Krupp responds

EDF chief rejects oil drilling as response to energy woes

Posted by Guest author (Guest Contributor) at 3:01 PM on 23 Jun 2008

Read more about: energy | oil | carbon trading | oil and gas drilling | Environmental Defense Fund

This is a guest post from Fred Krupp, head of the Environmental Defense Fund. It is a response to this post.

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I had the pleasure of appearing on PBS' Charlie Rose last week for a wide-ranging conversation about climate change and how we can reinvent our energy economy with cap-and-trade. As Grist readers know, EDF has been pushing hard for a strong cap on greenhouse gases to fight global warming and help break our addiction to oil.

The headlines last week were dominated by a renewed debate over offshore drilling in response to skyrocketing gas prices, so it's no surprise that our conversation turned to questions about domestic oil production. Charlie asked: Do we need to be drilling for oil in the short-term until we can get alternatives up-to-speed? My answer to Charlie: Yes, we will be drilling. That's simply a recognition of current reality -- oil companies have land under lease that they will exploit, both here and abroad.

But we reject the suggestion from the White House that we can drill our way out of our energy problems. Should we drill in ANWR and other environmentally sensitive areas? No, as I clearly stated on the show. Is lifting the ban on offshore drilling the right way to address rising gas prices? No. America holds about three percent of the world's oil reserves. Bringing it to market would scarcely make a dent in the price of oil, and likely not for decades, according to the Energy Information Administration. What we need now are policies that reduce our oil dependence and create incentives for new energy sources that protect the climate. That's precisely what a cap on global warming pollution will do: Cut our oil imports (by as much as $490 billion over the next two decades) and kick start the development of alternatives.

For story: Krupp responds
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Thanks Mr. Krupp

I was thinking that's what you might say, but the airwaves are so darned confused these days. There is some oil out there in the deepwater Gulf of Mexico, and is just coming online.

An offshore rig like Thunderhorse take several billion just to build, perhaps taking five years for construction and two years for deployment and drilling - without any pesky hurricanes. When the larger fields are drained, I guess it will be over, but there's plenty right now under lease and contract, as you say.

Interestingly, the continental shelf could provide smaller but significant amounts of natural gas, which is a "fossil fuel" but certainly cleaner than coal or oil. Most of these natural gas wells are very clean, with a few percent by volume weight of condensate and crude slops. This won't reduce our demand for liquid transportation fuels but can work on the electric power side of the equation. I wonder if ED has an opinion on this.

The only environmental problem I saw with these shallow-water gas rigs was that they often flared a bunch of gas during initial break-through in the well itself, perhaps a few days or a week. No leaking liquids or drilling fluids were detected, at least in the four or five we have 12 miles off South Texas. A side benefit is that the rigs hold great schools of fish, many species of which seem to be under pressure. I can understand the negative reactions because of the massive oil blow-outs from Ixtoc and off California during the 60's and 70's, but today it is a much cleaner technology for offshore gas wells than ... coal.
-sammie

Onward through the fog

by Sam Wells at 6:06 PM on 23 Jun 2008

I knew it!

Of course it was out of context. It's the EDF for god sakes, they're not idiots.

by intimidavid at 6:34 PM on 23 Jun 2008

Carbon Tax vs. Carbon Trading

Mr. Krupp,

I found your out-of-hand dismissal of carbon taxes to be quite specious. Here's why:

Argument #1: A carbon tax will not be simpler because the tax structure is incredibly complex, so that carbon trading will not be a simple as carbon tax proponents claim.

My response: The reality is that a carbon trading system will necessarily be far more complex than a carbon tax. So, the argument given is not only false, but quite the reverse. Under a revenue-neutral carbon tax system, prices are set based on the unit of fuel sold and prices per energy type are fixed based on the amount of carbon released by that unit (whether it be a gallon of gas or a therm of natural gas). In this way, there are no concerns about a loophole, since the quantity of fuel units is already measured for each fuel type.

Argument #2: A carbon trading system is preferable because you set an overall limit for carbon emitted each year, whereas a program of carbon taxation doesn't have any such guarantees.

My response: Even if one accepted that statement at face value, another way to frame the statement would be say that under a carbon trading system there is a minimum of the amount of carbon that will be emitted each year, since by setting a hard cap, all carbon credits will be bought at some price. Putting aside the question of framing, the statement is not true since the price elasticities for energy types and sectors has been studied quite closely for decades, so the overall carbon output for a specific price per ton can be predicted quite accurately. Additionally, businesses and individuals will be better able to estimate the future price of energy sources, if the price of carbon is set for modest increases each year for ten years.

There are many more reasons why a carbon tax is preferable from an environmental, social, economic, and governance perspective, but these were the only two points during the Charlie Rose interview. We are all concerned about limiting GHG emissions, bu twe must acknowledge the economic cost that comes from putting a price on what is currently considered an externality. There is a fundamental dishonesty among many proponents of carbon trading to dismiss the economic cost of lowering emissions and the regressive effect it will have as Americans struggle with higher prices, regardless of the state of the current economy. In my view, all of the revenue must be returned directly to tax-payers to help off-set the effects of the tax.

Please explain yourself without handwaving about tax loopholes or denying the theory of price elasticities.

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The video can be found embedded in the original post:
http://gristmill.grist.org/story/2008/6/20/111828/994

by rosenbluh at 12:49 AM on 24 Jun 2008

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