Earlier this year, while making plans for the growing season, we firmly decided we won’t try tomatoes. They’re notoriously hard to grow, sensitive to everything, need loads of water and fertiliser, and are too much of a hassle overall.
But then we took a look at all the space we’d cleared for plant production. We looked at how well all we’d already planted was growing. Ah, [censored word] it, we told ourselves, let’s try tomatoes.
It turned out tomatoes are not that hard to grow. They do need a lot of nutrients, so they do need regular fertilising, but they don’t need as much water as I suspected, and we had a rainy spring this year, so it all worked out rather well.
I’m happy to report that we’re having quite a crop although the tomatoes are looking smaller than they could. I may have underdone the fertilising — a lesson I won’t forget in a hurry. Spot the key word. It starts with an f.
Fertilisers have been instrumental in lifting great numbers of people out of poverty over the last century or so, since synthetic fertilisers were discovered and put into large-scale use.
That has been eloquently detailed by Vaclav Smil in How the World Really Works and many other vocal proponents of rationality and common sense such as one of my favourite Twitter people, Jusper Machogu, who is not just an agricultural engineer but an actual farmer. He should know what he’s talking about, right?
Now, to enable this large-scale use of fertilisers, governments have subsidised the use of fertilisers. Heavily. Too heavily, according to a new World Bank report. This has led to environmental destruction, pollution, and, of course, climate change, so obviously it needs to stop, along with hydrocarbon subsidies and fishery subsidies. What a shocking surprise.
The WB report argues that agricultural — and hydrocarbon — subsidies in most of their current forms are, to quote, wasteful and inefficient, so they need to be “repurposed” with a view to a more productive and efficient way of doing things like energy and food. Another shock, I’m sure.
The report takes 300+ pages to tell us exactly what’s wrong with the current way energy and agriculture are being subsidised, and why we need to change that way by, well, phasing out these subsidies and putting the money to better uses.
Oddly, these better uses are never named explicitly in detail, save for references to things like low-carbon electrification and equality. Or maybe it’s not odd at all. It’s simply a variation on the wind, solar, EVs theme with the new refrain that is fast gathering popularity among decision-makers in some parts of the world that call themselves developed: less consumption. In other words, degrowth.
The subsidy topic is a vast one. There are pros and cons, and tonnes of research literature, as is the case with most vast topics that concern human civilisation. What’s concerning about the World Bank report, however, is the framing of the topic. And, of course, the rather, shall we say, one-sided perspective on the issue.
For instance, last year’s subsidy rush to keep fuel prices affordable for Europeans is described as a waste by the World Bank experts. So are current subsidies for agriculture and fisheries. Even more interestingly, the authors of the report are putting forward the argument that subsidy reforms would benefit the poor.
Okay, I’ll allow that this is exactly what you might expect from an entity such as the World Bank, which has a great track record of making nations suffer in the name of a better future. But just because we might expect it doesn’t mean it’s right or we should ignore it. On the contrary, we should call those experts out any chance we get. It’s the least we can do.
Let’s start with the hydrocarbon subsidy spin. It goes like this: oil and gas subsidies are bad because they encourage more consumption. This is a fact. And it’s a bad thing because pollution and climate change, so we need to end these subsidies because they’re wasteful.
The spin comes next: The poor will benefit from the end of oil and gas subsidies because the rich will suffer more due to their higher energy consumption. I’m not kidding, that’s what the report claims, only in more words.
I must admit this is one of my all-time favourite spins. It sounds so logical, doesn’t it? It sounds like a truth. Until you rephrase it just a bit: Because poorer people consume less energy, when this energy becomes more expensive, they would need to reduce their consumption less than the rich ones who consume more energy.
As repeatedly empirically proven, this is not the actual case. While on an absolute basis poorer people would reduce their energy consumption less than rich people in a more expensive energy environment, they will suffer more because they will be forced to reduce their consumption.
Rich people, meanwhile, would simply pay more for the energy they consume. They won’t cut their consumption, not until they become too poor to continue affording that level of consumption. The pro-poor subsidy reform argument is a perversion of logic and nothing short of a blatant lie.
But how about the agricultural subsidy reform argument? That, again, is being advertised as ultimately benefiting the poorest among us because the current state of affairs benefits the rich farmers and destroys the land and the water for all.
Oh, and it also makes farming inefficient, which is clearly a horrible thing even though crop yields are much higher thanks to those same subsidies for fertilisers. I mean, who cares about crop yields when there is a problem with technical efficiency, right?
Bitter sarcasm aside, it is true that excessive use of fertilisers is not good for the environment, which also happens to be the place where we do our farming. It’s true that destroying this environment is bad long-term planning. Yet it is also true that while they talk about subsidy reforms, the authors of the WB report actually mean — and state it at one point — a phaseout of subsidies, plain and simple.
Now, this may increase efficiency. With no access to as much cheap fertiliser as before farmers would have to come up with other ways to keep their yields high. Or, more likely, resign to lower yields.
These lower yields, in turn, would make the produce more expensive, meaning less affordable for those of modest means, also known as the poor. But I’m sure they’ll be happy to know that the environment is now safe and climate change is slowing down because we’ve stopped using nitrogen fertilisers.
In fairness, the authors of the report acknowledge the sensitive nature of the proposed phaseout, I mean, reforms. They acknowledge the fact that there will be suffering involved among the less financially fortunate among us. So they propose compensation.
In other words, you take away the subsidies but you pay off the most vulnerable to ease the pain. To paraphrase the old saying, instead of teaching a man to fish, you pay him to buy the sustainably caught fish you sell. It could be a bit more expensive than he can afford over the long term but it’s for the good of the planet and anyway we don’t really need all that much food to survive, so all’s good.
Meanwhile, as we phase out those wasteful and inefficient subsidies we will be unlocking — a word that is fast becoming one of my favourite — trillions to spend on productive and efficient subsidies. As I said, the authors of the WB report are quite shy about naming those new subsidies. Or perhaps they feel they don’t need to. Because we all know what they will be for.
The EU is subsidising the conversion of rendered animal fats into aviation fuel. The U.S. is subsidising biofuels that are — I love this part — sustainably produced. The reason I love that part is the fact that corn farmers would only get their additional subsidy if they can prove the production of their corn-for-biofuel was done with low carbon intensity. I bet the WB people would love this, too.
The EU is being quite a bit stupider with their fat subsidies: they’re so generous that, per Bloomberg, “With supplies limited, that’s driven up prices for other users of rendered fats in areas such as soap, cosmetics and pet-food manufacturing. Palm oil is the most likely alternative — creating a new environmental fallout because the vast plantations have led to deforestation in countries like Indonesia.”
This neatly brings me to what I feel is the ultimate point of this post, a point that has been made by many bright minds: there is always a tradeoff.
“Subsidy reform can remove distorted incentives that obstruct sustainability goals, but it also can unlock significant domestic financing to facilitate and accelerate sustainable development efforts that would have greater, wider, and more equitable benefits,” say the authors of the WB report.
In other words, if we just remove those bad subsidies and use the money for good subsidies both we and our environment will be better off. It’s too bad this is an impossibility. Because it omits the unavoidable tradeoffs. It assumes there will be no tradeoffs, except temporarily, while we adjust to the new subsidy regime.
You can’t have massive crop yields without fertilisers. You can’t have cheap food for billions without massive yields. You can’t have cheap energy for billions without hydrocarbons. You can’t have mass electrification without a massive surge in mining. You can’t have a grid dominated by wind and solar without deforestation. It’s as simple as that. It’s unpleasant, to be sure, but simple.
As I’ve said before, I like simple things. Well, not necessarily all simple things, but I do have an aversion to needless complication. And I suspect there’s a simple solution to some of the horrible subsidy problems identified by the WB people.
First, put caps on fertiliser use to avoid excess. It should be clear by now, after decades of use, where the mark is between sufficient use and excessive use. That would be not just smart but also equitable (another great buzzword!) because it should free up some fertilisers for the poorer farmers who currently can’t afford them because the richer ones buy it all up to use excessively (presumably).
Second, leave hydrocarbons alone. That won’t be easy, I grant you, but how about it? Leave them alone, instead of trying to stifle the life out of the industry and when supply squeezes, having to throw billions at subsidising those same hydrocarbons because your economy would die otherwise.
Third, on a more personal note and completely unrelated note, fire Antonio Guterres. Seriously, we’re all fed up with his crap