Re: Exxon, Carbon Prices, and Surrender [Iain Murray]

If you're new here, you may want to subscribe to our or .

| Sourced From |

I cannot understand why US energy companies are so willing to negotiate the terms of their surrender. The usual “we must have a place at the table” excuse is laughable when you are going to be the menu.

As Andy says, there is every reason to oppose this disastrous “inevitability.” The American people will not put up with a massive rise in their energy costs, especially at a time when they are a) experiencing a significant tightening in their financial circumstances and b) seeing the only relief in those circumstances in the form of a drop in energy prices for transportation. That is why no one actually in the legislature or incoming administration is willing to do what Tillerson says and propose an outright carbon tax. Instead they are trying to disguise it by means of this inefficient and deceitful cap-and-trade policy that they claim is a “market mechanism,” which is really just so much hand-waving. The trouble is that by conceding the case for a carbon tax, which by Pigovian logic should be at most a trivial amount, they have made it so much easier for the weasels to get their cap-and-trade regime through. Energy prices will have to rise and it will be energy companies who get the blame, not the Congress that passes the legislation. This trap couldn’t be more obvious if it had a box over it propped up by a stick with a piece of string tied to it.

Of course, there is always the possibility that the energy companies have figured out that by demanding a carbon tax they can make cap-and-trade more likely, and that the game they have to play is putting the consumer rather than themselves on the menu. Obama and his team have said they want a full auction of emissions permits, which sticks an apple in Tillerson’s mouth. However, if they can do what their colleagues in Europe have done, and persuade the authorities to allocate permits for free on the basis of lobbying, they can make a windfall from trading these permits. This was the route favored by Enron and Lehmann Bros. It might just be that the perceived best course of action for the energy companies is to protest just enough that they get an EU-style weak cap-and-trade system in place.

Of course, EU emissions are not falling (they will this year, thanks to Putin and the recession). Even if they get a weak cap-and-trade system or a carbon tax, the ratchet is then in place. Weak cap-and-trade will become strong cap-and-trade. A small carbon tax will become a big carbon tax. The burden of carbon prices on our economy will grow and grow until economic activity is curtailed enough for emissions to fall to the envirocrats’ liking. Even if we turn to nuclear power — the best option in the circumstances — there will still be a carbon price handicap weighing down our economy. Far from rescuing the economy, a carbon price is good way of turning a recession into a depression.

Those points are easily made and easily understood by voters. The BTU tax, proposed by a new rock star President with his party in charge of both houses, still failed because voters, especially in Democrat energy states, feared its consequences. Carbon pricing can be defeated similarly. Pre-emptive capitulation, on the other hand, guarantees a bad result. This is the time when backbone is needed.

More on this from Chris Horner over on Planet Gore.