The Safety Valve

Marc Ambinder attended a Chevron-sponsored dinner last night and came away with an answer to the question of what oil companies hope to gain from trying to position themselves as green -- it's an opportunity to present efforts to gut climate change legislation as good-faith efforts to cope with the problem:

Everyone seems to agree that a carbon tax, or, more likely, the indirect carbon tax that is a cap-and-trade system, is the next step. The cap-n-trade system will include a "safety valve," a term of art that refers to a mechanism whereby government promises that, once carbon emissions prices reach a certain level, they'll cap the price but allow for more emissions credits to be purchased.

Now Marc cunningly made his "safety valve" link to a Climate Progress article explaining why it's a bad idea. But to put it briefly, a safety valve is a great provision to add if you don't care at all about mitigating climate change. Call it "John McCain environmentalism" -- you'd like to be associated with the climate change issue, but you also want to rake in huge dollars from polluters and you don't actually care accomplishing anything on the issue other than advancing your own political career.

In a different world, what you're trying to do is to reduce carbon dioxide emissions. There are two ways to do this. One is that you can put a price on carbon (a "carbon tax") and then increase that price over time so as to generate the kind of emissions reductions you're looking for. Another is that you can set an economywide level of allowable carbon emissions and make it such that firms need to obtain emissions permits in order to emit CO2 ("cap and trade") thus allowing the market to raise the price of carbon emissions up to a level commensurate with your goal. Either way, the idea is that higher prices for emitting carbon will lead to less emissions -- it creates financial incentives to switch energy sources (coal and oil to natural gas, fossil fuels to nuclear and renewables) to switch to more energy-efficient end-uses (SUVs to minivans, conventional engines to gas-electric hybrids) and to simply use less energy (movie theaters air conditioned to 72 degrees instead of 60) overall.

But either way, the mechanism is higher prices for carbon emissions. If you add on a provision that prevents the price of carbon emissions from rising too high, then you're not taking action to reduce emissions.