Chad Livengood had an interesting article in the Springfield News Leader last Wednesday on a pilot carbon sequestration program for a Springfield utility. The article was ostensibly about a push by Missouri utilities to get a cap for legal liability for injuries sustained during carbon sequestration, but as this is a complicated topic, Livengood spent a good deal of time explaining what carbon sequestration is and why it might be needed. But while I think Chad in general is a nice guy and works hard at what he does (and is receptive to questions on Twitter @ChadLivengood), I think he missed the boat here by only talking to the two sides of the utility liability debate.
The power company’s point of view is essentially this:
The Obama cap-and-trade tax on greenhouse gases will double consumers’ energy bills, so we need avoid the tax by sequestering carbon to save our customers money. There’s nothing to be worried about, but if we cap liability for an accident occurring during sequestration, this will allow us to save customers even more money.
In opposition to this, we have the trial lawyers’ point of view, which is that if there’s no risk, there’s no need to waive liability. But there’s another group that might have added a lot more information to the article, the broad coalition of environmental, labor, business, and social justice groups working to curb global warming, a coalition that has widespread public support to act now.
So what did Chad miss by not reaching out to some climate change activists? For starters, he gets the basic idea of the possible need for carbon sequestration right, but he easily falls into the utility companies’ spin on cap and trade. He refers to the cap and trade system as a tax more than once, and he allows the utility representative’s claim that carbon will be taxed at $115 a ton to stand without rebuttal. Needless to say, both are utterly false.
I’ll tell you why below the fold.
Energy companies like to refer to a “cap and trade tax” because that sounds a lot worse than what cap and trade really is – a market-based regulatory system. Basically, there are several different options for ensuring that greenhouse gas emissions (GHGs) are curbed on balance. You can tax them directly, forcing emitters to pay a flat rate per ton of carbon emitted into the atmosphere. You can use the blunt instrument of regulation, enforcing a penalty if the regulatory cap is exceeded. Or you can go the cap and trade route.
A cap and trade system is a market-based regulatory system, where a total cap for greenhouse gases is decided (just as you would set a target under another regulatory method,) and then divided up into permits which are allocated to emitters or auctioned off (depending on the proposal – the EU went with allocation, while President Obama proposes an auction.) Either way, a secondary market would give companies coming in over the limit allowed by their already obtained permits the ability to purchase credits from companies who had excess permits because of conservation and/or cleaner energy production.
Because GHGs would be treated as a commodity and traded on an open and transparent market, market efficiencies would determine a lower price per ton of GHGs for a greater effect towards a predetermined cap than crude regulations or a carbon tax. From the beginning, the market would create an incentive to be more energy efficient through conservation and/or cleaner sources of energy. Over time, the cap would be lowered, making GHG emissions more and more expensive and encouraging further switches towards conservation and cleaner forms of energy production. A cap and trade system has already outperformed expectations for sulfur dioxide emissions, which causes acid rain.
And the idea that Obama is imposing a $115 a ton carbon tax is totally without merit. We’ve already established that a cap and trade system is not a tax, and I’ll add that it goes beyond President Obama. There is a bipartisan agreement on cap and trade – McCain offered a plan during his presidential run, and Senator John Warner (R-VA) penned a cap and trade bill last year before he retired. The claim of the price must be a typo – European carbon prices topped out at $30 per ton, and most industry experts peg carbon prices under the Obama plan at around $14 a ton when the cap and trade system would begin in 2012.
Let’s also remember that 80% of the revenues generated by auctioning the emission permits would be rerouted to taxpayers in the form of tax cuts, while the other 20% would go to a mix of research grants, subsidies and tax incentives to research and implement sustainable, renewable, and most importantly non-greenhouse gas emitting forms of energy, as well as retrofitting older housing stock, businesses and transmission lines to be more energy efficient. In other words, pay a little more for energy, but save even more in conservation and tax rebates.
This isn’t even taking on the idea of carbon sequestration as a major piece of the climate change solution, which is problematic at best. Carbon sequestration is expensive, and injecting billions of tons of carbon into the Earth’s crust every year, crust that shifts and buckles constantly under pressure, doesn’t seem like a long-term, safe solution for avoiding climate change, either.
Both the scientific and popular consensus regarding the problem of climate change and the need for action remain strong. Let’s remain aware that industry representatives in favor of the status quo, which is untenable, will try at every turn to inject their talking points into the public discourse. We can certainly listen, but there’s no need to take them at face value.