The American Petroleum Institute did what? Because climate?

Guest “explaining what the API did” by David Middleton

Note: The primary purpose of this post is simply to lay out what the API has actually endorsed regarding carbon pricing. If you don’t want to know what they proposed, just skip to the comments section and heckle them. The secondary purpose is to explain why I think tax credits for reducing net CO₂ emissions are far less economically destructive than a carbon tax. The former is currently in the tax code. The latter is a real possibility in the near future. If you think the greenhouse effect violates some law(s) of thermodynamics, just skip to the comments section and heckle me.

Variations of this headline have been all over the news the past few days…

America’s most powerful oil lobby is changing its tune on a carbon tax

By Matt Egan, CNN Business

Updated 2:49 PM ET, Thu March 25, 2021

New York (CNN Business)The oil industry’s most powerful lobbying group announced Thursday that for the first time it will support setting a price on carbon, a significant shift that underlines intensifying pressure on Washington and business to tackle the climate crisis.

[…]

CNN

The catch-phrase seems to be that the API has endorsed a carbon tax, which is not the case. This is what the API has endorsed:

Industry Action Plan:

1. Accelerate Technology and Innovation to reduce emissions while meeting growing energy needs
   • Advocate for Federal Funding for Low-Carbon RD&D
   • Fast-track the Commercial Deployment of Carbon Capture, Utilization and Storage (CCUS)
   • Advance Hydrogen Technology, Innovation, and Infrastructure
2. Further Mitigate Emissions from Operations to advance additional environmental progress
   • Advance Direct Regulation of Methane from New and Existing Sources
   • Develop Methane Detection Technologies
   • Promote Reductions in Refinery GHG Emissions and Mitigate Upstream Flaring Emissions
3. Endorse a Carbon Price Policy by government to drive economywide, market-based solutions
   • Potential Approach Would Price Carbon Dioxide Emissions Across the Economy
   • Support Policies that Provide Transparency for Consumers
   • Minimize Duplicative Regulations and Help Maintain U.S. Competitiveness
   • Avoid Carbon Leakage and Integrate with Global Carbon Markets, while Focusing on Net Emissions
4. Advance Cleaner Fuels to provide lower-carbon choices for consumers
   • Develop Markets for Differentiated U.S. Natural Gas
   • Support Policies to Advance Lower-Carbon Electricity
   • Reduce Lifecycle Emissions in the Transportation Sector
5. Drive Climate Reporting to provide consistency and transparency
   • Expand Use of ESG Reporting Guidance for the Natural Gas & Oil Industry
   • Report Comparable Climate-Related Indicators in New Template
   • Build on the API Compendium of Greenhouse Gas Emissions Methodologies for the Natural Gas and Oil Industry

The outline above is directly quoted from the API statement. It doesn’t really strike me as a significant shift in the API’s position.

The belief that the API has endorsed a carbon tax appears to be based on its endorsement of a “Carbon Price Policy.” This is the only mention of a “carbon tax” in the API statement:

Rather than a patchwork of federal and state regulations and mandates that could ineffectively address the climate challenge, an economywide government carbon price policy is the most impactful and transparent way to achieve meaningful progress. We recognize there are different ways for policymakers to consider carbon pricing – from a cap-and-trade system to a carbon tax – but there are some general parameters to begin the discussion.

API

In my view, the API’s two key carbon price policy parameters are:

Maintain U.S. Competitiveness: The goal of a carbon price policy should be to achieve GHG emissions reductions at the least cost to society, to meet the dual challenge of continued U.S. economic growth and global competitiveness while addressing the risks of climate change.

Focus on Net Emissions: Attention should be given to net GHG emissions such that ongoing voluntary actions are recognized and the trading and use of applicable credits and offsets is allowed.

API

Maintain U.S. Competitiveness

One of the most frequently cited carbon tax proposals is the Baker-Schultz Carbon Dividend Plan. It’s also referred to as a “conservative” or “free market” climate plan. It’s neither. Half of it is straight out of Fantasyland. This plan would impose a tax on CO₂ emissions. The revenue generated by this tax would then be rebated to the American people:

All the proceeds from this carbon tax would be returned to the American people on an equal and monthly basis via dividend checks, direct deposits or contributions to their individual retirement accounts. In the example above, a family of four would receive approximately $2,000 in carbon dividend payments in the first year. This amount would grow over time as the carbon tax rate increases, creating a positive feedback loop: the more the climate is protected, the greater the individual dividend payments to all Americans. The Social Security Administration should administer this program, with eligibility for dividends based on a valid social security number.

Climate Leadership Council

Who actually believes that any tax bill passed by the U.S. Congress would actually rebate any of the proceeds, much less all of them, equally to the American people? The current proposal calls for the tax to start at $43/ton of CO₂ and then to escalate 5% per year. Fortunately, this regressive tax plan did not make it into the eleventy gazillion dollar infrastructure plan working its way through Congress. This is what a carbon tax would add to the price of gasoline, natural gas and coal:

Tax ($/ton of CO2)	$      35	$         43	$         65	$       175	$       250
Gasoline ($/gal)	$   0.31	$     0.38	$      0.58	$      1.54	$      2.20
Natural Gas ($/mcf)	$   1.86	$     2.26	$      3.45	$      9.30	$    13.30
Coal ($/short ton)	$ 73.53	$   90.33	$  136.55	$  367.63	$  525.18

Here is the tax as a percentage of recent average U.S. prices:

Tax ($/ton of CO2)	$      35	$         43	$         65	$       175	$       250
Gasoline – Retail w/taxes ($2.18/gal)	14%	18%	26%	71%	101%
Natural Gas – Electricity ($3.30/mcf)	56%	69%	104%	282%	403%
Coal ($59.43 /short ton)	124%	152%	230%	619%	884%

An average U.S. motorist drives 13,500 miles per year. The average U.S. passenger vehicle gets about 25 miles per gallon. At $43/ton CO₂ tax could cost the average driver $167/yr.

Average U.S. Driver: 13,500 miles/yr, 25 miles/gal
Tax ($/ton of CO2)	$      35	$         43	$         65	$       175	$       250
Gasoline tax ($/yr)	$    167	$       208	$       311	$       834	$    1,190

The average U.S. electricity bill in 2019 was $115/month. Fossil fuels account for 60% of U.S. electricity generation (20% coal, 40% natural gas). This is what a CO₂ tax could do to the average electricity bill:

Average Electric Bill ($115/month)
Tax ($/ton of CO2)	$      35	$         43	$         65	$       175	$       250
Electricity tax ($/yr)	$    653	$       798	$    1,211	$    3,264	$    4,664

Even if the hypothetical “family of four” actually received $2,000 in carbon dividends, they would only have $906 left after accounting for higher gas and electricity prices. And this doesn’t even begin to take into account the increased cost of just about everything else that requires to coal, oil or natural gas in manufacturing and transportation. “Maintain U.S. competitiveness” doesn’t seem to fit this ticket.

Focus on Net Emissions

I can’t find any mention of net emissions in the Carbon Dividend plan.

There’s more than one way to price carbon

The API does strongly endorse one method of pricing CO₂ that maintains U.S. competitiveness and focuses on net emissions…

Fast-Track The Commercial Deployment Of Carbon Capture, Utilization And Storage (CCUS):

The United States is the world leader in deploying CCUS technology. The U.S. has 12 commercial-scale, operating CCUS facilities, capable of capturing approximately 25 million metric tons (MMT) of CO₂ annually. In 2018, operators reported capturing more than 13 MMT of CO₂ for use with enhanced oil recovery. An additional 22 U.S. carbon capture facilities are being developed. Many are associated with natural gas power generation, though natural gas and oil firms are also partnering with other industrial firms to expand CCUS in heavy industry. API supports federal policies to achieve the “at-scale phase” of CCUS commercial deployment, consistent with the 2019 findings of the National Petroleum Council. This includes extending and expanding the 45Q tax credit and permitting reforms to streamline CO₂ infrastructure development.

API

• CCS: Carbon capture & storage/sequestration.
  • Capture CO₂, CH₄, CO, etc. from emission point sources.
  • Inject it into depleted oil & gas reservoirs and/or saline aquifer formations.
• CCUS: Carbon capture, utilization & storage.
  • Capture CO₂, CH₄, CO, etc. from emission point sources.
  • Utilize the gases for enhanced oil recovery (EOR) and other industrial/agricultural purposes.

The U.S. was already the world leader in CCS/CCUS before the November 2020 coup d’état.

Unlike the regressive carbon tax, the 45Q CCS/CCUS tax credit enjoys strong bipartisan support and will likely be enhanced and expanded with the Carbon Capture Utilization and Storage Tax Credit Amendments Act.

Why do anything?

I know that most of my fellow climate change skeptics think that the API is just virtue signaling, greenwashing and/or rent seeking and that there is no climate problem to be solved… However, the people who make the laws think otherwise, even many Republicans. Businesses and the trade groups that represent them have to obey the laws and actually have a fiduciary responsibility to encourage government to craft regulatory policies that are as business-friendly as possible.

While I can’t speak for the API, I know that some manner of carbon pricing is inevitable. It’s just a matter of when and how our government inflicts it upon our economy.

My position is to encourage government to take the least economically destructive path in reducing carbon emissions. Furthermore, while I know that the climate is relatively insensitive to CO₂ and that the increase in atmospheric CO₂ and warming since the 1800’s have been beneficial to mankind and I’m fairly certain that even at 600 ppm, the benefits will still outweigh the costs, my crystal ball gets really fuzzy beyond that. That’s why I support economically sustainable measures to reduce the carbon intensity of energy production, provided these measures do not negatively affect our continued access to affordable, reliable energy. This would mean maintaining a significant coal-fired capacity and expanding natural gas and nuclear power generation, while fast tracking the commercial deployment of CCS/CCUS.

The API’s Industry Action Plan won’t materially protect us from whatever the climate may or may not do in the future; but it could protect us from even worse things that our government is quite capable of doing.

The lesser of two evils is still Elvis!

If you insist on “perfect” and you think you can convince the government to end it’s war on CO₂ emissions and not impose some manner of carbon pricing…

CCS/CCUS can’t solve the problem… even if it exists

The U.S. Energy Information Administration estimates that in 2019, the United States emitted 5.1 billion metric tons of energy-related carbon dioxide, while the global emissions of energy-related carbon dioxide totaled 33.1 billion metric tons.

USGS

The Bureau of Economic Geology at the University of Texas estimates that the geological storage capacity in Miocene strata under Texas state waters is 172 Gt CO₂.

172 Gt CO₂ is equivalent to 34 years of U.S. energy-related CO₂ emissions. That’s a small fraction of the rest of the Gulf of Mexico. There is no lack of pore space for CO2 storage in the subsurface.

Lake Nyos!

That’s a big, fat no!

What happened at Lake Nyos?

On August 21, 1986, Lake Nyos in Cameroon “exploded” in a limnic eruption. The eruption released about 1 cubic kilometre of CO₂, or about 1 billion cubic metres, killing 1,800 people and 3,000 animals.

Lake Nyos sits inside a volcanic crater. Carbon dioxide, escaping from underground volcanic chimneys, is continuously dissolves and concentrates at the bottom of the lake. In 1986, an earthquake triggered a landslide, which disrupted the stratified layers of water and “overturned” the lake. The CO₂-rich water from the bottom rose to the surface and the gas burst out. Heavier than air, it flowed down the sides of the volcano and into adjacent valleys where it asphyxiated all living beings in its path.

Other lakes of this type exist around the world. In most of these cases, preventative degassing of the deeper waters is now underway.

It is important to understand that this scenario would never happen at a geological storage site where CO₂ gas is stored at least 800 metres underground and is therefore isolated from the atmosphere.

Groupe de recherche sur les ressources énergétiques des bassins sédimentaires du Québec

The Lake Nyos CO₂ was in a concentrated in a layer of water at the bottom of a stratified lake in a volcanic crater. The geological storage window starts at a depth of about 1,000 meters, where CO₂ is a supercritical liquid. It would be injected in formations where there was a demonstrable competent top-seal and in the case of depleted oil & gas reservoirs, a structural and/or stratigraphic trap that had successfully stored oil & gas for hundreds of thousands to many millions of years. Unlike volcanic lakes in Cameroon, U,S. geological CCS sites require Class VI permits, requiring extensive monitoring.

Carbon vs. carbon dioxide

I’m fairly certain I’ve used carbon and carbon dioxide/CO₂ correctly in this post.

• Carbon emissions include CO₂, CH₄, CO and other carbon compound gas emissions.
• Carbon taxes are often enumerated in U.S. dollars per ton of CO₂-equivalent.
• Carbon cycle includes, but is not limited to:
  • Photosynthetic conversion of atmospheric CO₂ into O₂ and energy-rich organic compounds.
  • Combustion of hydrocarbon fuels yielding atmospheric CO₂ and H₂O.

The Greenhouse effect violates some law of thermodynamics

Why did you even read this far? Since you’re already here, go ahead and read this too: Skeptical Arguments that Don’t Hold Water by Roy W. Spencer, Ph. D.