American Petroleum tells lawmakers it supports carbon fee because it’s easier to demonize

The bipartisan effort of Senators Lindsey Graham (R-SC), John Kerry (D-MA), and Joe Lieberman (I-CT) to craft comprehensive clean energy legislation that caps global warming pollution has brought some positive words from Big Oil and their political allies.  Brad Johnson explains why in this Wonk Room repost.

In particular, the senators are considering a proposal by ConocoPhillips, BP America and ExxonMobil to exclude petroleum producers and refiners from a carbon market and instead levy a carbon fee. “Once you have oil people saying, ‘We can live with this, this was our idea,’ then hopefully everybody else begins to look at this thing anew,” Graham told reporters. “That’s the hope.” However, the American Petroleum Institute’s Jack Gerard explained that the “support” from the oil industry for a carbon fee on petroleum will come in the form of “signs at the gas pump letting people know they’re paying more because of U.S. efforts to deal with climate change”:

Industry officials said they too welcome the discussions of a carbon fee as part of the Kerry-Graham-Lieberman effort.

Clearly it softens the reaction and increases the likelihood that a number of people who’ve been forced to push back will be much more cooperative in the dialogue,” said Jack Gerard, president of the American Petroleum Institute.

Gerard said that the carbon fee approach would yield net environmental benefits, while giving consumers the most transparent signal they can get about what the costs are from the program. Unlike the House bill’s cap-and-trade system, oil companies would pass through the costs with signs at the gas pump letting people know they’re paying more because of U.S. efforts to deal with climate change.

In other words, the oil industry likes the idea of legislators embracing a carbon fee plan “” a plan originally proposed by oil companies “” because they’ll be able to blame “U.S. efforts to deal with climate change” on high gas prices. And that is what they’re already doing, with full-page ads in Politico and Roll Call that attack Congress for “new energy taxes”:

Congress will likely consider new taxes on America’s oil and natural gas industry. These new energy taxes will produce wide-reaching effects, and ripple through our economy when America “” and Americans “” can least afford it.

These unprecedented taxes will serve to reduce investment in new energy supplies at a time when most Americans support developing our domestic oil and natural gas resources. That means less energy, thousands of American jobs being lost and further erosion of our energy security.

Our economy is in crisis, and we need to get the nation on the road to economic recovery. This is no time to burden Americans with new energy costs.

The direct target of this ad is the Obama administration’s effort to remove $80 billion in loopholes and subsidies for the oil industry, which allowed them to reap windfall profits while helping destroy the American economy under Bush. Even now, rising oil markets are threatening to cripple the fragile recovery. There’s simply no evidence that these subsidies have helped necessary exploration or protected American jobs “” instead they’ve fattened corporate profits at taxpayers’ expense.

If the oil industry is willing to launch false attacks on the removal of tax loopholes as “unprecedented taxes,” it doesn’t take a rocket scientist to figure how they’ll portray a carbon fee.

One can bet they won’t mention that even a very strong price on carbon only marginally affects consumer gas prices. Modeling by the Massachusetts Institute of Technology in 2007 of a scenario equivalent to emissions reductions to 1990 levels by 2020 and 80% cuts by 2050 found that oil producers would pay most of the pollution fees, not consumers. In fact, after an initial rise in consumer prices in the first decade of implementation that could be offset by increased fuel economy standards, MIT projects consumer gas prices would decline:

Carbon Policy and Gas Prices

The price of gasoline has fluctuated between two and four dollars a gallon in recent years, whereas the effect of carbon policy is only cents on the gallon. Yet every cent is one that stays in the American economy going to create jobs and maintain our infrastructure, instead of flowing overseas to countries like Iran and Nigeria. Quite simply, putting a price on carbon is a fundamental threat to the power of the oil industry over the U.S. economy.

10 Responses to American Petroleum tells lawmakers it supports carbon fee because it’s easier to demonize

  1. fj2 says:

    A new pamphlet would be in order:

    “Guess who’s paying for the current energy taxes . . .”

  2. Uosdwis says:

    The day will come, probably sooner than we imagine, that almost everyone will say, if not scream at the top of their lungs (if they can breathe), “WE WOULD PAY ANYTHING IN TAXES RIGHT NOW, IF IT WOULD ONLY STOP (fill in the catastrophe: raining, heatwaving, snowing, droughting)!!” But we can’t see past the next week, let alone the next quarter.

  3. Jeff Huggins says:

    Basic Economics says that a largely unregulated marketplace will not significantly consider an important (and real) factor in prices, in purchase decisions, and so forth, and will not support market decisions that reflect that factor, if the factor is not reflected in costs. To be clearer, the costs and prices of petroleum-based products that generate CO2 SHOULD reflect the real and genuine fact that carbon dioxide alters the climate in a way that we don’t want the climate altered. Period.

    That scientific fact and problem IS a cost of doing business in the oil and gasoline business. The industry needs to live with it, “own” it, acknowledge it, deal with it, and accept it, period.

    Farms have to pay for fertilizer. Doctors have to pay for insurance coverage. Many industries have to pay for equipment that keeps pollutants out of their effluents in the first place. (I have to pay for garbage and trash pickup.) And all of those sorts of costs, as well as others, are naturally and necessarily reflected in the prices of their products. NO EXCEPTION FOR THE OIL INDUSTRY.

    Does the industry want to pay the military bill for all the wars that have taken place in order to protect its interests? Is the industry willing to be transparent and honest regarding tax breaks it already gets?

    I thought that the oil industry was (presumably) full of “tough guys”, who drill and drill and build huge off-shore platforms. Why are they all now crying — and wanting to blame the government — over the fact that the product that THEY make pours CO2 into the air?

    GROW UP, oil industry. Get over it, and become responsible for once!

    And I do hope that our politicians don’t buy, or give in to, this crying. Give me a break!

    Jeff Huggins
    U.C. Berkeley, chemical engineering, class of 1981
    Chevron Research Corporation, 1981-1984
    Harvard Business School, class of 1986, Baker Scholar
    McKinsey & Company, 1986-1990
    Concerned citizen and parent

  4. fj2 says:

    Our primitive industries run on the detritous of ancient life as we exhaust vast tracks of arable land and fertile oceans as dystopian images “Soylent Green” and “Road Warrior” approach ever more rapidly from a not-so-distant future.

  5. Anne says:

    I posted on Gerard’s tactics a couple of weeks ago.

    API’s policy position has been the same all along: prevent a price on carbon, even a fair one that underestimates the externalities, by any means necessary, including massive deception.

  6. Eugene says:

    That’s a total non-starter. It’s selecting the bad aspects and trumpeting them. A sign at every gas pump across the country would be a devastating set back. The damage would out-weigh any potential benefit from the fee. If we lose the public relations battle, we’ve lost the war.

  7. Theodore says:

    Here is a simple solution – nationalize the coal, oil and gas industries without compensation and put all three on a rigid linear schedule of declining production. Let the price rise as needed to constrain consumption without shortages. Use the profits to finance renewable alternatives.

    The political power of the industry is based solely on their economic power. Take away their money and their political influence disappears at the same time. Problem solved!

  8. Leif says:

    Now that the Supreme Court has classified corporations as having the rights of people it would appear incumbent in my view to charge corporations with humanitarian responsibilities as well. Under present law corporations are charged with maximizing shareholder profits first and consequently, not actively denying AGW becomes a fiduciary “least cost option” to pursue. In my eyes the Supreme Court has given humanity a “Robot” with a license to kill. The only option that I see now for humanity, via the Supreme Court, is to charge those same corporations with the humanitarian responsibilities of long term sustainability first and foremost and shareholder profits secondary. Without a long term survivability clause some place, corporations will end up with all the money in a dead world. A dubious victory. It is unconscionable that capitalism, corporations and humanity cannot pursue long term survivability with shared enthusiasm.

    However being a retired boat builder with a dubious grasp of reality, what do I know?

  9. Jeff Huggins says:

    Referring to Leif’s Comment 8, it is no surprise that there are some very wise retired boat builders out there. After all, what better way to develop an appreciation for nature’s powers, an understanding of the importance of careful work (after all, a boat with leaks won’t get very far), and some understanding of human nature (those darn boat customers!) than by building boats?

    I particularly like this comment: “It is unconscionable that capitalism, corporations and humanity cannot pursue long term survivability with shared enthusiasm.” That is a big problem. Not one that can’t be fixed. But one that we don’t seem to want to fix, judging from the situation these days.



  10. Leland Palmer says:

    Nationalize the fossil fuel corporations, and set the oil corporations to converting to biofuels including cellulosic ethanol. Forcibly transform the coal fired power power plants to BECCS power plants:

    Combine BECCS with a topping cycle, producing combined cycle BECCS power plants, and use the increased efficiency of gas turbine/steam combined cycles to pay for the conversion:

    If we did this, we could use the coal fired power plants to put a billion tons of carbon back underground per year in the U.S., while simultaneously displacing fossil fuel use, avoiding methane production from landfills and other cellulosic waste, disposing of beetle killed trees that will burn in wildfires anyway, and thinning the forests of undergrowth to fire protect them from the huge wildfires that are coming.

    Then persuade China to do the same.

    Stop fooling around.

    Solve the problem.