Tax Domicile and the citizen of nowhere

I don’t usually write about tax here, but the tax status of the UK Chancellor has changed that.

After the Brexit referendum, Teresa May in a speech said:

“Today, too many people in positions of power behave as though they have more in common with international elites than with the people down the road, the people they employ, the people they pass on the street … but if you believe you are a citizen of the world, you are a citizen of nowhere. You don’t understand what citizenship means.”

So how should we view the issues around the tax status of the Chancellor and his wife which have emerged. And yes, normally the tax affairs of a politicians spouse shouldn’t interest us, but the specifics of this situation are important.

If reports are correct the wife of the Chancellor, Akshata Murthy, has filed her tax returns as a non domicile for UK tax purposes as she is allowed to. As the government website makes clear “UK residents who have their permanent home (‘domicile’) outside the UK may not have to pay UK tax on foreign income.”

The point is “permanent home” with the implication that this is where you will return after your stay in the UK (questions of citizenship are irrelevant, it is where you regard your permanent home to be). So how can one spouse in a marriage have a permanent home outside the UK and the other not, unless of course they are going to either split up or both return to the permanent home outside the UK?

The problem here is that Mr Sunak is the Chancellor and was seen as potential Prime Minister. But can he hold these posts if his spouse doesn’t regard the UK as her permanent home and doesn’t pay tax on her considerable non UK income?

Then it is reported Mr Sunak still holds a US green card. To quote Homeland Security

“A Green Card holder is a permanent resident that has been granted authorization to live and work in the United States on a permanent basis. As proof of that status, U.S. Citizenship and Immigration Services (USCIS) grants a person a permanent resident card, commonly called a “Green Card.”

So, Mr Sunak can live and work in the US on a permanent basis (he is a permanent resident of the USA) and his spouse has her permanent home in India.

Lets go back to Teresa May,

“Today, too many people in positions of power behave as though they have more in common with international elites than with the people down the road, the people they employ, the people they pass on the street … but if you believe you are a citizen of the world, you are a citizen of nowhere. You don’t understand what citizenship means.”

Given their status for tax purposes are the Sunaks, in fact, “citizens of the world” or as May goes on to say, “citizens of nowhere”? And more importantly should the Chancellor of the Exchequer have this status given his role in tax policy and the economic future of the UK?

Again, to quote May, does he understand what citizenship means, or is he one of those people in power who “behave as though they have more in common with international elites than with the people down the road, the people they employ, the people they pass on the street”?

© Chris Lenon and http://www.zerocarbonourchoice.com  2020-2022. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.zerocarbonourchoice.com with appropriate and specific direction to the original content.

 

Ukraine, Globalisation, Net Zero and consumers

I was going to write about the conflict in the Ukraine and the implications, a couple of weeks ago, but as the situation has developed more themes have developed.

The situation in Ukraine is a terrible indictment of our international structures and I’m afraid to say the UN, which has again proved itself incapable of action, given the veto powers of major states. But, aside from its veto, Russia’s power in Ukraine is a combination of the implications of challenging Russia and the dependence of Europe on Russian oil and gas. In my talks on net zero I discuss how many of the recent wars and conflicts have been about carbon (just think back over the last 50 years), Ukraine is not a war about carbon but is one which is being paid for by Russia from carbon income, income which European consumers and businesses have paid, and continues to pay, to Russia.

The shock of what has happened has started to show how much which we have assumed in our world order to be reliable is actually either fragile or needs reconsideration. The impact on German policy has been dramatic in the field of defence, but in achieving net zero, Germany is still hamstrung by its no nuclear power policy. Back in 2000, 29.7% of German power generation came from nuclear, in 2022 it will be nil. Germany is not alone, Ireland, Italy, Switzerland, Belgium, Denmark, Portugal and Austria source no power from nuclear (they are fine buying nuclear power generated by their neighbours). So, the road to net zero will be paved by buying gas, and some of that gas will be bought from Russia. A non-nuclear policy for some of these countries funds Russia because they rely on gas. And now we see what that funding leads to. Those who continue to oppose nuclear and lament the fate of Ukraine, need to look at the consequences of their decisions to oppose nuclear power.

Blackrock, has identified that the ramifications of Russia’s war and the positions taken by other countries may presage the end of globalisation. It is perhaps early to call this, but certainly we may have seen the high water mark of globalisation. As I wrote in Net Zero Our Choice, net zero and a dependence on electricity generated by non carbon sources leads to a regional not global market for power. Transmission losses limit the distance over which electricity can effectively be transported.

It may also lead to a more local approach to supply chains (and Blackrock identifies this) from a security perspective but also because transporting goods across the world rather than locally has a power cost and will for some time have a carbon cost (think shipping). But such a change will increase costs as goods are produced in higher cost countries and regions to supply markets in those countries. Will our consumerist binge be constrained by price?

The other theme about consumers relates to power and oil costs. The constriction of supply has led to price increases, dramatic increases. The response has been twofold, what do we do about the cost of living and what do we do about energy security? This is understandable as a reaction, and while politics is about short term and long term issues, politicians tend to prioritise short term issues. But what is happening is politicians calling for measures which are addressing these price and security issues by relegating the importance of the net zero trajectory.

The UK is considering encouraging more gas production from the North Sea for energy security reasons. Given my writing above, this makes sense if the perspective is strategic in regard to Russia (better produce it ourselves, than pay Russia for it), but it doesn’t if that action slows down action leading to reducing carbon emissions – burning UK gas instead of Russian gas doesn’t reduce emissions. Is there a danger that as these security issues are addressed, we become comfortable with using gas – that won’t help achieve net zero.

It is also understandable for governments to subsidise power costs to consumers from a political perspective, but if that subsidy is for carbon sources it won’t help achieve net zero. What  that requires is investment quickly in nuclear and renewables by all European countries.

© Chris Lenon and http://www.zerocarbonourchoice.com  2020-2022. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.zerocarbonourchoice.com with appropriate and specific direction to the original content.

Gas : Have the EC lost their marbles?

The draft text by the European Commision on Taxonomy covering gas and nuclear activities (1 Jan 2022) baffled me when I saw it. I thought I would wait for other comments to check I hadn’t missed anything.

Well the other comments have generally been trenchant in their criticism. I hadn’t missed the point.

The paper recognises some parts of Europe are still heavily based on high carbon emitting coal. One might ask, in 2022, why the EC hasn’t done more to reduce coal in the power mix in the EU, when some countries have?

This then leads to the statement that there is a role for natural gas and nuclear in the path to net zero.

Well nuclear is zero carbon, but gas!!! Gas power plants have a life of 30 to 40 years so promoting gas investment until 2035, will mean that gas has a major role until 2065 to 2075 in the EU. How does this reconcile with net zero by 2050? The simple answer is it doesn’t.

I pondered how this decision came about, was it great lobbying by the gas industry? Was it the result of a very good lunch at Scheltema? But then the coincidence with the end of nuclear power in Germany this month made it clear.

Germany had lobbied to remove nuclear as a net zero fuel source, presumably based on national interest. Given the stranglehold which the greens have on power in Germany, there won’t be any nuclear there for the foreseeable future. (All this with France – down wind of Germany – dominated by nuclear power!)

Without nuclear in its power mix, Germany can only reduce emissions from coal by switching to gas and or renewables. Clearly it has decided to transition to net zero over a longer period than to 2050 (now 28 years away) through gas as well as renewables.

So next time you read the glossy aspirations of the EC about net zero,remember how little has been achieved in removing coal in many EU countries, how gas will continue to be a major source and benefit from NEW investment.

Will the EU reach its net zero targets by 2050 given this road map? Of course not.

So,the taxonomy on gas is a consultation. There is a chance to remove gas. If it isn’t removed, it will say a lot about the reality of the EU achieving net zero by 2050….or not.

Watch this space.

Electric vehicles – Pollution and Congestion

I now drive a Nissan Leaf and very happy I am with it too. Its range is fine (Over 200 miles) and the cost per mile is about half of petrol for a 1.2 car.

I’ve also been doing some work on the problems of pollution and congestion in London with a small group.

Electric vehicles (like hydrogen vehicles) reduce pollution – they don’t remove particulate pollution as they still produce particulates from both the brakes and tyre wear. But they do remove carbon pollution.

What they don’t do is affect congestion. If everyone switches to electric vehicles the air will be cleaner but if they make the same journeys congestion will not change. So, I think we need to rethink some of the measures which apply in our cities. As an electric car owner I am exempt from the London Congestion charge (annual registration of £10 – so almost exempt). So the congestion charge is actually, at present, a pollution charge, but its “object” is to reduce congestion – confused? The exemption for non carbon vehicles stops in 2025 when it does become a congestion charge.

So, while electric vehicles help reduce pollution, they have no effect per se on congestion and local authorities will need to work on measures to reduce congestion. They can use pollution as a pricing point to discourage congestion/ encourage a switch to electric/hydrogen vehicles.

Net zero will make our towns and cities more pleasant in terms of air quality, but it won’t reduce congestion.

© Chris Lenon and http://www.zerocarbonourchoice.com  2020-2022. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.zerocarbonourchoice.com with appropriate and specific direction to the original content.

Climate denial and personal choice denial – barriers to net zero

I’ve given 10 talks over 2021 on the issues which reaching net zero will provide. The range of responses has been fascinating as has the level of understanding ranging from excellent to a real ignorance. After one of the meetings there was an exchange led by some who were in complete denial about man made climate change, here is a quote:

“It is clear that Mr B is convinced that human beings have the power to have a significant effect on the immense forces of nature which cause, and have always caused, climate change.   He will not be convinced otherwise and I do not intend to try.

I am however concerned that “climate-change” has become highly politicised.  It has become a multi-billion dollar industry which channels vast amounts of public money into universities and other research institutions and media outlets and commercial enterprises which support and promulgate and benefit from its views. By contrast there is little or no funding for those who do not agree with them. In particular, for many years the BBC has failed in its duty to examine both sides of this very important case. We have now reached the point that the climate change industry worldwide has become a quasi religion which will not tolerate dissent and which demands obedience from governments and people alike.”

These views still exist although they are often under the surface.

What is equally interesting is that people who recognise climate change and the need to do something about it, but are not prepared to change their lifestyle. After a lengthy discussion about fossil fuel heating (gas central heating) someone said “but Chris you’re not going to take my gas central heating away from it, I love it”.

Many of us are aware of climate change denial, but probably the more significant issue is personal change denial, a refusal to see the change in lifestyle which net zero inevitably involves. Unless individuals are prepared to change, net zero will not be achieved.

Please get in touch if you would like me to give a talk or host a discussion of issues either in person or using zoom, etc. I have spoken to amenity groups, universities and church groups so far. Happy to talk to commercial organisations.

SONY DSC

Government Greenwash: Coal : Australia and Japan

 

In my previous blog I discussed the effect of government greenwash in relation to  their carbon position and budget. Comments to the IPCC to tone down parts of its 2021 report are understandably mainly reported in the countries themselves and it is often difficult to see the bigger picture, so in my next three blogs I’m going to focus on coal, meat and oil and what governments around the world have said to water down the report.

The primary comments on coal which have been leaked relate to Australia and Japan.

Australia

To quote ABC News Australia

“Documents suggest Australia also asked to be removed from a list of big coal-consuming countries. The draft report said “major coal-consuming countries are still far from phasing out coal”. “China, the US, Australia and South Africa continue to extract and use substantial amounts of coal,” it said. The official in Canberra noted Australia’s consumption was “an order of magnitude lower” than the other countries listed.

Analysis from analytics firm Ember ranks Australia as the world’s 10th biggest coal-fired power generator. Australia remains one of the world’s  biggest biggest coal producers and exporters.”

To state the obvious, Australia has a population of 25.7m people (2020), South Africa 59.3m, USA 333.5m and China 1,446.6m. Given the relative population size it would be surprising if Australia had the same level of consumption as larger countries. But as the chart above showing consumption per head 2019 shows Australia is top dog in terms of coal consumed per head.

I would suggest it is difficult to argue that Australia’s consumption is “an order of magnitude lower” than other countries. Instead, I think most people would say Australia is the largest per capita coal consumer and a major producer and needs to address these issues, not prevaricate and obfuscate.

Japan

To quote Unearthed

“Japan, which is hugely reliant on fossil fuels in its energy and transport systems, rejects a key finding in the report’s summary for policymakers detailing how coal and gas fired power stations will, on average, need to be shut down within 9 and 12 years respectively to keep warming below 1.5°C and 16 and 17 years to keep warming below 2°C. A director in Japan’s ministry of foreign affairs claims this paragraph is misleading and suggests deleting it “because the required retirements of fossil fuel power plants due to carbon budget depend on the emissions from other sectors as well as their capacity factor and the opportunities of CCS.””

“Japan also rejects analysis that “the overall potential for CCS and CCU to contribute to mitigation in the electricity sector is now considered lower than was previously thought due to the increased uptake of renewables in preference to fossil fuel”. The official argues that “it would be better to remove this sentence to be more policy neutral.””

I have written in “Zero Carbon our Choice” that fully scaled CCS (needed for power generation by fossil fuel to be net zero) has not been achieved to date. This doesn’t mean, of course, that it won’t be achieved. However, significant work on this has been in progress for 15 years and the usual time lag for scaled up, commercial new technology is 40 to 50 years according to an Imperial College London study (quoted in Zero Carbon Our Choice). To use the “opportunities of CCS” to keep coal power generation operational is bizarre – a Mr Micawber approach of “something may turn up”. At the very least how long does Japan propose we go on hoping for full scale CCS to allow fossil fuels to be used for power generation and still achieve net zero by 2050.

So consider, if I buy a green piece of Japanese technology – made in Japan with fossil fuel power – how green is that technology I’m buying in lifecycle terms?

Of course, this lobbying by countries is to protect economies which are carbon dependent from the effects of decarbonisation. To solve a global issue, carbon dependent economies are going to have to make serious adjustments and start reducing their use of carbon to power and fuel their economies and exports, and they will need to be honest with their populations what these changes entail.

This sort of economic protectionism, the denial of the contribution to global emissions by these countries while other countries decarbonise is exactly what will lead to the call for  border tax adjustments, otherwise carbon dependent economies will gain an economic and trade advantage in not decarbonising. Countries cannot expect to have a free ride in not reducing emissions without consequences (and GAAP permits tariffs for environmental protection).

© Chris Lenon and http://www.zerocarbonourchoice.com  2020-2021. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.zerocarbonourchoice.com with appropriate and specific direction to the original content.

Government Greenwashing

First, an apology, I haven’t posted recently as I’ve been immersed in my divorce which appears to be resolved after a long period of negotiation. So I’m back.

COP 26 is shining a fascinating light on how serious players (be they governments, corporates or individuals) are about achieving net zero by 2050. This should not surprise anyone. The scale of change for many players to move to a net zero economic model is significant, well actually enormous, so attempting to slow the process, soften the impact and confuse the issue is to be expected.

The number of attempts by governments to influence the latest report by the IPCC, is a perfect example. These attempts are about national self interest of those economies where carbon plays a significant part in their economic success. So Coal, Gas and Oil  producer nations will experience a drop in economic activity, a change in their balance of payments, a resulting weakening of their currencies and a fall in taxation receipts when net zero starts to really bite, unless they change.

In my book, Zero Carbon our Choice, I devoted a chapter to the losers from net zero and the impact on geo politics including increasing instability in some regions as carbon becomes less of a source of wealth, unless these countries are able to reinvent their economies for a post carbon world. Africa is an interesting example, while affected by the changes of climate, many African nations are also significant carbon producers of coal, oil and gas, so their response to net zero will be equivocal.

The level of greenwash has scaled new heights. Perhaps best illustrated by Saudi Arabia promising net zero by 2060 but continuing to produce and sell petroleum products. But this greenwash isn’t just about producer nations, but about consumer nations as well. So in the run up to COP26, the EU has prepared its position to encourage other recalcitrant states to promise more, while at the same time moving forward on Nordstream 2 which will transport large quantities of gas to land in Germany and thence be distributed around Europe. This pipeline is a long term project, pipelines have expected lives ranging from 50 to 70 years, so this new pipeline will be functional in 2090.

The Nordstream2 website sets out the rationale:

“By 2035, the EU will need to import about 120 bcm more gas per year

The production outlooks of major gas producers such as Netherlands and UK, as well as Norway, are falling. At the same time, demand for gas is expected to continue, owing to its lower carbon qualities. This means that the EU will need to import more gas. Nord Stream 2 will have the capacity to meet about one third of the EU’s import requirement.”

And

“The new pipeline could play an important role in the EU’s climate strategy by making competitive supplies of natural gas available to replace high-carbon coal in the energy mix, in addition to providing back-up for intermittent wind and solar power. If the EU is serious about reaching climate goals, then the share of gas in the energy mix needs to increase to eliminate coal burning.”

Japan is investing in new coal powered power stations.

There are many more examples of government greenwash , but the question this poses is that if governments are economical with the truth about their net zero commitments, if they seek to move the debate and the carbon commitments to help their national economic interest, why should they expect either corporates or individuals to act in a different way?

My real concern is that we will see many promises coming from COP 26 which on proper examination will not achieve net zero by 2050. Beware greenwash, there is a lot of it about, whether by governments, corporates or individuals.

Zero carbon – a warning from Switzerland

Despite Orson Welles diatribe about Switzerland in the Third Man, the country is an important and successful economy. So, the recent June 2021 referendum result from Switzerland should be a wake-up call for the Green lobby around the world about zero carbon.

Voters voted against measures to reduce the country’s carbon emissions by 51% to 49%. The measures include a tax of airline tickets and a car fuel levy. Opposition was strongest in poorer, rural areas.

My concern is that the referendum result is an example of the failure of the Green lobby to convince citizens of the measures needed to achieve carbon targets, of a complacency and laziness that people will accept measures whatever the cost. Unless this issue is addressed, then we will see further resistance to measures to reduce carbon which affect ordinary people and voters.

It is not as though recent events do not provide examples where citizens have not accepted policies imposed on them. The gilet jaune protests, Brexit and Trump all illustrate that elites should not ignore the ordinary citizen. This appears to have been significant in Switzerland. Being told something is good for you or is necessary is not enough. No matter how many times Sir David Attenborough tells us what we need to do, when the actions start to affect our lifestyles and standard of living, then people will question the remedies proposed, particularly the poorer members of society.

Instead, politicians and green experts need to be honest about the scope of change needed to achieve net zero. They need to be honest about what it will cost an ordinary family and the changes in their lifestyle and standard of living it will engender. They have to get out of the green bubble where the change to net zero is achieved effortlessly. It won’t be. Changing domestic heating, only allowing electric cars and pricing airline flights will all affect the poorest 50% the most. Reconciling reducing carbon and the cost on the poorer is a crucial challenge.

© Chris Lenon and http://www.zerocarbonourchoice.com  2020-2021. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.zerocarbonourchoice.com with appropriate and specific direction to the original content.

Offsetting – buy while stocks last

Offsetting is promoted for those hard to decarbonise activities as a green solution to meet net zero carbon. Apple has  announced a $200 billion forest fund and other corporates are using the same method.

This seems a great idea and as net zero needs finance, using corporate funds makes sense – or does it?

The issue that isn’t talked about is that offsetting isn’t a limitless way to escape from decarbonising. Offsetting requires land and as Mark Twain said, they’ve stopped making it. So offsetting will compete with other land use, agriculture, housing, etc and there isn’t an infinite amount of land for offsetting given these competing demands.

First mover advantage is therefore sensible as Apple is demonstrating. But which emission sources should be prioritised for offsetting? Should offsetting, in land use terms, in effect, be licensed by governments? If it isn’t regulated, will some activities that we really need lose out?

Should the disposable business model be prioritised  ( for example, upgrade your mobile phone every two years, don’t maintain the software for old models to nudge consumers to buy new phones or with new model i phones introduce a new charger and ensure the old charger won’t work) or should other sectors be prioritised?

On the basis that net zero goes hand in hand with the circular economy, shouldn’t governments be thinking about which sectors should have priority over others for access to offsetting in strategic terms (cement, steel etc).

This is not to criticise those businesses which are investing in offsetting, but to question whether we should allow the market to decide which businesses have access to offsetting, which is what is happening de facto at present.

© Chris Lenon and http://www.zerocarbonourchoice.com  2020-2021. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and http://www.zerocarbonourchoice.com with appropriate and specific direction to the original content.

Zero Carbon A Challenging Goal

 

I gave the attached presentation to students and staff at the University of Gloucestershire in March. I have given other presentations to amenity societies tailored to their interests.

What has been interesting is that people are unaware of how much their personal lifestyles will need to change to achieve zero carbon. As my subsequent post will show this is an indictment of politicians and advocates of carbon reduction who have failed to explain the consequences for ordinary people.

There is a real danger of a backlash against proposals a la yellow vests in France.

COP 26 needs to be honest with citizens about the changes as they affect them.