BIOMASS HUB

Updating news about the Senate trio — Kerry (D-MA), Graham (R-SC), and Lieberman (I-CT) — who are attempting to revive carbon regulation, Darren Samuelsohn of ClimateWire reports that they are weighing a request from Big Oil to levy a carbon fee on the industry rather than wrap it into a sweeping cap-and-trade system that covers most of the U.S. economy.

The trouble with cap-and-trade is that it can be difficult to administer especially for an industry that would be subject to regulation on both emissions from the refining process and the products it sells.  The development has many implications, not the least of which is freeing up votes to get climate legislation on the books.

The solution has merit.  Samuelsohn explains:

Transportation fuels would face a carbon fee, with the price linked to the compliance requirements for other industries.  New revenue would be geared toward transportation projects, reducing fuel consumption and lowering domestic reliance on foreign oil.  The Highway Trust Fund is also a potential recipient of the carbon tax revenue.

“Carbon fee” is euphemism for a carbon tax.  The goal is to pass the most transparent price signal on to the consumer.  In reality, it allows Big Oil to hide behind the tax, which penalizes them behind the scenes, but also enables Big Oil to turn around and point fingers at the government for higher prices.  It’s not perfect, but it could likely move the climate debate forward in the coming year.

The difficulty will be balancing the need to impose hefty “fees” on Big Oil to incentivize environmental compliance while avoiding driving up the cost at the pump.  While the higher prices are an important component of the “de-carbonization” of transportation, it will be a politically dicey issue for politicians who will bear the brunt from a consumer backlash against higher gas prices.  This puts government in an increasingly compromised position in the face of future Big Oil lobbying efforts.

Image: Flickr/Gary Henderson