Thursday, August 20, 2009

Big Oil’s Opposition to “Cap and Trade” and the American Clean Energy and Security Act (H.R. 2454)

A recent New York Times article (8/19/2009) tells us about how “Big Oil” under the guise of the American Petroleum Institute (API), the industry’s lobbying arm, is organizing rallies in Southern and oil-producing states to protest “cap and trade” legislation pending in the Senate that would reduce greenhouse gas emissions by 83 percent by 2050. This is unsurprising since “cap and trade” will effectively eliminate the oil industry as we know it. The apparent goal of these rallies and other lobbying efforts is to increase the industry’s bargaining power in the coming negotiations over the American Clean Energy and Security Act in the Senate according to an internal API memo surreptitiously obtained by the environmental group, Greenpeace.

What is surprising about Big Oil is how little it got in the House-passed version of the bill. Under cap and trade, coal-fired utilities need emission allowances for each ton of carbon they actually emit. The requirement for refiners and importers of petroleum products is to possess emission allowances for each ton of carbon that will ultimately be emitted once the fuels they sell are consumed by their customers. In each year, the government will create allowances equal to the amount of the carbon equivalent greenhouse gas cap specified in the Clean Energy Act which by 2050 will equal 17 percent of the 2005 level of emissions. Unless there is some huge breakthrough in carbon capture technology, by mid-century, emission caps will cause Big Oil to be but a shadow of its former self. Instead, we will be getting most of our energy from some mix of wind, solar, biofuels, and nuclear power. One would think the prospect of its own death would have the petroleum industry kicking and screaming and throwing dollars into lobbying like mad, but so far its efforts have been rather pathetic, including 58 fake letters to members of Congress. At the first Big Oil rally held in Houston, the bulk of the audience was petroleum industry employees given time off and a bus ride to the site. This kind of staged outpouring of public support seems unlikely to impress much of anyone. To garner support for cap and trade, under the House version of the Act 85 percent of the allowances through 2029 would be given away rather than auctioned off as the Obama administration originally desired. The electric power industry managed to appropriate 35.5 percent of these while petroleum refiners got only 2.25 percent. This bodes ill for Big Oil’s legendary political clout.

All this leads me to wonder why some environmental groups, such as Greenpeace, are opposing the House version of the Clean Energy Act. For once, Big Oil seems to be on its knees. I would think it is time to go in for the kill and finally get us unhooked from the environmental horrors of fossil fuels.

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