My Turn: A tax on carbon is no longer a pipe dream

For the Monitor
Published: 12/3/2016 3:09:55 AM

Imagine if the Saudi Arabian Oil Company and other international oil giants were to urge the U.S. government to put a price on carbon dioxide emitted from the burning of fossil fuels. And President-elect Trump were to reconsider his opposition to climate action and support a carbon tax or a carbon cap-and-trade system.

That shift would certainly turn the energy picture upside down, resulting in changes that would challenge the established order in ways that would have worldwide implications. It would lead to new support for the use of low-carbon natural gas, renewables and, yes, nuclear power instead of coal in the production of electricity.

Well, that might seem, on the face of it, a hopelessly quixotic quest. But, despite Trump’s denial of global warming science, it could happen. According to the Financial Times, Saudi Arabia was among a vocal group of countries at climate talks in Marrakesh insisting that the U.S. presidential election outcome will not affect their plans to curb carbon emissions under the Paris agreement on climate action. Khalid al-Falih, chairman of the Saudi Arabian Oil Company, or Aramco, as the company is commonly known, described the Paris accord as “a watershed agreement” and “a great thing” that needs to be implemented “sooner rather than later.”

The industrial and technological strength of the U.S. is such that the U.S. would find it easier than poorer nations to abide by the Paris accord, the oil minister said. “If you think of economies like China and India and other energy intensive economies, I think the U.S. has a lot more flexibility to meet Paris with less sacrifices,” he said.

“The U.S. already enjoys a competitive advantage in terms of its energy costs and I think, given what is happening in technology and renewables, especially in the U.S. capabilities in that regard, I think the U.S. will find that provided everybody lives by Paris, the U.S. would retain if not improve its global competitive position,” he said.

Putting a price on carbon is an ambitious goal, but we’ve reached a tipping point, where it has become close to inevitable. Many utilities, oil and gas companies, and institutional investors favor a price on carbon.

Technological advances have made it much cheaper to move away from coal, making a carbon price less punitive than it would have been in the past. And in the U.S. coal use has declined, from more than 50 percent of the nation’s electricity generation just five years ago to 30 percent today. One of America’s biggest global rivals, China, is about to impose a carbon-pricing system, and it has announced plans to create a nationwide carbon market in 2017 that is on track to become the largest in the world.

Some of Europe’s strongest economies, like Sweden, Denmark and the Netherlands, have taxed carbon dioxide emissions since the early 1990s, and Japan, Ireland and Australia have introduced them more recently. Though the issue has been a nonstarter in the U.S. political arena, some economists estimate that a modest carbon tax could raise $400 billion annually in the United States, reducing the nation’s deficit.

Oil companies potentially stand to benefit from a carbon tax, because a tax on carbon emissions would compel electric utilities to shift from coal to natural gas. The executives of six large international oil and gas companies – BG Group, BP, Eni, Shell, Statoil and Total – have called for a carbon tax. And Exxon Mobil has said it can support a revenue-neutral carbon tax if Congress cuts other taxes by an equal amount.

In fact, there already is a de facto price on carbon in the U.S., and companies accept it as part of the cost of doing business. For example, oil companies assume a long-run carbon price of $40 to $80 per ton of carbon when weighing plans for a new oil-field development.

A carbon tax would make polluters pay for their own pollution. It would cut emissions without the need for government command-and-control regulations like EPA’s rule requiring states to achieve a 30 percent reduction in carbon emissions by 2030. Simply put, a carbon tax would make coal plants too costly to operate and some oil fields like Canadian tar sands and those in ultra-deep waters too costly to drill. The shift to clean energy sources depends on it.

Eventual elimination of coal as a fuel is a certainty. As the jobs issue in the presidential election showed, a national education and retraining program for miners and those in the coal industry will be a must. Unemployment insurance, state programs and community colleges have proven to be not enough for workers displaced by global trade.

(Howard Shaffer of Enfield is a retired nuclear engineer.)

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