11 February 2010

Oil Imports Damage Economy

Why in the world would I support efforts to reduce carbon emissions when I am a global warming skeptic?

Because we need to begin the slow and painful shift away from oil. Our dependency on imported energy is endangering our security, and is damaging our economy.

MarketWatch: U.S. trade deficit widens to $40.2 billion in December

The U.S. trade deficit widened to a seasonally adjusted $40.2 billion in December as imports of crude oil surged, outpacing a large increase in exports, the Commerce Department reported Wednesday.

Imports of crude oil rose 9.2% to 8.9 million barrels a day from 8.2 million in November. The average price rose 0.9% to $73.20 a barrel, the highest since October 2008.

Excluding petroleum, real imports rose 3.3%.

Here is an idea to reduce our dependency:

The Economist: A refreshing dose of honesty

Enter Maria Cantwell, the junior senator from Washington state. She is pushing a simpler, more voter-friendly version of cap-and-trade, called “cap-and-dividend”.

Under her bill, the government would impose a ceiling on carbon emissions each year. Producers and importers of fossil fuels will have to buy permits. The permits would be auctioned, raising vast sums of money. Most of that money would be divided evenly among all Americans. The bill would raise energy prices, of course, and therefore the price of everything that requires energy to make or distribute. But a family of four would receive perhaps $1000 a year, which would more than make up for it, reckons Ms Cantwell.

Cap-and-dividend would set a price on carbon, thus giving Americans a powerful incentive to burn less dirty fuel. It would also raise the rewards for investing in clean energy. And it would leave all but the richest 20% of Americans—who use the most energy—materially better off, she says.

Ms Cantwell’s bill is refreshingly simple. At a mere 40 pages, it is one-thirty-sixth as long as the monstrous House bill (known as “Waxman-Markey”, after its sponsors), which would regulate everything from televisions to “bottle-type water dispensers” and is completely incomprehensible to a layman.

Instead of auctioning permits to emit, Waxman-Markey gives 85% of them away, at least at first. This is staggeringly inefficient: permits would go to those with political clout rather than those who value them most. No one is proud of this—Mr Obama wanted a 100% auction—but House Democrats decided that the only way to pass the bill was to hand out billions of dollars of goodies to groups that might otherwise oppose it. (There was plenty of pork left over for its supporters, too.)

Of all the bills that would put a price on carbon, cap-and-dividend seems the most promising. (A carbon tax would be best of all, but has no chance of passing.) Ms Cantwell has a Republican co-sponsor, Susan Collins of Maine, and says she is hearing positive noises from a few other Republicans, such as Lisa Murkowski of Alaska.

The most attractive thing about the bill is that it is honest. To discourage the use of dirty energy, it says, it has to be more expensive. To make up for that, here’s a thousand bucks.

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