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Subsidies and their discontents
Ron Steenblik and Doug Koplow join the Cosmopolicast to explain the opaque, perverse, and often counterproductive nature of energy subsidies. Plus: A question for our readers.
The Cosmopolicast today is about subsidies: energy subsidies, in particular.
By some estimates, subsidies to the fossil, nuclear, and renewable energy sectors are worth more than a trillion dollars a year—and that was before Russia invaded Ukraine. Since then, governments around the world have been frantically trying to address the problem of skyrocketing energy costs by means of subsidies ranging from price caps and tax cuts on electricity bills to sops for energy firms. These policies may be politically expedient, Ron and Doug argue, at least in the short term, but they come at a cost.
Ron and Doug look in detail here at the way subsidies work. Often, they’re insidious and opaque. Not only do subsidies stress government budgets, they’re prone to having unexpected effects, fiscal and environmental, and failing to produce the desired economic, social, and political objectives.
This is a really well-informed discussion. These two know everything there is to know about this subject. We’re sure you’ll learn a lot from it.1
Ron Steenblik, a senior adviser to the Cosmopolitan Globalist, is a non-resident Senior Fellow with the International Institute for Sustainable Development. Between 2006 and 2007, he served as the institute’s first director of research for the Global Subsidies Initiative, a program aimed at shedding light on perverse subsidies.
Doug Koplow is the founder and president of Earth Track, based in Cambridge, MA, which focuses on making the scope and cost of environmentally harmful subsidies more visible and identifying strategies for their reform. He’s worked on this issue for more than thirty years, advising a wide range of governmental agencies, environmental groups, foundations, and trade associations.
❓A question for our subscribers
A reader wrote to me this morning with this advice:
[I]n my humble opinion, these editions still have far too many links and far too little summary for those for whom keeping up with world events is not their profession. May I suggest something more along the lines of the number of words and organization of something like the Monocle Minute, at the least as an optional alternative to the longer newsletters? The Monocle Minute has about the quantity of material that is reasonably digestible for something issued weekly or more frequently. More and it will often go guiltily unread, like the notorious stacks of New Yorkers in so many people’s closets.
As I replied to him, I’m torn about this because among the readers who write to me, half say exactly what he said. The other half say exactly the opposite. There doesn’t seem to be an in-between.
I know we have readers who’ve subscribed because they find the comprehensiveness of the long version useful. They tell me they use it as their primary source of global news. They trust me not to miss or skip anything important. I don’t want to let them down. So I’ve been trying to make everyone happy by alternating formats.
But when I read this email, it occurred to me that I could pull out the short summaries I write for each section of Global Eyes and send them to you in a separate newsletter—a Global Eyes Mini version of Global Eyes Max. That would be just about as long as the Monocle Minute.
Have a look at the sample below, based on yesterday’s newsletter, and tell me whether you’d like to receive this, too, whenever you receive the long version of Global Eyes:
GLOBAL EYES MINI
Putin gave a great big speech announcing that four Ukrainian regions would become part of Russia and describing Russia as locked into an existential battle with the West. He denounced the United States for its “Satanism” and “neocolonial hegemony.” The Kremlin hasn’t yet posted the full speech on its website—even the transcribers seem taken aback—so here’s a thread by Konstantin Kisin summarizing it.
Alexei Navalny: This is what a post-Putin Russia should look like: “[T]he problem with the West’s current tactics lies not just in the vagueness of their aim, but in the fact that they ignore the question: What does Russia look like after the tactical goals have been achieved?”
Russian garrison surrounded in one of worst defeats in the war. The Kremlin again says attacks on annexed territory would be attacks on Russia itself.
Moscow shelled a convoy of civilian cars in the southern Zaporizhzhia region, killing at least 23.
🇬🇧 Liz Truss’s government is off to the most disastrous start of any government in British memory. Last week she and her Chancellor, Kwasi Kwarteng, unveiled what they called a “mini-budget,” triggering an economic meltdown. The markets took a look at her unfunded tax cuts and went into a seizure. The pound crashed to its lowest-ever value against the dollar. Gilt soared. (The price of gilt determines the cost of servicing the debt.) Mortgage providers hiked rates. Pension funds scrambled for liquidity. The IMF scolded the UK as if it were Gambia. Most embarrassing of all, the Bank of England was forced to step in and launch an emergency bond purchase to rescue the UK from its own government. Truss hasn’t made things better by first slinking off and refusing to face the press then denying all responsibility. Labour has soared in the polls, and we’re now seeing headlines like these: How not to run a country.
🛢⚡️ Meanwhile, Sweden has reported finding another leak in the Nord Stream 2 pipeline, the fourth major leak discovered this week. Russia continues to deny that it attacked its own pipeline.
Nord Stream pipeline sabotage shows the weakness of Europe’s critical infrastructure.
I’m wondering whether I'm the only person to read the play here. Nord Stream 1 severance takes that one right off the negotiating table, and sharpens the energy challenge for Europe to a “it’s real” level. At least it’s now a known known. But it signals that even if Russia isn’t able to compete in land warfare against better tech and strategy, it can grip Europe’s and the UK’s windpipe at will. Russia has been perfecting asymmetrical underwater warfare for three decades. Next will be the North Sea pipes and the jugular—the fiberoptic cables on which the internet and most of modern life and commerce relies.Like his rat of legend, Putin has more defensive cards up his sleeve that are way more immediate for us than sanctions on him. He doesn’t need to go nuclear: He just needs to go asymmetrical. Best the West be aware, be ready, and now, now, now establish no fly, no sail areas—everywhere where we have strategic interests. Guys, this just got serious.
Dead right, David.
Tigray war: Satellite images capture troop build-up near Eritrea border.
The US blamed Eritrea for playing a central role in the resumption of conflict in Ethiopia’s Tigray region and called for Eritreans to “withdraw to their borders immediately.”
Totalitarianism is still with us. The case of Eritrea shows that totalitarian systems are inherently toxic, and no amount of “engagement” will change them.
🇨🇳 A China on the threshold of decline is a dangerous China. If demographics threatens to stunt Beijing’s ambitions, party leaders might opt to act now.
China’s public opinion is shifting away from Russia. Anyone relying only on official pronouncements and the state media may have missed that Chinese public opinion is turning against Russia as the war drags on.
🌍 Middle East
Iran is attempting brutally to suppress an explosive protest movement triggered by the murder of a Kurdish woman, Mahsa Amini, beaten to death for wearing her hijab improperly. The uprising is now in its third week, with at least 83 dead in the crackdown.
How one woman’s death set Iran on fire. When 22-year-old Mahsa Amini died after being arrested by police in Tehran, months of frustrations with the country’s repressive regime erupted.
I found the clip above so eerie and fascinating that I tried to figure out where it came from. I discovered that what you’re hearing is a TikTok of drunken Germans at a concert, tunelessly belting out a banal pop song composed by a talentless hack. But someone had the insight to see that the music would have a very different effect when juxtaposed with those images. If you listen while watching the video, it sounds like only women are singing, and it takes on a different tone. To realize the soundtrack would have this effect took an artistic insight I would never have had.
Most remarkably, though, it seems the animation was produced by AI. My best guess is that it was made with Stable Diffusion. The whole thing is a pure product of the Internet: All of its elements emerged from Twitter, TikTok, and AI, were assembled by a series of anonymous users, and somehow a true work of art emerged—one that would have been unimaginable only a few weeks ago.
The Biden administration’s negotiations with Iran have hit a dead end, making a new agreement unlikely, senior US officials reportedly told Congress in a classified briefing.
A new Iran deal won’t prevent an Iranian Bomb. Tehran’s program is far more advanced than in 2015. Only a credible threat of force will stop the regime from crossing the threshold.
🇧🇷 Lula versus Bolsonaro: What’s at stake in Brazil’s 2022 presidential election?
💸 Strong US dollar an unstoppable force endangering other currencies. The dazzling rise of the US dollar, which has hit one record after another, is raising fears of a currency crash of a severity not seen since the 1997 Asian financial crisis reverberated around the world.
That’s what it would look like—that’s exactly the same length as Monocle Minute, and the format is similar. I could do this in seconds: It’s just copy and paste. But I’m worried about sending you too much mail. I don’t want to be spammy. So I thought I’d ask. They don’t let me use enough characters to write the poll questions clearly, so here’s what each of the options below mean.
“Just send the long version,” means, “I only want to receive the long version of Global Eyes. I love the long version. It’s why I subscribed. If you stop sending the long version, I will feel cheated. Receiving a short version of the same newsletter would annoy me: I don’t want that many emails in my In Box.”
“Just send the short version” means, “Knock it off with the long version already—how many times do we need to tell you? Just send the short one. Never darken my In Box with your infernal long Global Eyes again.”
“Alternate” means what I’ve been doing—sending both long and short versions, depending on my whim.
“Send them both” is the option under consideration. If I send you the long Global Eyes and the abbreviated version of the same newsletter, on the same day, would this be helpful for those of you in a hurry or an annoying excess of emails? Note: If I send both, you needn’t feel guilty about preferring one to the other. I’ll never be the wiser if you press “delete” on the long version. That’s between you and your desire to beat everyone else on the News Quiz.
Your wish is my command: Tell me what would make you happiest.
Claire—Doug sent us this email, after our conversation, in response to my final question:
A bit more on the SMRs, and nuclear in general while the issue is on my mind. I reached out to Henry Sokolski, a colleague with whom I've worked on nuclear issues for the past 15 years or so. His focus is on non-proliferation, and has been for decades before SMRs were in vogue. He is particularly concerned about fast reactors, which he views as significant proliferation risks. This would include the TerraPower design being promoted by Bill Gates. This article goes into more detail, and was co-authored with Victor Gilinsky, who was a commissioner of the US Nuclear Regulatory Commission under three presidential administrations (both parties). Gilinsky came out of Rand, was trained as a physicist, and witnessed the early development and growth phases of the civilian nuclear power sector in the United States. Sokolski served as deputy for nonproliferation policy in the office of the US Secretary of Defense during the George H.W. Bush administration. Claire, there are a bunch of articles and links on the website of Sokolski’s NGO, the Nonproliferation Policy Education Center. I suspect that some of them may also be of interest.
In speaking with him about proliferation and the fuel cycles being promoted in SMRs, he also brought up the equally important issue of distributed reactors being used as weapons of war. This issue has been clearly demonstrated by Russia in its invasion of Ukraine, something Henry wrote about here. But we’ve also seen the rise of unmanned drone attacks on non-nuclear infrastructure, such as on oil infrastructure in Saudi Arabia. The expansion of armed drone technology opens a whole new set of risks for reactors, and perhaps even more importantly, spent fuel pools. These risks arise not only from nation states, but from non-state actors as well. Further, I hadn’t realized until speaking with Henry today that attempted missile strikes on reactors have already happened a number of times well before the situation in Ukraine.
To the extent that kWh can be produced and delivered using clean technologies at equal or lower cost, but don’t have the same proliferation and attack risks as nuclear, I strongly prefer that path. Since the time for nuclear to scale as a resource sufficient to blunt carbon loadings is measured in decades, we do have a competition cost and delivery scale positioning nuclear versus battery storage. This is the case because storage can make intermittent resources able to provide firm and dispatchable power, can bank off-hours production for future use at existing conventional or nuclear plants, and can provide a less expensive way to bypass grid bottlenecks that occur only at certain times of day. For reasons I detailed here a few years back, my bet is on batteries to win—even ignoring all of the baseload subsidies nuclear receives now to be competitive.
Note: The Cosmopolitan Globalist explored these issues, in depth, in our Great Energy Debate, which Ron moderated.