Keystone XL, carbon sequestration, and the tax in the closet

The Keystone Pipeline XL (Keystone Expansion) is a part of  a multi-billion dollar project to "transport synthetic crude oil and diluted bitumen from the Athabasca Oil Sands in northeastern Alberta, Canada to refineries in Illinois and Oklahoma, and further to the U.S. Gulf Coast".

There is debate about the project, but the media coverage is hard to follow. That's because there is an "elephant in the room". (see - unspoken).

The elephant is carbon. If we taxed CO2 to offset the externalities of global climate change the Keystone XL would not be built and the existing Keystone pipeline would be dismantled. Of course if we had a Carbon tax the price of energy would rise about 10%, though that would be offset by the increasingly low costs of solar power.

It's easy to see why the media is missing the Keystone XL story. Without a Carbon Tax, or the regulatory equivalent, the Keystone XL makes business sense. A Carbon Tax, however, is a wee bit unpopular. It's easier for XL opponents to talk about other environmental impacts such as oil spills, water contamination and the like.

Of course once Keystone XL is built, instituting a carbon cost would mean dismantling a suddenly irrational multi-billion dollar investment. So maybe we should be talking about the real issue now.

It's a similar story with coal plant carbon sequestration. To the surprise of nobody whose paying attention, it's not happening. Shareholders would fire the CEO of a corporation that invested in carbon sequestration without either a carbon tax or the regulatory equivalent.

There's more than one elephant in this (too small) room. The other is Peak Oil, defined as the beginning of the end of the good stuff. It's gotten lost in the so-far-lesser depression, but our fracking and Keystone investments are consistent with Gwynne Dyer's 2008 prediction. We are now post-peak-oil.

Does it all make more sense now?

Yeah, I thought so.

There's a twist to this story though.

Is a Carbon Tax really all that unpopular? Governments need money to provide services an aging and increasing disabled population needs. There's no happy way to increase taxes. Compared to the alternatives, a Carbon Tax may not be as unpopular as we imagine. Maybe that's why nobody is talking about it. When politicians are forced to deal with big problems, they prefer to keep the real solutions behind closed doors.