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Putting a Price on Carbon

Posted By Nicolas Loris On May 5, 2009 @ 3:02 pm In Energy | Comments Disabled

During the 2009 Offshore Technology Conference yesterday a lengthy panel took place to discuss meeting America’s energy challenges in both the near and the long term. The list of the panelists can be found below. Although not everyone came out and said it, a number of the panelists concluded a price on carbon was necessary.

Marvin Odum, President of Shell Oil, was the first to come out and say it. While he acknowledged it will cost energy prices to rise, he supported cap-and-trade legislation that would reduce carbon dioxide reduction. He mentioned that the legislation must be done right and cannot hurt the economy, suggesting that a gradual phasing of reduction cuts would be ideal. Other members of the panel concurred.
But the reality is that any carbon reduction scheme (a carbon tax was also mentioned) will have significant economic consequences. Either way, it’s a tax on energy consumption. In fact, it would act as a huge tax. If enacted, cap-and-trade will be one of the government’s largest revenue sources within the next decade.

Panelist David Holt, the president of Consumer Energy Alliance, noted that just about everything we produce and use must be made with energy. In fact, since 85 percent of our energy demand is met through fossil fuels, increasing the costs of energy through a cap and tax bill and not hurting the economy are mutually exclusive.

Bill Graves, CEO of the American Trucking Association and former Governor of Kansas, took the most realistic approach. He emphasized that we should fully understand what a carbon cap will do to all sectors of the economy and slow down with policy implementation for something that could have such drastic unintended (and intended in terms of forced reduced energy demand) consequences.

According to The Heritage Foundation’s Center for Data Analysis, job losses resulting from the Lieberman-Warner cap and trade would have surpassed 900,000 in some years [1]. Keep in mind; this is net of any “green jobs” created. Also keep in mind; the Waxman-Markey bill is has stricter emission cut targets. It also amounts to about a $2000 tax per year on families.

Rather than taking a cautious approach to studying the consequences of a bill, companies are instead jumping in line for handouts so they don’t miss the boat. They have an interest in ensuring that their bottom lines are protected. Many of them have calculated that some sort of carbon capping is inevitable and that their interests will therefore be best served by trying to influence how such a cap is implemented. And the best way to do that will be to position themselves as supporters of the legislation and then to provide some helpful suggestions on how to improve it. As it currently stands, any carbon cap will do little to reduce emissions. It will allow businesses to operate pretty much as normal, transfer the costs to consumers or circumvent the system, and lead to no environmental benefit with a great deal of economic pain.

Some panelists suggested including a clause in a cap and tax bill that somehow protects the economy if a carbon cap slows growth too much yet no one offered a credible explanation of how this would work. The reality is that it can’t be done. Look at today’s economic recession. Energy demand is down, economic production is slowed and as a result carbon dioxide emissions are down. If we want a preview of what global warming regulations will do, we’re witnessing it.

Panelists: Roger Ballentine (Senior Fellow, Progressive Policy Institute), Jack Gerard (President, American Petroleum Institute), Bill Graves (President, American Trucking Association), Jason Grumet (Executive Director, National Council on Energy Policy), David Holt (President, Consumer Energy Alliance), Congressman Sheila Jackson Lee (D-TX), Jim May (President, Air Transport Association) and Marvin Odum (President, Shell Oil Company).


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[1] surpassed 900,000 in some years: http://www.foundry.org/2009/04/06/the-cost-of-global-warming-a-story-in-pictures/

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