going.
The focus has been on national-level ceilings, arrived at arbitrarily and based on production rather than consumption.
This policy has failed of course since global emissions are continuing to rise. One of the countries more sinned against than sinning in this debate is China, the world’s largest emitter of greenhouse gases.
Measured on a consumption rather than production basis, Chinese emissions are lower than they appear to be, since China exports lots of carbon-intensive products (steel for example) to the US and Europe.
These countries have in effect outsourced their emissions to the Chinese who look like the bad guys when the numbers are totted up on a production basis.
The Irish farm sector has more in common with China than it does with the designers of the EU’s nation-by-nation production-based emission ceilings. It makes sense for Irish farm interests to support the efficient alternative, a universal consumption-based carbon tax.
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