Editorial: Oil drillers want to overturn California’s new health protections. Don’t let them.
One of the most controversial provisions of California’s Clean Power Plan is a requirement that oil companies set aside 40% of their production from new offshore drilling for carbon dioxide emissions to be covered by the plan. A proposed amendment to the bill that passed the Senate yesterday would allow oil companies to sidestep the provision by paying to set aside the carbon dioxide that they produced in the past.
The amendment would also allow companies to “direct the use of an additional amount of carbon dioxide from their current operations to fund the compliance with the new CO2 standards.” The language is as vague as it is misleading. The intent is not to use the carbon dioxide they produced as a penalty for not complying with the new policy, but rather is to enable them to claim that the additional carbon they produced on a day-to-day basis in 2009 is what they used to cover the costs in compliance.
Even using this dubious language, the proposal is flawed. If the 40% requirement is included in the language, then it is a flat tax or a tax rate that is equivalent to 40% of the pollution generated by the company’s operations. While the industry may think the added value to its carbon footprint is worth the added cost, it is unlikely to do so if the cost is effectively a premium for compliance, not a fair price for the added value. And it does create a perverse incentive for companies to cut back their output without a direct benefit to the public health.
This is not the kind of policy the oil industry wants. For it to be effective, the requirement should be tied to the cost of complying with the new rules and the extent to which the industry wants to take action on climate change. Under this proposal, the industry would have some real incentive to cut their output. It would also reduce the scope of the public to the extent that the CO2 is not used in the process of making the oil–which would likely be the case for new oil sources like tar sands and deepwater drilling.
What’s the alternative? A flat tax? Even if the industry believes that it is worth the price to generate the carbon dioxide they produce on a day-to-day basis, they may not be able to pass that price to the consumer.
An even worse idea is the direct payment for reduced emissions that the industry could not possibly pass on to the public, even if it is technically feasible.