The coming carbon tax

You know, it seems like only yesterday that I was hearing a bunch of self-professed Eco-warriors prattling on about the need for some form of carbon tax to gin up prospects for algae based energy or something. (Oh, that’s right… it WAS yesterday.) But I took some consolation from the knowledge that something that big and controversial would take quite a while to pick up steam. Apparently, as Redstate’s Steve Maley reports, I may have been wrong about that too.

Folk wisdom tells us, “Where there’s smoke, there’s carbon emissions.” And where there are carbon emissions, there are internationalists hell-bent on hobbling the American economy in the name of Global Warming. Several recent signs:

In 2010, the Treasury Department commissioned a National Academy of Science study of the best ways to “green” the tax code. The report was originally due in September, but an extension has been granted until early 2013.

International banking and financial services giant HSBC Holdings Plc expects the Obama Administration to implement a $20/ton carbon tax (plus 6% per year increase) in its second term, to serve as “revenue enhancement” and as a replacement for the ill-fated Cap-and-Trade scheme.

The Treasury Department’s Office of Environment and Energy has given the Heisman treatment to a Freedom of Information Act request from the Competitive Enterprise Institute for its emails and economic analysis relative to carbon tax proposals. CEI has filed suit in an effort to compel disclosure.

Last but not least, the idea of a carbon tax has been embraced by the unlikeliest suspects: ExxonMobil, BP and Shell.

The first three headlines on that list likely won’t come as much of a surprise to anyone here, but the last one should give you pause. Why on Earth would some of the planets biggest oil and related liquid energy corporations be on board with a carbon tax? I think Steve’s instincts are correct on this one, and as disappointing as it may sound, it’s not that far fetched of an idea. First, having some sort of generic carbon tax across the board would probably work out being cheaper and easier to manage than a truly restrictive and government operated carbon credit trading scheme on a national or even international scale. So in that regard, BP and Shell might be looking at it as the lesser (and cheaper) of two evils.

Also, Big Oil is extremely aware of their public image and they follow the trends of public opinion closely. Particularly in Europe, there’s an appetite for green revolution policies, and the subject gets a lot of play in American media as well. They would probably be willing to not only pay the tax, but use it as a promotional campaign, talking about how they’re pitching in for a renewable energy future. Do you find that annoying?

I’ve been a long-time defender of the oil and gas industry in general, but it’s hard to deny that “Big Oil” (the multinational, vertically-integrated giants) are historically among the first to turn their backs on conservative principles and seek unholy alliances with statist governments. It’s all about rent-seeking and protecting returns.

That’s a bit more harsh than I’d put it, but it’s hard to deny the truth behind the sentiment. But there’s more to this than simple politics. There could be a profit motive here in terms of a competitive edge. Big Oil – particularly those who are cross invested into natural gas – might feel the pinch from a carbon tax, but it would hit the already declining coal industry much harder and faster. That’s a huge segment of the market with competitors ready to dance on their graves if Uncle Sam drives them out of business.

None of this story is pretty, but it’s something to keep our eyes on. Expect to see carbon tax proposals in Washington in the near future.

• Ireland: Yes, we have sweet international tax incentives, sorry we’re not sorry
• Yay! Tax dollars for “prison poetry”
• Of course: Keystone pipeline decision probably won’t be ready until early 2014 or so

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