By Mitch Rofsky, Better World Club

A letter is being circulated asking President Obama to stop the Keystone XL Tar Sands pipeline:

“… The well-being of our businesses and the economy in the United States are tied to the health of our environment.  The Keystone XL pipeline will have an immensely negative impact on the environment.  It would bring 700,000 barrels of heavy crude from Canadian tar sands to the US every day, furthering the US addiction to oil, and risking new oil spills in rivers and the Ogallala aquifer. The production of oil from tar sands would generate enormous greenhouse gas emissions, and create greater impacts from global warming. The impacts of global warming — from droughts, to floods, to extreme weather – are bad for business in the United States.  As we saw in the Gulf, oil spills also have a devastating impact on the economy.  The failure to shift America away from its dependence on oil to cleaner fuels will further imperil our economy and reduce the number of green jobs we need for sustainable economic growth. Your administration has taken bold and necessary steps to increase the green energy economy in the US.  Now, we urge you to reject the Keystone XL pipeline, and further invest in clean energy technologies.  It is the right decision for the US, and it is the right decision for business.” Of course, this is an understandable effort on the part of those who believe that the Canadian tar sands may address one part of our energy problem (that we are too dependent on dangerous sources for our fuel) but ignores the other part (global warming and the environment).”

However, is having the President block the pipeline the best way to go about it?  Either politically or economically?

Fundamentally, the environmental problem is a market problem.  The marketplace is essential, but not perfect.  For instance, the marketplace doesn’t incorporate the cost of “negative externalities”.  Such costs are imposed on 3rd parties, often the U.S. taxpayer if not the US air breather or US water drinker.  Since producers don’t have to pay for the impact of their pollution, the market is subsidizing polluters.

Government regulation is sometimes necessary, but should be avoided when there are effective market alternatives.  What would a market orientation toward the pipeline look like?  How about this:  an externalities tax, in this case, mainly, a carbon tax (although other externalities should be included as well).  This would address global warming directly.

And this:  require a sinking fund sufficient to clean up any oil spills.  If the money is never used over time, it would go back to the oil companies.  If it is used, the oil companies would be required to replenish it.  The sinking fund should include sufficient amounts to cover economic as well as environmental damage.  (Alternatively, require the oil companies to purchase liability insurance that would cover these costs.)

Now if these requirements make the pipeline too expensive, so be it.  Then, construction isn’t economically justified.

But if the oil companies believe it is still profitable, this approach has one more benefit: it would increase the price of fossil fuel relative to greener alternatives.  The accurate pricing of fossil fuels could do more for alternative energy development than any government subsidy. Many conservatives will recognize the propriety of this approach.  They don’t like to remember it now, but it was Republicans who first proposed “cap and trade” as a market alternative to greenhouse gas regulation.  Many conservative economists support a carbon tax as the most efficient way to confront global warming and energy independence.

For those politicians who resist, Obama should use the threat of a complete block to determine whether this kind of compromise can be reached. After all, if successful, it wouldn’t be more, typical government regulation.  Rather, it would be the marketplace—a perfected marketplace—determining the proper energy mix while reducing greenhouse gas and other pollution. Now that’s a win-win.  Politically and economically.

 

Better World Club is the nation’s only eco-friendly auto club.  In addition to a different policy agenda than that other auto club (we’re not members of the highway lobby), BWC  has been a pioneer:  Providing the 1^st and only nationwide bicycle assistance.  Offering free carbon offsets to auto insurance clients.  Discounting membership fees for hybrids and electric cars.   Donating 1% of annual revenues toward environmental clean-up and advocacy. All while providing the Emergency Roadside Assistance, Travel Services, and Auto Insurance usually offered by auto clubs.   Check out our eNewsletter, Kicking Asphalt, called “The Onion” of corporate newsletters by Eco-Talk Radio