Anthropogenic Global Warming . . . again

Very informative.

 

AustinG,

Not to put too fine a point on it, I joule argue a bit about your contention that the price of oil is "set by a cartel". In some measure OPEC does adjust the price by withholding supply, but increasingly that is Ineffecive. In fact the price of oil is very directly related to supply and demand. There are regional differences based on quality and local refining capacity, but demand (and anticipated demand) is wht really drives the market.

As for Keystone; If we don't build Keysotone, and don't import vast quantity of tar sand oil, yes the Canadians will continue to sell on the world market. They will however, in the net command a lower price for thier oil (as they do already, Tar sands oil is now priced significantly lower than world bench mark price (around 60% if memory serves) because of the cost to transport to world markets). If it goes to China, it will have to be discounted further to reflect the transport an refining costs, even if they build the Northern Gateway Pipeline to Rupert. At some point, the sustainability of the business model of the tar sands will get questioned by the tax payers and federal and provincial governments. This is already beginning to happen, because folks realize that selling the oil below the cost of production (not even including the externalities) is not sustainable.

So the simple answer is institute a transparent carbon tax on all fossil fuels on a weighted BTU basis (so that less carbon intense pays less per btu), in an attempt to force the market to begin to recognize the externalities. Use the money to concentrate on alternatives and efficiency. do this in All The industrialized countries and you hold see individual and societal behavior change quickly. It is a false choice to assume that we can't afford to do what we need to in regres to CO2. The fact is, we can't afford not to, and the longer we wait, the greater the cost. In point of fact huge efficiencies can be had with comparatively little investment, investment that typically saves more than it costs.

Icarus

 

Then why when OPEC decides to release more oil does the price go down? Absolutely if an opec country stops producing the price spikes. There is of-course also the market manipulation in trading of oil futures speculating on if an opec nation will not produce their quota. If we produce more oil from canada, opec will cut production. If we cut consumption its the same to opec and they will cut production. One thing that is true, if the US stops importing oil from OPEC, it can't be used as a political weapon, but they still can increase the price by cutting production.

If we don't build keystone, we will simply continue importing oil by truck. This simply makes the chances of spills more likely and burns more fuel. What openents to keystone really want is to close the border, which again won't stop the oil from being burned, it will simply go to china. I do not see the Canadian government having any desire to greatly tax the oil sands production so that it cost more to produce than the OPEC price. Remember it does cost more to truck the oil and refine, so the pricing mechanism pulls it down. The keystone pipeline would produce more profits in canada as costs to move the oil would drop.

Well we can agree to a flat oil tax, one where the use doesn't really affect tax rates. That will free us from saying heating oil good, diesel bad. I would not do a flat one time tax though. It will provide a better economic signal if it is slowly rising, and can be suspended or reduced in the case of OPEC shenanigans.

I imagine that if you are doing this for oil externalities, and want the signal to work, you would not decide to spend it all on new government programs. Certainly health care is one of the big ones from oil, both air pollution and car accidents. A huge objection to passing a new tax rate is that government will simply expand. How about reducing payroll taxes (medicare) while increasing the price at the pump.

For alternatives to oil, these are already subsidized. We have the battery tax credit, the ethanol mandate, and cafe standards. I think there will be an very negative reaction to a program like PNGV or freedom car, with give aways to big auto companies but no tangible results.

A flat tax on power generation will not work. Problems vary a great deal from state to state, and signals in poorly regulated states will simply get passed onto rate payers. The problem with the schemes passed in Europe and proposed in the bill in the house, just got loaded with pork so would be ineffective. Trying to tie coal co2 taxes to oil taxes just is a reason for legislatures to write give aways to coal states into the bill. Its a tougher problem, and unlike oil, there is a political push back when you try to drop coal use from ghg. Its much more popular to cut off moutaintop mining and unhealthy pollutants. Tying oil taxes to coal taxes just seems to kill bills.

IMHO a well written cap and trade including unhealthy emissions would work best for the electric sector, but don't think such a beast could get through congress. The next best thing is regulatory. Kill mountain top mining with the Clean water act. The majority in the mountaintop mining states are against it. Remove grandfathering from old coal plants, so that they do not require lawsuits to close. Reduce the caps in SO2, NOx, and particulates.

Then for incentives to build, for wind the federal subsidy per kwh seems to be fine and working. The solar subsidies seem to have failed. Forbes points to the cost of regulation. The government needs to make it easier for people to put up solar, like the government of germany does. A feed in tarrif instead of a tax credit may be the other piece of the solar puzzle. Solar is subsidized where I live by over 60%, and seems to be going up in most new homes.

 

A couple of quick comments. In he 1970s OPEC could for the short term set the price of oil by controlling supply. The reality today is that the power of OPEC to control supply iq much more limited (as I noted above) and in fact it really is the market that drives the price. OPEC turning of the tap just allows others to open theirs futher (in the long term).

Second, those opposed to Keystone understand that by not building the pipeline oil will flow through trucks and trains, (increasing the chance of spills, that have already happened (see April spills in Northern MN and near White River ON!) and indeed more output will go to China. As I pointed out earlier, this forces the Canadians to sell a a steeper discount to the world market. as I pointed out earlier, tar sands oil ALREADY sells at a discount relative to world market. The "break even" point for tar sands oil is purported to be in the $100/bbl range (exclusive of certain externalities!). If they can only sell for $65 bbl how long is the government going to support this. remember, the Canadian gov, both federal and provincial have a huge stake in the tar sand.

The point is, are we going to stop the development of tar sands oil? Of course not! But by educating the public on the real environmental issues, with the net effect of slowing down production, making it ever more expensive to produce, the negative effects on the planet MAY be reduced in the net. At some point the people paying the bills wake up and realize that it is a bad investment.

The larger problem with tar sands oil economics is the level of government involvement. With out the Canadian Feds, and Alberta investment, it would still be a remote wilderness. Some where on the order of 30-50% of all Canadian infrastructure investment is going to tar sands issues. It is, a fools errand! The problem is, the current Harper and Alberta governments are so invested in the process, they will accept any and all environmetal costs (even to the point of muzzling thier own scientists and those scientists studies that are critical of the project(s)). They are in so far, they can't figure out a way to turn back.

By blocking Keystone, forcing the Candians to defend thier actions, causing thier net costs to go up is the defacto way of at the very least forcing an open dialogue on the subject, and at the very best, making the projects so uneconomic that the Canadian and Alberta governments to pull the plug.

Icarus

 

Your point here is spot on. When the government becomes a business, then they cease being a government.

 

^I agree that my point is "spot on" but for different reasons. In the case of the tar sands, it is not that the government is "becoming a business" but rather they are supporting private business with MASSIVE subsidies, both up from and hidden! For example the transportation infrastructure, social service structure, etc is not paid by the business but rather is paid for by government and I don't believe the royalty payments comes close to covering the up front cost, not even to mention the externalities.

This is a classic case of privatizing the reward, but giving the tax payer the risk! If the major players were forced to pay the life cycle cost of thier product, there is no way on gods green earth that any sane investor would invest in this business.

To argue your point, if the government thinks that pursuing this is such a good idea, they should, IMHO, create a public ownership model that addresses the externalities and the life cycle costs. The sad reality of Petro wealth (worldwide) tends to be more of a curse for the population at large than a benefit. In the net, very few benefit greatly ( very few very vastly!) but the masses are left with the real costs, human, environmental etc. Only the Norwegians and perhaps the Scots have done it very well.

Corruption, oils spills, workers health and safety are just the tip of the costs that are not bring paid.

Icarus