Jacob Solomon's group - M2015(B)

The figures from the Overseas Development Institute suggest that Britain is now the world's fifth largest subsidiser of fossil fuels

For every $1 spent to support renewable energy, another $6 were spent on fossil fuel subsidies

In 2011, the latest year for which data is available, Britain gave tax breaks of £280m to oil and gas producers and reduced VAT on fossil fuels by several billion pounds

Rich countries have committed to phase out "inefficient" fossil fuel subsidies but the ODI figures, drawn from the International energy agency, OECD and other sources, suggest global subsidies to fossil fuel producers totalled $523bn a year in 2011 – dwarfing subsidies to renewable energies.

£2.6bn yearly incentive favours investment in carbon at the expense of green energy, says thinktank

In effect, each of the 11.6bn tonnes of carbon emitted from the top 11 developed countries comes with an average subsidy of $7 a tonne – around $112 for every adult

The figures have been released as ministers prepare to go to Poland for the deadlocked UN climate talks and as uncertainty surrounds the future of government-mandated levies on energy bills that support fuel poverty schemes and renewable energy.

G20 governments accepted in 2009 that fossil fuel subsidies encourage wasteful consumption, reduce energy security, and undermine efforts to deal with the threat of climate change.

The report said: "Investors are being sent the wrong signals on two fronts as carbon prices decline and fossil fuel subsidies increase."

The report argues that fossil fuel subsidies also fail in one of their core stated objectives, which is to to benefit the poorest.

Surprisingly, a carbon tax would operate much like a diamond tax, for reasons both of demand and supply.

Demand: The wealthy actually consume a disproportionate amount of carbon. Discussions of a carbon tax usually focus on the price of gasoline. One gallon of gas produces about 17 pounds of CO2. One metric ton is 2,204 pounds. So a $100 tax on a ton of CO2 comes to $0.77 per gallon -- a significant cost to low-income commuters and small truckers.

But the very poor don't drive or travel or occupy much space; the rich fly planes, including private jets; drive to low-density suburbs; occupy and heat multiple houses and hotels; and buy lots of stuff. Clearly the rich consume much more carbon per capita than the poor.

Demand elasticity for oil is low, about 0.5; so a 1 percent increase in oil price would cause a 0.5 percent decrease in consumption. That makes sense, since in the short run, it's hard for people to cut energy consumption, especially if they must drive to work. But, though numbers are hard to come by, elasticity of supply is much, much lower, for two reasons. First, oil production takes decades and billions in capital investment; producers cannot quickly increase or decrease supply. Second, oil producers form an international cartel, an organized mega-monopoly, which holds down production to drive up prices. Since they're already charging what the traffic will bear, they can't much raise prices to cover a tax.

As economists long ago figured out, buyers and sellers share a tax in inverse proportion to elasticity. Therefore, if supply elasticity of carbon is, say, 0.1, while demand elasticity is 0.5, the suppliers will pay five times as much of the tax as consumers. That reduces that $0.77 per gallon gas tax to only $0.13. Moreover, precisely because most of the tax falls on suppliers, it will generate plenty of revenue to help those unfortunate long-distance commuters and small truckers, to build more public transportation, to invest in renewable energy, and even to cut super-regressive taxes like the payroll tax.

According to Edward Wolff, in 2007, the top 1 percent in the U.S. owned 43 percent of non-home wealth, mostly securities, including of course energy company stocks and bonds. The top 10 percent of wealth holders owned 83 percent.

A May 2013 federal study of the Social Cost of Carbon estimated costs of additional CO2 emissions for 2010 to 2050 ranging from $27 to $221 per metric ton in 2050, depending on assumptions.

So we have good news and bad news. Good news: The cost of reducing carbon emissions will fall hardest on the 1 percent, who consume the most energy and own the energy companies. Bad news: Ditto. Expect a fight!