The crude oil, straight from the ground45 pence · 32%
Refining, delivery and the shop19 pence · 14%
Fuel duty, a tax on each litre53 pence · 38%
VAT, the sales tax23 pence · 16%
A £1.40 litre, 2024, rounded.
Here is what a litre of petrol costs in Britain and who gets each part: the oil itself, the refinery that turns it into petrol, the shop, and the government's two taxes. Every person in this chain got paid. One cost is missing. Burning the litre puts about 2.3 kilograms of carbon dioxide in the air.
You buy the litre
↓→
You burn it
↓→
2.3 kg of carbon dioxide goes up
The warming from it lands on everyone, everywhere, for centuries.
That carbon dioxide does damage: hotter summers, higher seas, lost crops. The damage is real and it costs money. But it lands on people all over the world, and on people not yet born. None of them were at the pump, and nothing in the price goes to them.
The driver paysoil, refinery, shop, two taxes
vsvs
Everyone the warming reachesthe harm
Who pays for the harm from the litre's carbon dioxide?
The driver. It is in the price.
Not yet. Look at the parts again: oil, refinery, shop, two taxes. Each is a payment to someone in the chain. The tax goes to the government's general spending; nothing in the price is a payment to the people who get the harm.
Nobody. The harm is not real money.
Not yet. A flooded home, a failed harvest and a hospital bed are all paid for in money by someone. The bill exists. It simply arrives at a different address from the pump.
Everyone the warming reaches, most of whom never bought it.
Right. Every line in the price went to someone in the chain. Not one went to the farmer whose harvest fails or the town whose sea wall must be raised. That bill arrives elsewhere.
Harm per tonne, US government estimate$190
What Europe's power stations pay per tonne, 2024$70
Governments and economists have tried to put a number on the harm from each tonne. The US government's estimate, made in 2023, is about $190 a tonne. Others are lower. At $190, one litre's harm comes to about 44 cents, a cost that appears on nobody's receipt.
Move the control to put a price on each tonne of carbon dioxide, and watch what it adds to a litre of petrol and to a tonne of coal.
Extra on a litre of petrol (cents)0
Extra on a tonne of coal ($)0
Price on each tonne of carbon dioxide: $0 a tonne
No price on the harm. The litre and the tonne cost what they cost, and the damage lands elsewhere.
Extra on a litre of petrol (cents)12
Extra on a tonne of coal ($)120
Price on each tonne of carbon dioxide: $50 a tonne
At $50 a tonne, a litre of petrol carries 12 cents more and a tonne of coal $120 more.
Extra on a litre of petrol (cents)23
Extra on a tonne of coal ($)240
Price on each tonne of carbon dioxide: $100 a tonne
At $100 a tonne, a litre of petrol carries 23 cents more and a tonne of coal $240 more.
Extra on a litre of petrol (cents)44
Extra on a tonne of coal ($)456
Price on each tonne of carbon dioxide: $190 a tonne
At $190 a tonne, a litre of petrol carries 44 cents more and a tonne of coal $456 more.
Why does $100 a tonne add 23 cents to a litre of petrol but $240 to a tonne of coal?
Governments tax coal more heavily.
Not yet. This is the same price on the same tonne of gas, whoever makes it. Nothing here treats coal differently. Coal simply makes far more gas per tonne of fuel than a litre makes.
Coal is much dirtier per kilogram than petrol.
Not yet. Per kilogram, petrol makes slightly more carbon dioxide than coal, about three times its own weight against coal's two and a half. The gap here is not dirt. It is a thousand times more fuel.
Amount. A litre weighs under a kilogram and makes 2.3 kilograms of carbon dioxide. A tonne of coal makes 2.4 tonnes.
Right. The same price per tonne of gas is being charged to both. One of them is a thousand times more fuel, so it makes a thousand times more gas and pays a thousand times more.
Move the control.
Emissions under Europe's permit scheme, 2005100
Same plants and factories, 202353
With 2005 set to 100. Other things changed too: gas prices, closures, wind and sun.
Some places put the missing cost into the price. In Europe, power stations and big factories must buy a permit for every tonne they send up. A permit cost about €65 in 2024. People call this a carbon price. It bans nothing. It makes cheap fuel a little less cheap, so whoever chooses a fuel sees some of the harm.
How much do governments around the world spend each year making coal, oil, gas and the electricity from them cheaper for their people?
Pick one. Nothing is scored.
Spent making fossil fuels cheaper, 2023$620 billion
The year before, when prices spiked$1,000 billion
About $600 billion.Guesses run low. In 2023 governments spent about $620 billion holding down the price of petrol, diesel, gas and fossil electricity. In much of the world, then, the missing cost is not merely left out of the price. The price is pushed lower still.
Which of these costs is inside the price the buyer pays, and which lands on someone else?
One card at a time. Tap the pile it belongs to.
Card 1 of 6
The wages of the oil rig crew
Asthma treatment for children living beside a coal plant
The ship that carries the crude oil
A farmer's lost harvest in a hotter year
The tax the government adds at the pump
Sea walls a city builds as the tide climbs
The wages of the oil rig crew → The buyer pays
Not yet. The buyer pays this. The crew's wages are in the price of every litre, because the oil company had to pay them.
Asthma treatment for children living beside a coal plant → Someone else pays
Not yet. Someone else pays this. The children's families and the hospital pay, and none of it is on the coal's receipt.
The ship that carries the crude oil → The buyer pays
Not yet. The buyer pays this. The shipping cost is folded into the price at the pump.
A farmer's lost harvest in a hotter year → Someone else pays
Not yet. Someone else pays this. The farmer loses the crop, years later and far away, and was never asked.
The tax the government adds at the pump → The buyer pays
Not yet. The buyer pays this. The tax is printed on the receipt and paid at the till.
Sea walls a city builds as the tide climbs → Someone else pays
Not yet. Someone else pays this. The city's taxpayers build the wall, and the fuel that raised the tide was sold long ago.
The buyer pays the chain→The chain is paid in full→The harm is billed elsewhere
Right. Everything on the first list is a person the buyer paid. Everything on the second is a bill that arrived somewhere else, at a different time, to someone who was never asked. That is the cost the receipt leaves out.
The factory's waste
↓→
Runs into the river
↓→
A town cleans its drinking water
A factory lets its waste run into a river. Fish die downstream and a town has to clean its drinking water. The factory's product is cheap. Which is true?
The product is cheap partly because part of its cost is being paid downstream.
Right. Same shape as the litre. If the factory had to clean its own waste, the price would carry that. It does not, so the town carries it instead. The cost did not vanish; it moved.
The product is cheap because the factory is efficient.
Not yet. It may be efficient too. But a factory that pays for its own waste and one that does not can be equally efficient, and only one of them looks cheap. The difference is who pays for the waste.
The town's cost has nothing to do with the product's price.
Not yet. It is the same cost, moved. Every pound the town spends on clean water is a pound the factory did not spend, and did not have to add to the price.
Lesson complete
A fuel's price pays for digging and moving it. The harm it does lands on people who never bought it.