Scuttlebutt: Energy Policy

     As numerous others have mentioned, Trump's personal behavior has obscured some of the more important developments taking place in the real political world. Hard news has a difficult time competing with sexy women and pee tapes.  We call it “hard news” because sometimes it may be hard to absorb the complexity of a particular political development.  There are nuanced arguments that must be considered.  This is an anathema to today's instant I-don't-have-time-for-this world.  The Statistic Brain Research Institute tells us that the average attention span for Americans is 8 seconds, 33% less than in 2000.  The attention span of a goldfish, we are told, is 9 seconds.  That makes serious policy discussion virtually impossible among a populace that is far more interested in Beyonce and Jay-Z than they are, for example, in energy policy.

     Which brings me around to the subject of energy policy.

     Would it catch your attention if I told you that some Republicans and even some oil companies are proposing a new tax?  Yes, the foulest word in Grover Norquist's vocabulary is being spoken by none other than traditional Republican heavyweights James Baker and George Shultz?  

     The tax I am referring to is a carbon tax.  23 Republican college campus groups, led by Yale College Republicans, are calling for this under the name Students for Carbon Dividends.  They are joined by no less than Texas Christian University.  Uh-huh, Texas.  It seems these young Republicans were tired of hearing their leaders deny climate change and did not want their party branded as anti-science.

     Under the plan the students are proposing, an initial tax of $40 per ton of carbon would be levied at the point where fossil fuels enter the economy, for instance a mine or port.

     The tax money collected would then be returned to taxpayers in a per-person monthly payment, with half-payments going to children under 18 and a limit of two children per family. The Climate Leadership Council created by Mr. Baker and Mr. Shultz estimates a dividend would amount to about $2,000 a year for a family of four. This would account for the certain rise in the cost of motor fuel and electricity.  It would also hit coal harder than natural gas.

     This is not the first time a carbon tax has been proposed, though rarely by Republicans.  Other plans call for different uses of the tax money, but most adhere to the idea of a “neutral” tax, in that the government could not have this tax money for the general fund budget.  It would have to be returned to the public in some form of subsidy if not a check.

      For some the big attraction to the carbon tax is, as Mr. Baker has stated, “.... a free-market based solution,” meaning that consumers would be free to use whatever method they themselves choose to avoid paying the carbon tax.  Buy an electric car, get solar panels, walk, pedal, or carpool to work.  Sell the speed boat.  Dump the monster old fridge and get a smaller, more efficient one.

     Science magazine has estimated  that the tax would be expected to reduce carbon emissions by 28 percent by 2025, allowing that, “Many, though not all, of the Obama-era carbon dioxide regulations could be safely phased out, including an outright repeal of the Clean Power Plan”.  Republican supporters of the tax expect to emphasize this point when selling the plan to fellow Republicans, Libertarians, and others who cringe at the sound of the word “regulations”.

     Even some oil companies now support a carbon tax.  These are largely European oil companies and do not include the biggest 3 American (?) companies, ExxonMobil, Chevron, and ConocoPhillips.

     Europe's oil and gas giants know that climate policy is moving ahead with or without them, and they'd prefer to have some influence over how that process plays out.  As the saying goes, you are either at the table or on the table.

     Besides, by moving away from coal to natural gas, it helps their bottom line.   Most of all, though, they want to avoid the nightmare of a global patchwork of different carbon policies, all with different stringencies and regulatory requirements, which would create an administrative nightmare and a highly volatile climate in which to develop investment strategies. The American companies are holding off because of being joined at the hip with the Republican party, most of whom need an oxygen bottle when you say the word “tax”. Nevertheless, a new report by the environmental data company CDP has found that at least 29 companies, some with close ties to Republicans, including Exxon Mobil, Walmart and American Electric Power, are incorporating a price on carbon into their long-term financial plans.

     There exists another carbon emissions reduction scheme already in play in California and a coalition of Northeastern states called cap and trade.  This is a system by which polluting industries may purchase the right to pollute.  If they don't use all their “credits” because, say, they reduced their emissions, they could sell the credits to another polluter who needs them.  It is obviously a more complicated system and, as it turns out, in California at least , it has not come close to meeting expectations.  Read that to mean income for the state.  The credits are auctioned off each year and they have not brought in the kind of money that was anticipated.  Not by a long shot.  The auctions have come up hundreds of millions of dollars short of their goals.  In reaction to this shortfall California Senate President Pro Tem Kevin de León hinted strongly at ditching cap-and-trade for a straight up carbon tax, saying California government needs, “…a program that both reduces pollution and provides stable funding to clean up climate emissions.”

     Therein lies the rub.  California uses the carbon sale money to fund programs that advance the stated goal of reducing greenhouse gas emissions by 40% by 2030.  It is not considered a tax (a question to be answered by the courts) and so the “net neutral” concept is not in play.  Should California abandon the cap and trade and start charging a carbon tax, de Leon and others, including the Governor, would be expecting to not return the money to the public in the form of cash, but by subsidizing activities that reduce overall emissions.

     That could prove difficult.


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