Big Oil shifting position on global warming



By Clifford Krauss and Jad Mouawad

HOUSTON — Confronted with a sharp change of priorities in Washington, international oil executives are expressing an eagerness to work with President Barack Obama to fashion new policies to tackle global warming.

At an industry conference here this week, the executives struck a conciliatory tone on how to limit the emissions that are contributing to climate change, with many of them sounding like budding conservationists as they stressed energy efficiency and the need to develop renewable fuels.

At the same time, they declared that the United States would still need oil for a long time and sought to persuade the new administration of the need for more drilling off the nation’s coasts.

On tackling global warming, a subject that has long divided the industry, some executives said they supported a tax on carbon, while others favored a trading system like the one adopted by Europe. Almost all of them seemed reconciled to the United States’ adopting some kind of climate policy and said they were eager to work with the new administration to devise an effective energy strategy.

“President Obama comes to office with a strong commitment to tackle climate change,” said Tony Hayward, the chief executive of BP. “Suddenly the challenges many of us have been wrestling with for a long time – the importance of energy security in providing economic security and tackling the issue of climate change in a way that is commercially viable – are center stage.”

During his election campaign, Obama frequently criticized big oil companies, expressed skepticism about offshore drilling and pledged to try to begin to replace hydrocarbons with renewable fuels. He has made energy and environmental policy a cornerstone of both his national security and economic efforts.

The executives strongly urged the administration to open up the continental shelf for offshore drilling at the very time that the interior secretary, Ken Salazar, announced that the government would review and probably scale back the plan of the administration of President George W. Bush to give new rights to drillers for oil and natural gas.

Exxon Mobil, which had long been skeptical of global warming, offered its own suggestions on how to curb emissions of carbon dioxide, one of the greenhouse gases that have been blamed. The United States imposes no penalties for emitting carbon dioxide, meaning that companies have little incentive to curb their pollution.

One of Exxon Mobil’s top executives, Michael Dolan, a senior vice president, criticized one idea that has considerable momentum in Washington under which the government would set a cap on how much carbon dioxide could be emitted into the atmosphere each year in the United States. It would then give or sell permits that companies would be allowed to trade to meet their limit. Dolan said a carbon tax would be simpler and less subject to manipulation than such a cap-and-trade system.

“A carbon tax reduces policy risks for businesses and investors in a way that cap-and-trade schemes do not,” Dolan said in a speech. “In addition, by reducing other taxes – such as income or excise taxes – we can make a carbon tax revenue-neutral and offset the impact of higher taxes on the economy.”

His European counterparts offered a different approach, favoring the sort of cap-and-trade system that has already taken hold in Europe. One of them, Jeroen van der Veer, chief executive of Royal Dutch Shell, said the key was to assign a cost to carbon. “I don’t lose any sleep if the United States or anyone else gets a carbon tax,” Van der Veer said. “The world is helped by pricing carbon dioxide, whichever way you do it.”

A cap-and-trade system establishes a clear environmental goal by setting an upper limit on emissions, something a carbon tax does not necessarily do, he said. Meanwhile, the possibility of trading the permits provides companies with an economic incentive to invest in technologies that reduce emissions. He said a cap-and-trade system had worked well in the United States for cutting the emissions that cause acid rain.

Taxation can be effective, too, he said. “Both can work, and even coexist,” he said of the two approaches, noting, for example, that higher fuel taxes largely explained why European vehicles were far more efficient than American ones.

Daniel Yergin, chairman of Cambridge Energy Research Associates, a consulting firm that organized the conference, said oil companies recognized that major policy changes were coming, and that they needed to be a part of the debate.

“They are not arguing about basic philosophy anymore, but about practical steps,” he said. “We’re moving into a new era of policy making that will have very important and far-reaching implications for energy markets.”

(c) 2009 The New York Times Media Group


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