Who needs higher energy taxes?

Published December 1, 2001

The Organization of Petroleum Exporting Countries (OPEC) has announced its intent to “develop strategies to trim potentially huge financial losses that are expected to follow implementation of the Kyoto Protocol on climate change.” Rationing the world supply of oil to keep prices up is one strategy OPEC is considering, which could damage the United States economy even if the U.S. does not ratify the Protocol.

The oil cartel estimates emission control measures agreed to in Bonn could eventually cut OPEC revenues by between $22 billion and $63 billion a year.

OPEC Secretary General Ali Rodriguez warns “such losses will make it difficult for OPEC members to justify current and future investments in oil exploration and development, potentially leading to crude supply shortages. The problem is how to guarantee income for the producers in order to maintain the cost of exploration, production, transportation, storage, and refining. If the producers cannot guarantee investment, the world can face many problems with supply.”

According to Rodriguez, “joint production restraints with non-OPEC producers could protect revenues that would otherwise be eroded by climate change mitigation policies. Joint management of a relatively buoyant oil price with non-OPEC oil-exporting countries offers the most feasible route to mitigating the severity of losses incurred, together with a full global trading system that is unrestricted by capping.”

Carbon taxes associated with Kyoto will only worsen the problem, OPEC says. “Green taxes are a masquerade,” complains Kuwaiti oil minister Adel al-Subeih, adding “the oil taxes imposed by western countries will increase further if Kyoto is implemented. And although the aim is to reduce fossil fuel emissions, the taxes will also bring them a huge fiscal windfall. Western governments are trying to blame oil producers, when the blame lies with them.”

Comment: Even before Kyoto goes into effect, rising energy taxes in many nations will reduce demand for oil. This comes on top of the economic slowdown, now exacerbated by the terrorist attacks of September 11. This will lower the world price and hurt mainly high-cost producers in the U.S. and elsewhere–unless the OPEC core, mainly Saudi Arabia, decides to restrict production in order to keep the price from falling.

Cheaper than coal?

An article in the August 24, 2001 issue of Science magazine, “Exploiting Wind versus Coal,” claims wind energy is cheaper than coal and could easily replace 59 percent of U.S. coal-fired electricity generation. By replacing coal with wind energy, the article notes, the U.S. could meet its Kyoto Protocol emission targets.

To reach their conclusion, the authors of the article, Stanford University engineers Mark Z. Jacobson and Gilbert M. Masters, just about doubled the cost of coal-fired electricity by adding externality costs, relying on pro-wind-energy references.


  • If the externality costs of modern coal plants are really as high as Jacobson and Masters claim, then the Clean Air Act has been a colossal failure and EPA has failed miserably in doing its job.
  • If the cost of coal-fired electricity is really as high as they claim, there should be no further need for the substantial federal and state subsidies wind power now enjoys to make it “competitive.”
  • And if the costs of coal are really that high, then nuclear power is most certainly the cheapest source of electricity.

The Coming Storm: Extreme Weather and Our Terrifying Future

Yes, that’s the actual title of a forthcoming book by Bob Reiss, a writer who has obviously talked to a lot of the wrong climate experts. If you read this book and believe what is says, it will scare the dickens out of you. Much of the “evidence” is anecdotal and relates to people’s recollection of the last great storm.

When I debated Reiss on ABC, with Cokie Roberts as moderator, I mentioned that the people I talk to all believe earthquakes have been getting more violent in recent years. Obviously, a consequence of global warming.

Is ethanol a net energy loss?

As lawmakers and energy experts warn of a looming energy crisis, ethanol–an alcohol fuel produced from corn–keeps popping up as an alternative to gasoline. But Wired News reports that a new study by David Pimentel, a professor of ecology at Cornell University, threatens to nip some of the ethanol excitement in the kernel. (http://www.wired.com/news/politics/0,1283,46045,00.html)

Pimentel’s report, published in the 2001 edition of the Encyclopedia for Physical Sciences and Technology, says producing ethanol is more trouble than it’s worth: 131,000 British thermal units of energy are required to produce one gallon of ethanol, but a gallon will only give you about 77,000 Btu of fuel energy. In other words, producing ethanol results in a net loss of energy.

Consequently, Pimentel thinks the only reason people like to talk about ethanol as a valid alternative to gasoline is “politics and large corporations who are getting big bucks from the government (in the form of ethanol subsidies).”

In “Push Ethanol Off the Dole” (http://cato.org/dailys/7-10-97.html), Stephen Moore discusses how ethanol subsidies have been a costly boondoggle with almost no public benefit.

In a Cato policy analysis titled “Archer Daniels Midland: A Case Study in Corporate Welfare (http://www.cato.org/pubs/pas/pa-241.html), James Bovard looks at the numbers behind ADM’s subsidies: Every $1 of profits earned by ADM’s corn sweetener operation costs consumers $10, and every $1 of profits earned by its ethanol operation costs taxpayers $30.

Comment: And just think about all the extra CO2 emitted in making ethanol!

S. Fred Singer, professor emeritus of environmental sciences at the University of Virginia and president of the Science and Environmental Policy Project, shares his thoughts on environment and climate news stories of the month. Singer’s The Week That Was columns can be found at www.sepp.org.