Carbon Tax Center

Oil Innovations Pump New Life Into Old Wells

03/5/2007 by Charles Komanoff

Oil Innovations Pump New Life Into Old Wells (NYT)

Carbon Tax, not “Peak Oil,” Can Save Climate

03/5/2007 by Charles Komanoff

“It’s the fifth time to my count that we’ve gone through a period when it seemed the end of oil was near and people were talking about the exhaustion of resources,” said Daniel Yergin, author of a Pulitzer Prize- winning history of oil, who cited similar concerns in the 1880s, after both world wars and in the 1970s. “Back then we
were going to fly off the oil mountain. Instead we had a boom and oil went to $10 instead of $100.”

That’s from a front-page article, Oil Innovations Pump New Life Into Old Wells, in today’s New York Times. The article uses Chevron’s Kern River oil field near Bakersfield, CA, whose life has been extended by injections of high-pressured steam, as a template for how advancing technology and profit opportunities from today’s higher oil prices are combining to increase recovery rates at oil fields around the world.

The bottom line: peak oil will come some day, but not soon enough to avert climate catastrophe. I’ve long maintained that “peak oil” wouldn’t be a climate lifesaver. In my first talk centered on carbon taxing, at the “Philly Beyond Oil” meeting in 2005, I noted that $70 crude would “stimulate conservation, extraction and substitution,” and that only the first of this trio (conservation) would be a climate-helper. Quoting the trenchant economics writer Doug Henwood, I cautioned that there’s “no shortcut around political agitation,” which is why Dan Rosenblum and I founded the Carbon Tax Center earlier this year.

The Times article closes by quoting a Chevron engineer: “peak oil is a moving target [and the supply of] oil is always a function of price and technology.” True enough. Our task is to make the use of oil, coal and gas a function of a climate-aware price and technology.

At present, the fuel prices that determine the demand side of the equation include nothing for the climate damage resulting from burning those fuels, resulting in vast overuse. Moreover, those feedback mechanisms I mentioned in my 2005 talk invariably overshoot the mark, resulting in the kind of wild price swings that Yergin described. These fluctuations drown out underlying movements toward higher prices, frustrating investment in low-carbon alternatives on both the demand and supply sides.

What to do? A tax on carbon fuels will internalize the costs of carbon damage and make manifest today the long-term trajectory of rising carbon-fuel prices. No other policy option – not cap-and-trade, not fuel efficiency standards, not subsidies for renewables – can do that.

Photo: RavenHawk / Flickr

Carbon Tax, not “Peak Oil,” Can Save Climate

03/5/2007 by Daniel Rosenblum

"It’s the fifth time to my count that we’ve gone through a period when it seemed the end of oil was near and people were talking about the exhaustion of resources," said Daniel Yergin, author of a Pulitzer Prize- winning history of oil, who cited similar concerns in the 1880s, after both world wars and in the 1970s. "Back then we
were going to fly off the oil mountain. Instead we had a boom and oil went to $10 instead of $100."

That’s from a front-page article, Oil Innovations Pump New Life Into Old Wells, in today’s New York Times. The article uses Chevron’s Kern River oil field near Bakersfield, CA, whose life has been extended by injections of high-pressured steam, as a template for how advancing technology and profit opportunities from today’s higher oil prices are combining to increase recovery rates at oil fields around the world.

The bottom line: peak oil will come some day, but not soon enough to avert climate catastrophe. I’ve long maintained that "peak oil" wouldn’t be a climate lifesaver. In my first talk centered on carbon taxing, at the "Philly Beyond Oil" meeting in 2005, I noted that $70 crude would "stimulate conservation, extraction and substitution," and that only the first of this trio (conservation) would be a climate-helper. Quoting the trenchant economics writer Doug Henwood, I cautioned that there’s "no shortcut around political
agitation," which is why Dan Rosenblum and I founded the Carbon Tax Center earlier this year.

The Times article closes by quoting a Chevron engineer: "… peak oil is a moving target [and the supply of] oil is always a function of price and technology." True enough. Our task is to make the use of oil, coal and gas a function of a climate-aware price and technology.

At present, the fuel prices that determine the demand side of the equation include nothing for the climate damage resulting from
burning those fuels, resulting in vast overuse. Moreover, those feedback mechanisms I mentioned in my 2005 talk invariably overshoot the mark, resulting in the kind of wild price swings that Yergin described. These fluctuations drown out underlying movements toward higher prices, frustrating investment in low-carbon alternatives on both the demand and supply sides.

What to do? A tax on carbon fuels will internalize the costs of carbon damage and make manifest today the long-term trajectory of rising carbon-fuel prices. No other policy option — not cap-and-trade, not fuel efficiency standards, not subsidies for renewables — can do that.

Photo: RavenHawk / Flickr 

Quoting Lenin, WSJ Editorializes on “Cap and Charade”

03/3/2007 by Daniel Rosenblum

After noting that the "idea of a cap-and-trade system for limiting carbon-dioxide emissions in the U.S. has become all the rage," the WSJ’s lead editorial on Mar. 3 observes that:

But this is not, as Lenin once said, a case of capitalists selling the
rope to hang themselves with. In most cases, it is good old-fashioned
rent-seeking with a climate-change patina.

The WSJ correctly recognizes that:

It’s all about the cap, because without it there’s no trading. We don’t
buy our daily ration of oxygen because it’s in abundant supply. Same
with carbon dioxide — there’s no constraint on your ability to produce
CO₂ until the government creates one. When it does, it creates an
artificial scarcity. What Duke, Entergy, TXU, BP, Dupont and all the
rest want is to make sure that when the right to produce CO₂ becomes
limited, they’re the ones that end up owning the allowances. Because
that would mean they could sell them, and make money off something that previously wasn’t worth a dime.

Of course, if the cap isn’t set low enough there won’t be the type of emissions reductions needed to avoid climate disruption. Similarly, if the government auctions off additional allowances if allowance prices increase over a predetermined amount, the "safety-valve" requested by many companies, then it won’t really matter how high or low the cap is set. You can bet that most of the corporate proponents of cap-and-trade will be fighting for a cap that costs little or nothing, but allows them to say they care about the environment. Moreover, the WSJ editorial doesn’t even mention most of the problems with cap-and-trade. If the U.S. ends up with a cap-and-trade system there will be profit-making opportunities for some alert companies, a lot of self-congratulations by cap-and-trade proponents, but CO₂ emissions will keep growing. As the WSJ concludes, "don’t believe for a minute that this charade would do much about global warming."

Wall Street Journal Editorial – Cap and Charade

03/3/2007 by Daniel Rosenblum

Wall Street Journal Editorial – "Cap and Charade" (WSJ)