Tax on Emissions?

Gulf Oil Spill Response Should Include Carbon Price, Kerry Says
June 06, 2010, 3:23 PM EDT


By Simon Lomax

June 6 (Bloomberg) -- The U.S. should respond to the Gulf of Mexico oil spill by approving legislation that makes companies pay for the carbon dioxide produced by burning oil, coal and natural gas, Senator John Kerry said today.

Legislation that helps the U.S. “wean ourselves from our addiction to oil” should take precedence over “throwing the blame around” for the spill, triggered by an April 20 explosion on a Transocean Ltd. rig leased by BP Plc, Kerry, a Massachusetts Democrat, said on ABC’s “This Week” program.

Kerry and independent Senator Joseph Lieberman of Connecticut unveiled last month legislation that seeks to cut emissions of carbon dioxide and greenhouse gases, linked by scientists to climate change, 17 percent from their 2005 level by 2020.

Under the bill, power plants and factories would be regulated by a cap-and-trade program in which companies buy and sell a declining number of carbon-dioxide allowances. Oil refiners would pay fixed fees to the government for the carbon dioxide produced by cars and trucks burning their fuels instead of being regulated by the cap-and-trade program.

Legislation that “prices carbon” will result in “less pollution, better health, better national security” and create jobs as companies invest in energy technologies such as wind farms and solar arrays that produce less carbon dioxide, Kerry said.

The bill by Kerry and Lieberman combines these greenhouse gas limits with proposals to boost domestic energy production, including federal loan guarantees for the construction of nuclear power plants and financial incentives for coastal states to expand offshore drilling for oil and natural gas.

Obama, Reid

President Barack Obama urged the Senate last week to pass legislation that includes “a price on carbon pollution.” Senate Majority Leader Harry Reid of Nevada said he plans to bring comprehensive clean energy legislation up for debate next month. Reid’s spokesman Jim Manley said last week it hasn’t been decided whether the energy bill should include greenhouse gas limits.

Kerry and Lieberman’s bill revamps cap-and-trade legislation that narrowly passed the U.S. House last year and stalled in the Senate. Their only Republican supporter for a reworked cap-and-trade bill, Senator Lindsey Graham of South Carolina, backed out of the effort in late April.

Graham, who withdrew from climate-change talks to protest Democratic plans to take up an immigration bill, later said the Gulf spill made it “impossible” to pass any legislation that included offshore drilling provisions. Graham said he wasn’t willing to drop expanded offshore drilling to win the support of some Democrats for the climate-change bill.

‘New Energy Tax’

Charging companies a price for the carbon dioxide produced when oil, coal and natural gas are burned is effectively “a new energy tax” and shouldn’t be considered when U.S. unemployment is almost 10 percent, Senator John Cornyn, a Texas Republican, said on ABC.

“If we do that then we’re going to kill a lot of jobs that currently exist,” Cornyn said. Senate Republicans might be willing to support parts of Kerry and Lieberman’s legislation that boost domestic energy production and nuclear reactor construction, Cornyn said.

--Editors: Steve Geimann, Ann Hughey.

To contact the reporter on this story: Simon Lomax in Washington at slomax@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.