Sunday, February 15, 2009

Oil Industry Response to Global Warming

The Obama administration puts much more emphasis on the study of global warming than previous administrations. With new blood in Washington, oil executives who have long been skeptics the effects or even the existence of global warming are beginning to transition to the other side of the table to join the discussion for a solution. Under current regulations, which there are no penalties for excessive carbon emissions companies have no motivation to reduce operating emissions. The carbon tax would be a tax on the total amount of emissions by any given company. This policy is supported by oil giant Exxon Mobil. Under the cap-and-trade approach a carbon ceiling would be implemented by the government and permits will be sold to companies that outline their limits for a period of time. I do not think this is such a good idea because it is difficult to determine how much should be used and who should be able to use it. At the same time with just a tax the motivation might not be large enough for companies to change harmful behaviors. A ceiling firmly limits the amount of carbon that can be emitted and I think that is what we need. Recently released information by the Intergovernmental Panel on Climate Change suggests that global warming or climate change could in fact be far more widespread and destructive than previously anticipated. If the research is proven to be true it is crucial that we take action to try to reverse some of the sources of the climate change as soon as possible. Any form of regulation on carbon dioxide emissions enacted I believe can be beneficial to the environment. Allowing companies to regulate themselves is not going to be effective enough to cause an impact. In Europe a similar cap-and-trade approach has been implemented. Jeroen van der Veer, chief executive of Royal Dutch Shell believes both systems (carbon tax and cap-and-trade) can be effective or even coexist together since they both have the same end goal: pricing carbon dioxide to encourage innovation and environmental conservatism. He also notes that cars in Europe are more efficient largely to the considerably higher gas taxes. We witnessed the same effect this summer when gas prices were setting record highs and everyone scrambled to get more efficient cars. Only time will tell what policies are implemented but it is clear that the oil companies want their input to be heard.

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