Monthly Archives: April 2014

265 – Fossil fuel subsidies

Amidst all the discussions about carbon taxes and emissions trading schemes for mitigating climate change, we hear very little about fossil fuel subsidies. You’d be forgiven for not knowing that they are, in fact, enormous.

This matters for several reasons, including that these subsidies encourage increased use of fossil fuels. From the perspective of climate-change policy, fossil-fuel subsidies make things even worse than they need to be. Climate policies are intended to push us in one direction, but fossil-fuel subsidies are pushing us in the opposite direction. It’s like running a race but starting well behind the start line.

I was surprised to learn that Australia has one of the highest levels of fossil fuel subsidies in the OECD, totalling US$8.5 billion of budgetary support and tax expenditures in 2011.

petrol_pumpWe have a bewildering array of schemes that subsidise fossil fuels. Federal subsidies include exemptions from crude oil excise for condensate, a reduced excise rate on aviation fuel, and the clean coal fund, plus there are numerous schemes at the state level. The biggest subsidy by far is the Fuel Tax Credits program, which provided almost $6 billion dollars of support to businesses for their fuel use in 2011.

Our total level of subsidies is behind the USA ($13 billion) but ahead of some economies that are much bigger than ours: Germany ($7 billion), the UK ($7 billion) and France ($4 billion).

We are told by our national government that our carbon tax is cripplingly expensive and has to go, but in 2012-13 it collected only $4.9 billion, not much more than half the cost of our fossil fuel subsidies. For some reason, the subsidies are not considered too expensive for us to bear. The most cost-effective way to make a start on reducing carbon emissions would probably be to remove these subsidies. At the same time, it would help to reduce our budget deficit.

The problem is even worse outside the OECD, with some staggeringly large subsidy programmes in Egypt ($19 billion), China ($20 billion), Russia ($23 billion), Venezuela ($24 billion), India ($34 billion), Saudi Arabia ($46 billion) and Iran ($65 billion). In Venezuela, fuel at the retail level is almost free – just a few cents per litre.

Fuel subsidies in these countries are often justified as a form of assistance to poor people, but it’s a really dumb way to try to help them. For one thing, most of the benefits go to people who are not poor. Secondly, the greatest needs of poor people might be something other than fuel – food or education, for example. Thirdly, big subsidies hold countries back economically, which ultimately is bad for poor people.

Getting rid of them is really hard, though, because the beneficiaries are used to them and see them as entitlements. Sometimes the subsidies are targeted at special interest groups, like farmers, who would fight really hard against any attempt to remove them.

It’s another illustration of the adage that we shouldn’t put any major policy in place that we might later want to remove, because special interests take hold and use the political system to defeat the public interest.

Further reading

Burniaux, J.M. and Chateau, J. (2011). Mitigation Potential of Removing Fossil Fuel Subsidies: A General Equilibrium Assessment, OECD, Paris, IDEAS page

OECD (2012). Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels 2013, OECD, Paris, here

Whitley, S. (2013). Time to change the game: Fossil fuel subsidies and climate, Overseas Development Institute, here


264 – Capitol Records’ shameful handling of The Beatles

This year is the 50th anniversary of the Beatles first success in the US, and there is a lot of celebrating and reminiscing going on. Capitol Records in the US probably made more money from The Beatles’ phenomenal success than anybody else, but nobody less deserved to profit from The Beatles than Capitol Records. They were dazzlingly incompetent and shamelessly greedy

Capitol had the right to release all of The Beatles music in the US, because Capitol was owned by The Beatles’ British label, EMI. But for ages they refused to release any Beatles music at all, turning down four singles and two albums, to the enormous frustration and anger of everyone associated with the band. Capitol arrogantly presumed that anything produced by the British would not succeed in the US. Even “She Loves You” (not just obviously a great track but the all-time highest selling record in the UK for the next 14 years) didn’t hit them as something that would be worth releasing. Clearly they were totally incompetent as judges of music, but they couldn’t even take the signals from the Beatles’ extraordinary success in England throughout 1963. American artists touring the UK were returning to the US with tales of the great music and unbelievable success of The Beatles, but Capitol didn’t know or didn’t care.

Eventually they released “I Want To Hold Your Hand” (one source says they were forced to by their parent company EMI) and immediately the Beatles records took off like nothing else before or since. In the opening four months of 1964, more than half of all records sold in the US were by the Beatles. One week they held all of the top five positions on the singles chart, plus the top two albums. Did Capitol learn from their previous arrogance and stupidity and treat The Beatles with more respect? Not a bit of it – they found a variety of ways to add insult to injury.


In a demonstration of brazen greed, Capitol omitted three or more songs from every Beatles album, and when they had accumulated enough songs in this way, they put out additional albums. This must have infuriated the Beatles, who were always concerned about providing value for money. The average length of The Beatles’ early Capitol albums is about 26 minutes. Most outrageously, Something New included only five new songs; four of the other six had already been released the previous month on A Hard Day’s Night and two had already been released as singles. And they called it Something New! Even including the six songs that fans already had, the album was only 24 minutes long.

They didn’t just shorten the albums, they re-juggled and mashed together songs from different albums and singles, meaning that the albums lost continuity of sound and style. Capitol threw out any of the band’s judgments about album coherence and song sequencing. For American fans, the Beatles’ extraordinary album-by-album progression – so obvious in the rest of the world – was masked. Most of the US albums are incongruous messes, with songs stuck together from several different sources. For example, Yesterday and Today (which was at least honestly titled) included two tracks from Help! from mid 1965, four tracks from Rubber Soul from late 1965, two tracks from a late 1965 single, and three tracks from Revolver from mid 1966. When they released Rubber Soul, they didn’t just trim down the UK version, they slashed four tracks and threw in two tracks from Help! that didn’t belong there at all. All of their albums prior to Sgt Pepper were pruned, muddled and mangled like this.


United Artists got in on the rip-off act when they released the movie soundtrack albums for A Hard Day’s Night and Help! In the rest of the world these albums had 13 or 14 Beatles tracks, but in the US they had only 9 (AHDN) or 7 (H!). They were padded out with instrumental music from the soundtrack, not performed by The Beatles.

Displaying further greed, Capitol released an absolute appalling documentary album, The Beatles Story, in 1964. It is truly ghastly.

By this disgusting combination of practices, Capitol and UA required US fans to buy 12 albums (prior to Sgt Pepper) compared to 7 in the rest of the world.

Capitol butchered the sound of the recordings. Without permission from The Beatles or their producer George Martin, they added treble and extra echo to the early recordings and they manufactured fake stereo from mono recordings by putting high frequencies in one speaker and low frequencies in the other. As a result, the sound quality of the US releases was noticeably inferior to the UK originals.

Capitol was so careless about things that they actually failed to release two great Beatles songs on Capitol albums at all (“Misery” and “There’s a Place”). Rather than give US Beatles fans better value for money for a change, they just left them off The Early Beatles, presumably hoping to squeeze out one more album at some point, but there was never a suitable place to put them until Rarities in 1980. (The sleeve notes for Rarities trying to explain the omission of these tracks add dishonesty to the list of crimes. “In the early Sixties … [Beatles’] albums from one country seldom resembled those from another.” Absolute rubbish. Outside North America most releases in most countries matched the UK albums. Only in America did they mangle the albums.)

Another way that Capitol made easy money was by releasing extra singles for tracks that were only on albums or e.p.s in England. Some of these were good choices for singles (“Yesterday” and “Nowhere Man”) , but a couple of the songs were really second-rate by The Beatles’ standards (“I’ll Cry Instead” and “Matchbox”). Clearly, Capitol couldn’t tell good music from bad, or they didn’t care.

Up until Rubber Soul, the album artwork of US albums was just awful, as illustrated in the above two examples. They passed over some excellent artwork design on the UK albums to release a series of tacky and tasteless covers.

Overall, the contrast between the good taste, value for money and integrity of Parlophone/EMI in the UK, and the tastelessness, greed, incompetence and unscrupulousness of Capitol in the US could hardly be greater.

When the albums were released on CD in 1987, the Beatles insisted on the UK versions being used in all countries, and the appalling US albums were finally put to bed.

Or so it seemed. Unfortunately, Americans who grew up knowing only the mangled albums continue to hold a soft spot for them, despite their many failings. Eight of the albums were released in two box sets in 2004 and 2006, complete with the original poor sound. In January 2014, another CD box set of all 13 US-specific albums was released, and you can now buy them all individually. There is no excuse or explanation for this other than greed. This time they have better sound but the dreadful original track listings and covers are preserved. I pity the fans who are allowing themselves to be ripped off all over again. They should be giving Capitol their condemnation, not their money.

Further reading

Lewisohn, M. (2013). Tune In, (The Beatles: All These Years, vol. 1), Crown Archetype, New York. [This is actually about the era that predates Capitol’s worst disgraces, but it’s easily the best of the many Beatles books on the market.]

263 – The EQ Index

Here is an idea: an index measuring the quality of the process used to evaluate environmental projects? It would provide a simple summary of the extent to which the evaluation process can be relied on to produce information that is useful for decision making. It would also provide a checklist of issues for people to think about when they are putting together an evaluation or prioritisation process.

Let’s call it the EQ Index, for Evaluation Quality.

I like the idea because many existing systems have weaknesses that lead to poor decisions about environmental projects. If people talked about and compared the EQ Index values for different processes, it might encourage a general improvement in their quality.

The EQ Index is a score out of 10, consisting of the following factors. Score 1 for each of these factors that is adequately accounted for in the evaluation process.

  1. Behaviour change. Does the process explicitly account for the likely degree of behaviour change resulting from the project? This could be voluntary behaviour change in response to information or payments, or compliance with a regulatory requirement. If relevant, it might include cooperation with the project by other organisations. (PD240)
  2. reefChain of links from management changes to outcomes. Does the evaluation quantitatively consider the chain of links between the changes in behaviour or management and the outcomes being sought? For example, a water pollution project might prompt farmers to reduce their use of fertilizers, the reduction in fertilizer use causes a reduction in export of nutrients from the farm into a water body, and that reduction in nutrients causes improvements in environmental conditions leading to improved ecology and ecosystem services. Are these links quantified?
  3. With versus without. Are the benefits of the project estimated by comparing outcomes without the project and outcomes with the project (not outcomes before and after the project). Many existing systems fail to do this correctly (Maron et al., 2013). (PD237, PD93)
  4. Values. Different outcomes have different values to the community. For example, not all threatened species are seen as equally important by the community. The Great Barrier Reef is more valuable than an urban creek. Score a point if the process accounts for differences in value or importance for the outcomes of different projects. (PD239, PD218)
  5. Risks. The process should account for the fact that different projects have different probabilities of success or failure, depending on issues such as community or political opposition, technical feasibility, financial risks, and the capabilities of the organisation implementing the project. The risk of project failure should be explicitly recognised and factored in. (PD241)
  6. Time lags. Some projects deliver benefits quickly and others may take a century or more. This matters because interest payments on project costs accumulate over time and benefits in the distant future need to be large enough to outweigh the accumulated costs. Therefore the process should estimate time lags and should discount benefits and costs accordingly. (PD242)
  7. Project costs. The process needs to account for project costs because projects with the biggest benefits don’t necessarily provide the best value for money. For example, if a project is very expensive, funding it may may mean that you have to give up many other smaller projects that would have been better in aggregate. (PD246)
  8. Maintenance costs. Many projects need ongoing funding, beyond the initial project, in order for the environmental benefits to be continued. Ignoring this is common but can lead to poor selection of projects. (PD249)
  9. The maths. One requirement is for the evaluation process to focus on value for money. That means dividing overall benefits by costs. (PD236) An optimisation model achieves the same thing, but is more work. The second requirement is for the benefits-related factors (numbers 1 to 6 above) to be combined appropriately. In particular, they should often be multiplied together (see Pannell (2013) for details). Many systems estimate weights for each of these factors and add them up to provide an indication of project benefits, but this is often a serious error. (PD253)
  10. Data quality. If the information used in the evaluation comes from reputable models and published research, or the information is reviewed by independent experts, score 1. If it consists of estimates provided by proponents of the project, score 0. (PD213)

If a factor is not relevant to a particular project, the project scores 1 for that factor. For example, a project that consists of building physical infrastructure might not require behaviour change, so it automatically scores 1 for factor 1.

What scores should be considered good, bad and indifferent? Here’s my suggested system.

8.5 to 10: Good

6.5 to 8: Room for improvement

0 to 6: Bad

I think 7.5 to 8 should be the minimum acceptable score. Below that, there is a high probability of serious errors in decision making.

To illustrate the system, here are a few assessments of EQ Indexes for different processes I’ve looked at. The scoring requires some judgement, but I think it’s not too difficult.

EQ Index examples

ExampleFactors includedEQ Index score
Caring for our Country 2009 competitive round5, 72
Rodruquiez et al. (2004)4, 102
Project Prioritisation Protocol (Joseph et al. 2009)2, 3, 4, 5, 7, 8?, 9, 10?6-8
INFFER (Pannell et al., 2012)1, 2, 3, 4, 5, 6, 7, 8, 9, 10?9-10

It would be nice to see people referring to the EQ Index for their project evaluation process. How does your process score? (I will give a prize to the first person to comment below with a convincing estimate of the EQ Index for a project prioritisation/evaluation process that they use.)

Further reading

Joseph, L.N., Maloney, R.F. and Possingham, H.P. (2009). Optimal allocation of resources among threatened species: a project prioritisation protocol, Conservation Biology 23(2), 328-338.

Maron, M., Rhodes, J.R. and Gibbons, P. (2013). Calculating the benefits of conservation actions, Conservation Letters 6(5), 359-367.

Pannell, D.J. (2013). Ranking environmental projects, Working Paper 1312, School of Agricultural and Resource Economics, University of Western Australia. Full paper ♦ IDEAS page for this paper

Pannell, D.J., Roberts, A.M., Park, G., Alexander, J., Curatolo, A. and Marsh, S. (2012). Integrated assessment of public investment in land-use change to protect environmental assets in Australia, Land Use Policy 29(2): 377-387. Journal web site ♦ IDEAS page for this paper

Rodríguez, J.P., Rojas-Suárez, F. and Sharpe, C.J. (2004). Setting priorities for the conservation of Venezuela’s threatened birds, Oryx 38(4), 373-382.