# 17 Cost of taxed oil and coal, wind power progress

Shell, BP, Exxon Mobil and Statoil demand a global carbon tax (see post 12). This is not only because they need it for future planning. They have vast reserves of natural gas, which emits only half the amount of CO2 as coal does. The price increase caused by the tax would force coal fired power stations to switch to natural gas. That is a perfect example how the world’s greenhouse gas emissions can be reduced without subsidies. The tax has to be global, otherwise there will be unfair competition and complicated duty arrangements between countries based on their pricing of carbon.

The above development raises the question, how well will other oil companies fare? Not too bad, as can be seen from the calculations below. A tax of $30 per tonne of CO₂ as applicable in British Columbia raises the price of crude oil by 9% and the price of thermal coal by at least 70%. That 9% is within the range of price fluctuations caused by political events but the 70% is hard to swallow by coal companies. It is however the only way to make green energy more competitive without subsidies. Such subsidies have worked but they are not equally distributed and a lot of money has been wasted on firms which eventually went bankrupt.

 Last year the US spent billions of dollars on subsidies at 2.3 c/kWh, which gives an idea how much wind power is generated. They are now about to terminate the subsidies because wind power has become competitive even without the help of carbon tax. According to the Department of Energy, the average electricity cost from a new natural gas plant in 2018 will be 6.7 cents per kWh, compared with 8.7 cents for wind, 10 for coal and 11 cents for nuclear power. Energy from offshore wind farms remains expensive, at 22 cents per kWh see http://www.globalpost.com/dispatch/news/afp/140115/blown-away-us-suspends-wind-power-subsidies-now  

 Ontario is not that lucky. They are obliged to pay a subsidy of 13.5c/kWh for wind power and at least 44c/kWh for solar power until their 20 year contracts signed since 1999 are running out, see http://www.theglobeandmail.com/report-on-business/rob-commentary/the-sorry-lessons-of-green-power-subsidies/article4103467/

 Since power from wind remains unsteady a carbon tax would encourage the development of pumped storage facilities and vehicle to grid systems. That would allow to store wind power and maintain a steady delivery during windless days. It could even be used to store excess windpower to meet peak demands.

Here follow the calculations:

Taxed price per barrel of crude

The search for correct figures is complicated by the fact that there are many different barrel values for dry and liquid goods. In the US and Canada the fluid barrel equals 119 litres but the figures below are based on the oil barrel which equals 159 litres

According to http://numero57.net/2008/03/20/carbon-dioxide-emissions-per-barrel-of-crude/ each barrel of crude contains 317 kg of CO₂. At the present British Columbia rate of Can$ 30 per tonne of CO₂ we would cash in an extra 317x30/1000  = Can$9.52 (US$ 8.76) per barrel of crude.

This compares to the Ministry of Finance tax schedule for oil products as follows:

Gasoline @ 6.67c /L =       Can  $ 10.61/ bbl = US $ 9.76

Light fuel oil@ 7,67c/L=    Can $ 12.20/ bbl = US $ 11,22

Heavy fuel oil @ 9.45c/L =  Can $ 15.03/bbl = US $ 13.83

These are all higher than the $ US 8.75 per barrel of crude arrived at in the article. That may be explained by other fractions in crude which contain less carbon per volume. The present price for crude oil is US $ 97.10/bbl so the BC tax of US$8.76  per barrel would add about 9% to the price.

Taxed price per ton of coal.

There are 3 different values for the ton. British Columbia’s carbon tax is $ 30 per tonne of CO₂, which is the metric ton, 1000 kg (2204.6 pounds). The long ton is 2240 pounds and the short ton is 2000 pounds. In BC coal is taxed at $53.31 to $62.31 per tonne depending on heat value. Present prices for coal are shown in $ US per short ton and will be converted to $ Can per tonne. The carbon tax bill in the US is based on $20 per T of CO₂. There is quite some confusion about symbols so until further investigation we only know that it is well below the BC rate.

According to http://www.infomine.com/investment/metal-prices/coal/ the present price of thermal coal has during the year varied between US$55 and US$65 per short ton and is at present US$ 60 per short ton

http://www.steelonthenet.com/files/metallurgical-coal.html shows a table of quarterly prices for metallurgical coal. There is a gradual drop from US$202/short ton in 2011 to the present US$106/short ton,

The resulting minimum figures are:

                                      Cost US$/st   Cost Can$/tonne  Carbon tax   Total    % increase

Thermal coal low heat v        60                    71.88            53.31       125.19           74

Thermal coal high heat v      63 (est)              75.47            62.31       137.78          83

Metallurgical coal                 106                  126.99            53.31      180.30          42