The New Energy Policy

By Sheril Kirshenbaum | March 29, 2010 9:56 am

In these difficult economic times, cap and trade couldn’t survive. Wall Street, massive industry opposition, and political polarization were among the leading factors that killed the bill by Waxman and Markey. Now what?

Senators Cantwell and Collins have proposed a 39-page plan called “cap and dividend.” It’s very similar to what Obama discussed during his campaign and would auction 100 percent of pollution permits to producers and fossil fuel wholesalers and return three-quarters of revenue to consumers for high energy costs. Not bad.

Additionally, Senators Kerry and Graham are working on a new bill. According to The New York Times, it would:

include a cap on greenhouse gas emissions only for utilities, at least at first, with other industries phased in perhaps years later. It is also said to include a modest tax on gasoline, diesel fuel and aviation fuel, accompanied by new incentives for oil and gas drilling, nuclear power plant construction, carbon capture and storage, and renewable energy sources like wind and solar.

I’ll be following the energy policy discussion as it continues with great interest. What do you want to see in the bill?

CATEGORIZED UNDER: Energy

Comments (25)

  1. ChrisD

    This is the bit that confuses me: The Kerry-Graham bill includes various measuers that are “accompanied by new incentives for oil and gas drilling….”

    What is the purpose of incentives for oil & gas drilling, especially for oil drilling?

    The article refers to Graham as “Mr. Kerry’s partner in promoting global warming legislation”. I don’t see what incentives for oil drilling have to do with “promoting global warming legislation” unless the actual intent of the legislation is to promote global warming.

  2. SLC

    One of the things that the Congress and the President should be working on, as advocated by James Hanson, is phasing out coal burning power plants and converting them to natural gas. As a number of newspaper articles over the past few months have indicated, new technology has opened up huge quantities of economically feasible natural gas deposits.

    1. 47% of US CO(2) emissions come from coal burning power plants (and that’s not counting the CO(2) produced by diesel powered trains that transport the coal). It’s probably much higher in China and India.

    2. Natural gas produces 1/2 the CO(2) compared to coal per KH of electricity generated.

    As the CEO of BP put it in an OPED in the Washington Post, what are we waiting for? Coal burning power plants can be converted a lot quicker then nuclear or new gas burning plants can be constructed.

  3. Guy

    Natural Gas drilling is potentially disastrously bad for the drinking water supply.

    http://www.pbs.org/now/shows/613/index.html

    I sincerely hope that part is removed from the energy policy.

  4. Pete

    3/4 rebate sounds like a good idea to me. I also like the prospect of all permits going to auction as it should be.

  5. SLC

    Re Guy @ #3

    Clearly, the extraction practice known as “fracking” is going to require regulation and careful monitoring. However, claims made by Mr. Fox remind me of the overwrought claims made by opponents of nuclear power 30 years ago. As best I can tell, Mr. Fox has no qualifications in geology or any other science pertinent to analysis of the environmental effects of fracking. As with the issue of global warming, one should be cautious about accepting the claims of the non-experts. In other words, is Mr. Fox just the environmental version of Marc Morano?

    http://climateprogress.org/2010/03/03/natural-gas-fracking/

  6. Guy

    @SLC,

    If Mr. Fox was like Mr. Morano he would already have been bought by the oil & gas industry. The guy made an independent documentary film on the things he could video and confirm. I don’t think he’s claiming to be an expert on geology. His film does make several good points and this issue should be carefully considered before they subsidize further drilling.

    I’m sure it can be done safely, that doesn’t mean that it will. All it would take for a disaster would be some contractor drilling in the wrong place or making some other error. There have been instances of wells filling up with methane and exploding. If there was a major leak into a large aquifer you’re talking about contaminating a lot of drinking water. Fresh water is in short supply in some areas. They should also take that into consideration.

  7. Instead of complicated permitting schemes, I’d rather see the income tax replaced with a pollution tax, including carbon, methane, sulfur, etc. Then with the right price signals incorporating externalities like pollution, let the market figure out how best to make power.

  8. SLC

    Re Guy @ #6

    Mr.Guy and I are in agreement. The application of fracking, as I stated previously, has to be carefully regulated and monitored. However, I would point out that coal mining and coal burning also have severe environmental consequences relative to ground water supplies (recall the collapse of slurry ponds in Tennessee a year or two ago). This is in addition to the mercury released into the environment when coal is burned. Even if one rejects the theory of global warming, there are good environmental reasons to phase out coal burning.

  9. TomInAlaska

    It would be nice to see some sort of “act like you mean it” clause in the bill. I envision rules limiting the household CO2 output of any Congresscritter, celebrity, or science journalist pushing GHG regulation to the median emissions for a middle-class family of the same size as the subject’s. If this really is a planet-threatening crisis, then our leaders should lead by example.

  10. Tax and dividend makes so much more sense than a cap and trade or cap and tax (without dividend). T&D doesn’t create a hidden economy like C&Trade, and does not create gov’t budget problems like a C&Tax would. What if the gov’t becomes dependent on the tax money, and someone invents a new carbon-free power source? The budget would get even more screwed up. T&D gives the right price signals to the right spot, the consumer.

  11. How do they set the tax rate? I’m a fan of $1/ton (carbon, not CO2)/ppm atmospheric concentration over 350.

    That would put the current level at about $35/ ton C (~$10/ton CO2), and it would go up and down depending on how the world deals with the atmosphere (at cuorrent production levels, up by about $2/year).

  12. sinz54

    Europe has found that cap-and-trade has been a license for lobbyists, shady dealings, bribes, and complex side deals. After the collapse of the derivatives and financial markets in 2008, we ought to be leery of creating yet another arcane market that passes any average citizen’s understanding–trading in carbon permits.

    Instead, a straight-up carbon tax is easy to implement and easy to figure out. The tax rate can be widely posted, just like the gasoline tax is posted at every filling station. And it can be adjusted up or down as needs warrant.

  13. moptop

    “What is the purpose of incentives for oil & gas drilling?”

    Uh, maybe some modicum of energy independence? Maybe we could keep the cost of production down, and if you really want to keep the price of fuel high, you could be honest about it and tax it, rather than force Americans to buy it from overseas dictatorships and kingdoms at inflated prices? Naah!

    Oh yeah, and let’s prevent the use of natural gas too! Oh, and nuclear, no way! Hair shirts for everybody!

  14. ChrisD

    @moptop 13

    “What is the purpose of incentives for oil & gas drilling?”

    Uh, maybe some modicum of energy independence?

    Methinks you missed the point. The Times article referred to this as “global warming legislation.” If that’s what it is, then incentives for oil and gas drilling shouldn’t be in it.

    Look again at the list of items mentioned:

    - Cap on greenhouse gas emissions (for utilities)
    - Modest tax on gasoline, diesel fuel and aviation fuel
    - Incentives for nuclear power plant construction
    - Incentives for carbon capture and storage
    - Incentives for renewable energy sources like wind and solar
    - Incentives for oil and gas drilling

    All together now:

    One of these things is not like the others.
    One of these things just doesn’t belong.
    Can you tell which thing is not like the others
    By the time I finish my song?

  15. moptop

    ChrisD,

    I am sure you think I missed the point, but whatever. You can still tax your gasoline if you are getting it from the US. The govt just gets to keep more of the money since it costs less when the supply is increased. I know that is a subtle point, or I guess it must be, but if that is too hard for you, I can’t help you.

    I guess it is no skin off your nose if good American union jobs like producing oil are shipped overseas, but, and I know you probably can’t understand this, and will reject it and ask another rhetorical question, if a president wants to get re-elected, he has to worry about American jobs. He is not president of the world.

  16. ChrisD

    I can’t believe you’re this obtuse, but whatever. My point has zero to do with taxes, costs, jobs, overseas oil, or elections. My point is very simple, and you can get it if you try: Putting incentives for oil drilling in what’s labeled as a climate bill is pretty weird.

    I would similarly call putting incentives to buy bourbon in a drunk driving bill “pretty weird.” But surely you would argue with that, too, since there are American jobs involved in making and selling bourbon. Or something.

    I know that is a subtle point, or I guess it must be, but if that is too hard for you, I can’t help you.

  17. Guy

    Good point.

    There should be no incentives for fossil fuels in a climate bill.

  18. ThomasL

    Well,

    I see that “Obama is allowing oil drilling 50 miles off Virginia’s shorelines” (http://www.msnbc.msn.com/id/36110038/ns/business-oil_and_energy/). I’m sure that is going to upset quite a few in here. He has decided to pass on some planned area in Alaska however, so I guess in a way it is a bit of a wash.

    I honestly doubt any of you would actually be happy with what you “wish” would happen, our society is going to take decades to adjust to changing energy infrastructure and limited supplies, and even then there will likely be serious social dislocations in the process (and people tend to get rather upset with such).

    We’ve had some of the conversation in other threads, but part of what I find trouble with is this attitude that there is actually enough cash lying around to spend on unproved “maybe’s” here (lots of great ideas, few proved and even fewer that are proven to be cost effective). I am not for any “subsidies”, and think neither fossil fuels nor alternative fuels should be getting subsidies, but rather the markets should be allowed to work (limited growth in fossil fuel development will lead to naturally rising prices and drive the development of real alternatives). The “western” world, or “developed” world is the part of the world’s economy that is viewed as being able to shoulder these expenses – a little reality on that thinking: http://globaleconomicanalysis.blogspot.com/2010/03/irish-banks-need-43-billion-in-new.html gets into issues in almost every developed economy and points out just how bankrupt most of them actually are. There were comments in a previous thread about how great Canada is doing, again I suggest you gain a real economic education quickly, you will greatly served by having one the next few years. And, if you missed it our treasuries auctions didn’t go so swell this week, so the debt will likely be getting more expensive to carry already (and those of you with public pensions ought to be worried as well: http://globaleconomicanalysis.blogspot.com/2010/03/states-have-517-trillion-in-pension.html).

    Still, the subsidies are there to help keep costs down. Look at how many are already unable to afford to be with s “slight” increase in their utility bills that they will directly connect to many of these plans? If the answer is we will subsidies all of them that just means it will be that much more expensive for everyone else (and the middle class is already steaming)… “Money makes the world go round”, and at the moment the world seems to be a tad short. Many in here seem to greatly trivialize such real issues and instead seem to have this attitude that there are no limits to what we can spend money on…

    ChrisD,

    Welcome to how our government does business anymore – half of every bill has nothing to do with what is in it – which leads for a never ending stream of lawyers to figure out what the heck things actually mean (because stuff is stuck in 100’s of different bills). Take a good look through the health care bill as an example – there’s a lot in there that has nothing to do with health.

    But hey, we are very likely to have a greatly reduced standard of living shortly one way or another, so our energy consumption should drop accordingly.

  19. As ThomasL points out, the petroleum industry is subsidized heavily in the U.S. just as it is in other places. Alternative energy – not nearly so much. Until those subsidies are removed – i.e. tie lease costs in oil fields are tied to market valuations of the product in them – oil and gas will remain cheap alternatives.

    That said, I disagree that we couldn’t be further down this road in the U.S. and have done so in ways that benefit the economy. The Chinese made it a matter of national economic policy to try and get carbon Capture and Sequestration technology to a working, production cost scale. I still have my doubts about that whole enterprise – but IF they succeed, American Companies will have to buy Chinese tech to duplicate the concept, probably at high prices because the chinese will hold the patents. Instead, the U.S. could have led the development, and forced the Chinese to buy from us. Opportunity costs are a real bear sometimes.

  20. moptop

    “Putting incentives for oil drilling in what’s labeled as a climate bill is pretty weird.” Uh, it’s called an “energy bill” for one, and for the other, why did the govt take over student loans in what was called a “Health Care” bill. 2500 layoffs announced yesterday on account of it too.

    You elected this thugocracy, not me.

  21. moptop

    Oh yeah, ChrisD,
    Why did Obama include a provision to allow him to snuff investigations into executive brand departments by inspectors general in what was supposed to be a “stimulus bill”? Puleeze call BS, puhleeze!

  22. moptop

    brand =branch, preview would be nice.

  23. Eric the Leaf

    It’s true that energy policy and climate policy are different, although there are some areas of overlap. Offshore drilling and the combustion of the hydrocarbons obtained will have a miniscule impact on climate and for the same reason will have a miniscule impact on the oil supply. It is also hard not to believe that all of the petroleum that can be burned will eventually be burned. Even so, the primary threat to climate is coal combustion, not oil, and it already looks like the latter has entered its global depletion phase. I think the Obama administration is aware of all of this and is just throwing a bone by liftiing parts of the offshore drilling ban. It makes little difference one way or the other.

  24. ChrisD

    @moptop 20/21:

    <why did the govt take over student loans in what was called a “Health Care” bill. >

    <Why did Obama include a provision to allow him to snuff investigations into executive brand departments by inspectors general in what was supposed to be a “stimulus bill”?>

    Good God. I give up on your ever grasping the essential point. You win.

  25. Guy

    Including any provisions that give incentives to produce more fossil fuels contradicts a bill aimed at combating global warming. We know that burning fossil fuels contributes to increased warming because of the greenhouse gas emissions.

    I am starting to loose confidence that this administration is serious about dealing with climate change.

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About Sheril Kirshenbaum

Sheril Kirshenbaum is a research scientist with the Webber Energy Group at the University of Texas at Austin's Center for International Energy and Environmental Policy where she works on projects to enhance public understanding of energy issues as they relate to food, oceans, and culture. She is involved in conservation initiatives across levels of government, working to improve communication between scientists, policymakers, and the public. Sheril is the author of The Science of Kissing, which explores one of humanity's fondest pastimes. She also co-authored Unscientific America: How Scientific Illiteracy Threatens Our Future with Chris Mooney, chosen by Library Journal as one of the Best Sci-Tech Books of 2009 and named by President Obama's science advisor John Holdren as his top recommended read. Sheril contributes to popular publications including Newsweek, The Washington Post, Discover Magazine, and The Nation, frequently covering topics that bridge science and society from climate change to genetically modified foods. Her writing is featured in the anthology The Best American Science Writing 2010. In 2006 Sheril served as a legislative Knauss science fellow on Capitol Hill with Senator Bill Nelson (D-FL) where she was involved in energy, climate, and ocean policy. She also has experience working on pop radio and her work has been published in Science, Fisheries Bulletin, Oecologia, and Issues in Science and Technology. In 2007, she helped to found Science Debate; an initiative encouraging candidates to debate science research and innovation issues on the campaign trail. Previously, Sheril was a research associate at Duke University's Nicholas School of the Environment and has served as a Fellow with the Center for Biodiversity and Conservation at the American Museum of Natural History and as a Howard Hughes Research Fellow. She has contributed reports to The Nature Conservancy and provided assistance on international protected area projects. Sheril serves as a science advisor to NPR's Science Friday and its nonprofit partner, Science Friday Initiative. She also serves on the program committee for the annual meeting of the American Association for the Advancement of Science (AAAS). She speaks regularly around the country to audiences at universities, federal agencies, and museums and has been a guest on such programs as The Today Show and The Daily Rundown on MSNBC. Sheril is a graduate of Tufts University and holds two masters of science degrees in marine biology and marine policy from the University of Maine. She co-hosts The Intersection on Discover blogs with Chris Mooney and has contributed to DeSmogBlog, Talking Science, Wired Science and Seed. She was born in Suffern, New York and is also a musician. Sheril lives in Austin, Texas with her husband David Lowry. Interested in booking Sheril Kirshenbaum to speak at your next event? Contact Hachette Speakers Bureau 866.376.6591 info@hachettespeakersbureau.com For more information, visit her website or email Sheril at srkirshenbaum@yahoo.com.

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