The Senate's failure last week to vote on global warming legislation is a reminder that the politics of cutting carbon dioxide will be nasty and difficult. Most carbon dioxide, the chief cause of global warming, comes from burning fossil fuels. The public seems unwilling to embrace global warming policies that must raise energy costs to be effective when the price of oil and other energy sources is already at all-time highs.
The Senate will try again next year with a new president. Even then, the politics will be tricky to master. That's bad news because without serious rules to cut carbon the country will be flying blind as it struggles to decide which energy systems to build. Congress can fix the problem by passing a stopgap rule that won't run afoul of today's nasty energy politics. What's needed is a guarantee that sky-high energy prices at least won't fall.
A price floor would have two elements. First, Congress would create an energy security fee on every barrel of oil. Above $100 a barrel the fee would be zero and the policy wouldn't increase prices. Below that floor the fee would offset two-thirds of the price decline. (This is a "soft floor" -- hard floors would be better, but they create a perverse market that is easy for oil suppliers to manipulate because they know the price. A hard floor at $50 would guarantee that the market price wouldn't collapse entirely.) The revenues would flow into the general budget to reduce the deficit, which would help the economy.
A price floor would make it much easier for companies to begin immediate planning to cut the nation's dangerous dependence on oil. To be sure, some of that planning is already happening, but it is tentative because companies fear that energy prices could collapse as quickly as they have soared in the last two years. A floor would particularly encourage much higher energy efficiency as well as research and deployment of oil alternatives. The good news is that many alternatives look cost-effective already and still more ideas are winding their way through laboratories; a floor would help their backers be sure that these ideas make sense to pursue.
An oil floor, alone, would be dangerous because there are many ways to cut the consumption of oil, and some of them will make the global warming problem even worse. Above $50 a barrel, for example, it is cost-effective in many places to convert coal into liquids that replace oil but unfortunately double the carbon dioxide emitted for every barrel.
The second element is a floor on carbon dioxide. Despite the complaints that global warming rules would raise energy prices, in fact the markets have already forced consumers to pay more when they emit carbon dioxide. Less watched than the price of oil, the cost of buying coal has roughly doubled in the last two years. Coal is the most carbon-intensive of fossil fuels, and the rise in coal price means that companies burning coal area already paying at least $20 more for every ton of carbon dioxide they emit to the atmosphere. Congress could create a floor on the price of carbon dioxide at $20 -- with the same design as the soft floor on oil. The carbon floor would apply to all fossil fuels.
This stopgap policy is no substitute for a full-blown strategy to tackle global warming.
Much bigger investment in research and development is needed. Also needed is a foreign policy that engages the rest of the world, especially the rapidly growing developing countries that already account for half of world emissions.
Serious global warming policies require careful design and political engineering because they imply a radical reorganization of the energy system. Last week's vote is a reminder that those policies could be years away.
Until then, the planet warms and the indispensable nation sits on its hands. Price floors can push the country in the right direction while assuring the public that, for now, these policies won't push energy prices even higher.