This week representatives from countries around the world will be traveling to South Africa for the UN Summit on Climate Change.  This Summit begins on Monday, November 28 and continues through December 9.  I have several thoughts about climate change.

Climate Change – congratulations to the world for taking this on, despite the nature of the data.  Corporations around the world and individuals are making adjustments to their residential and commercial lives to reduce their carbon footprint.  Corporations and other entities are attaining positive results through a variety of means and technologies.  They are employing solar, wind, geothermal, better insulation, smarter architecture, energy efficient technology, etc. These costs are being born by them with various subsidies to encourage the adoption to the technology.  The education by these groups should be applauded.

However, I do not think that this should be mandated on an international basis.  Given the current financial and economic environment, this would be a costly endeavor.  Corporations and companies forced into reduced carbon emissions, would pass the costs onto the consumers, who can ill afford such pass-through costs at this time.

Environmental Protection Agency – again, congratulations to another environmental group.  The EPA should be basking in their glory for their efforts in changing the behavior of consumers and corporations in the US.   While the results are dated, smog levels around the country have dropped considerably because of fuel regulations on NOx and Sox reductions.  Rivers are significantly better.  Acid rain has been greatly reduced.  In fact, according to recent conversations that I have had with a farming coop, acid rain reduction has been so successful that the soil is now barren of sulfur.  Farmers must purchase sulfur and apply it with the fertilizers. 

However, they should not be constraining job growth by preventing the development of projects such as the Keystone XL oil pipeline, shale gas development with associated pipeline infrastructure or oil drilling.  The success of drilling shale gas, has been so successful that 6 years ago, we were importing 15 percent of our natural gas needs.  We had constructed LNG regas facilities along the coasts to import natural gas from Qatar and other Middle East countries.  Now, we are talking about building LNG trains to become an LNG exporter.  Who would have thought? All of this shale gas development has significantly dropped the price of natural gas that we have returned to one of the low- cost countries for natural gas.  Companies like Dow are talking about taking advantage of that cost benefit, by restarting one of their mothballed ethylene plants.  This will allow the US to bring back high paying chemical, fertilizer and petrochemical jobs that were lost when we were natural gas importers.  That will lead to more industry, more revenues and more taxes.  Many of the facilities are already built and can be brought back on line with minimal capex.  All of this has a job multiplier effect, adding support industry jobs.  Allowing us to develop these reserves provides us/US with cheaper energy, more jobs, more revenues (worth repeating), more taxes (again worth repeating), and more security (less revenues going to unfriendly countries).  This is a win-win for all of us/US.

Carbon Dioxide - lastly, DO NOT, I repeat DO NOT, all the trading companies and investment banks to trade carbon credits.  If you think that the banks and trading companies make too much money now, give them carbon credits to trade.  They will become rich beyond your wildest imagination and the government would lose out on one of the biggest paydays in history.  I propose that we allow the EPA to tax carbon dioxide emissions.  It could be pro-rated across the industries using a life-cycle apportionment.  This means that we do not shut the coal business down, because it is our greatest energy source and security of all the energy types (for now).  But the EPA would apportion some of the carbon tax to them – this would encourage the closing of high-sulfur mines, while keeping larger low-sulfur mines operating.  Utilities would then allocate capital resources across their electricity-generating portfolio and eventually close high-sulfur emitting coal-fired power plants.  While both of these industries would shed jobs, the revenues that the EPA take in from the carbon tax on emissions would be used for incentives to build low or no carbon emission, electricity generating capacity.  This should create more jobs than it eliminates.

Until next quatbtu.