In a very good article, E&E Daily News reported today that a group of senators are considering a proposal from ExxonMobil, ConocoPhillips and BP America to levy a carbon fee on the industry rather than a cap-and-trade system.  By putting forward their own idea of what they can accept, the industry appears to be following the example led by automakers during the debates on CAFÉ standards.  A cooperative dialogue will undoubtedly be much more conducive to developing a long-term solution to the oil dependence and environmental challenges that our nation faces.

The article notes that Sen. Graham found fault in the House bill because it forced the industry into an upstream cap-and-trade system covering emissions from refining and emissions from the products sold.  “It really increases gas prices dramatically more than consumers can bear,” Sen. Graham said.  “The goal is to price carbon on the transportation side in a way that’d allow alternative vehicles to become more attractive to the consumer, and to manufacturers.”  Sen. Durbin said that “maybe the sector approach is the right start,” and Sen. Landrieu said that she had been in talks with Sens. Kerry and Lieberman on a “linked carbon fee” on transportation fuels.  No decisions have yet been made, but these are certainly interesting political developments that could ultimately attract more support than a cap-and-trade system from those interested in the climate debate and the energy debate.

For consumers it means that future vehicle purchase decisions (gasoline, hybrid, plug-in hybrid, electric) will be more informed.  But it would not only create price signals for consumers that could be more simply interpreted.  From an operations perspective it is something that oil companies can account for in their activities just like they account for any other cost from electricity to manpower.  This could reduce uncertainty and risk, and create greater project stability overall.  As the shift away from our dependence on oil in the transportation sector continues, we must analyze all of these potential policies to ensure that we move forward on those that are most effective.

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