Recently, BP Managing Director Robert Dudley was asked if he felt his company’s oil spill in the Gulf of Mexico could cause the public to lose faith in offshore drilling.  He responded that there is a tradeoff between making drilling “completely safe for the entire industry” and the need for “affordable energy.”  Transitioning to renewable energy is often considered too expensive.  But how “affordable” is oil?

We will not know the total bill for the Gulf disaster for some time.  Its entire fishing industry, worth $3 billion a year in Louisiana alone, is threatened not only this year, but for perhaps a generation.  Tourism is threatened from Louisiana to Florida for years to come.  While BP has said it will pay “reasonable claims” resulting from the spill, Gulf residents and American taxpayers will bear the brunt of the damage far into the future.

If these impacts were factored into the price of gasoline, it would appear far less “affordable.”  But we don’t do that.  These costs and many others are externalized, giving the impression that oil is far cheaper than it is.

The true economic cost is hidden by a combination of mechanisms that have subsidized the industry for decades.  As Paul Roberts notes in The End of Oil, oil companies receive special deductions lowering their effective tax rate to about 11 percent, compared to 18 percent for non-oil industries.  This has cost American taxpayers an estimated $200 billion since 1968, and with soaring industry profits in recent years, is growing at an ever-increasing rate.

In the 1980’s, the Interior Department slashed the average price of drilling leases to $263 an acre – a staggering 88% reduction.  In 1995 Congress began exempting oil companies from royalty payments to incent expanded deep water drilling, which could cost taxpayers $55 billion over the life of the leases – or more, depending on well performance and oil prices.

Taxpayers also pay for the U.S military presence abroad required to keep international oil supplies secure.  Our troops in the Caspian, West Africa, South America and Middle East (except, debatably, Iraq) serve mainly to keep oil flowing to America.  In his book Blood and Oil, Michael T. Klare estimates that the total bill for military support and other aid to oil producing countries may exceed $150 billion per year.

Because taxpayers bear these costs, gas prices remain artificially low.  But we still end up footing the bill.  Moving the costs back to oil producers would significantly increase the price of gasoline at the pump, but would not impact the true cost borne by society.  This change would create the appropriate price signals, helping consumers act more rationally.

Congress can address this by removing oil tax breaks and subsidies, and restoring the price of leasing rights to previous levels.  Congress should also levy a surcharge on oil imports to recoup expenditures to secure those supplies.  By announcing this plan immediately, but phasing it in over several years starting in the middle of the decade, oil companies and consumers have time to adapt.  Within ten years these costs would be fully internalized.

While the actual price increases would not take effect for several years, simply announcing this plan would immediately shift behavior.  Oil drilling becomes less desirable.  Choices on automobiles, housing and office locations would be altered – all long-term investment decisions that have a significant influence on our environmental footprint.  We saw the impact on behavior when gas prices reached $4 per gallon in 2008.  Prices would move beyond that after this plan was enacted. 

Again, this would not alter the total cost borne by American society.  It would simply reflect prices differently, in a way that gives Americans much greater control. 

No plan will satisfy all constituencies, but this one has elements that appeal to a broad spectrum of interests.  It will reduce oil use, address our budget deficit and allow markets to function better, which appeals to environmentalists, budget hawks and free market champions, respectively. 

This plan would likely face opposition from both sides.  Fossil fuel supporters will object because it will accelerate the structural shift away from oil and gas, and reduce industry profits.  Environmental advocates will complain that, because it does not include environmental costs, the plan does not go far enough.

But this approach contains elements that appeal to several factions.  It is simple to explain and straightforward to calculate, making it more politically palatable than other options such as cap-and-trade legislation or a straight carbon tax.  And while not a substitute for tougher safety requirements or comprehensive energy policy, it would immediately begin to alter behavior to more desirable outcomes.

Click here for the version of this Op-Ed piece published by The Oregonian (along with a less-than-flattering photo of Jon).

Hutani's Jon Blumenauer spoke at the 2010 VerdeXchange conference in Los Angeles in January on a panel discussing the role and responsibility of Chief Sustainability Officers.  Click here for more about VerdeXchange.

The Oregonian publishes "Addressing global warming fears," an op/ed piece written by Jon Blumenauer on constructive ways to engage children on the subject global warming.

Jon Blumenauer meets Chinese President Hu Jintao in BeijingIn May I had the privilege of traveling to China with House Speaker Nancy Pelosi and other members of the House Select Committee on Energy Independence and Global Warming. The delegation met with top Chinese leaders, including President Hu Jintao, to discuss the global environmental crisis and how our two countries can work together to solve it.

The trip included stops in Shanghai, Beijing and Hong Kong. The itinerary in Beijing included individual meetings with the top three Chinese officials: President Hu Jintao, Premier Wen Jiabao and Wu Bangguo, the Chairman of the National People’s Congress.

The lineup of meetings was remarkable considering that Speaker Pelosi has been referred to as “the most hated person in China” due to her strong stands against Chinese abuse of human rights, and the fact that the express purpose of the delegation was to address the environmental crisis – an area where China has been resistant to outside pressure.

Many Americans associate China with rampant air and water pollution, where the focus on economic growth trumps any concerns about the environment or health of its citizens. There is truth to this view. The skies of major cities are constantly shrouded in smog, which kills 600,000 Chinese per year. China had been building an average of one coal-fired power plant per week. Pollution from dust storms affects US populations as far away as Colorado.

However, the Chinese are doing a great deal to address environmental problems – in fact, their targets are much stronger than U.S. initiatives. Their energy efficiency targets are the most aggressive in the world, targeting a 20% reduction in energy per unit of output in the 2006-10 five-year plan. China targets of 15% its energy coming from renewables by 2020. Cars are required to get an average of 36 miles per gallon – already significantly higher than the U.S. standard, and during our visit, the government announced a plan to require an 18% improvement to the current standard by 2015.

While China is not always meeting its targets, leaders appear to be serious about environmental improvement. And they will need to be. In absolute terms, Chinese emissions are now on par with the U.S. However, as each Chinese official we met pointed out, on a per capita basis China emissions are still a small fraction of those in America, and much of their emissions are to produce goods that Americans consume. But that is changing rapidly.

Only about a third of the 1.3 billion Chinese live in urbanized areas, which use more energy. The urbanization process is continuing, and Chinese cities are developing at a rapid pace – the country now has nearly 200 cities with populations of 1 million or more. Construction of these new urban areas is highly energy intensive, but perhaps more importantly, it is done largely without integrating environmental sustainability into the planning process. China adds ten million new cars to its roads each year – equal to the new fleet in the US, and growing at a faster rate. And environmental problems lead to tens of thousands of protests per year.

Still, the delegation came away impressed with what we saw in China. We rode on the fastest passenger train in the world. The trip from Beijing to Tianjin 75 miles away was completed in less than 30 minutes aboard a train that maxed out at over 200 miles an hour. We toured an electric car factory, which was located next to a Vestas plant manufacturing wind turbines. And China is already the largest producer of solar panels in the world.

I believe the trip was successful in pounding home the newfound U.S. commitment to environmental improvement. The delegation sought to bring China to the table to discuss commitments at the next round of international negotiations in Copenhagen later this year. Chinese leaders were resistant to any binding reductions, but the feeling is that if the U.S. makes meaningful commitments at Copenhagen, China and other countries will also take action. If not, we will have lost a critical opportunity. Congressional approval of the Waxman-Markey bill is a very important first step, but we have much work to do in the coming months prior to Copenhagen.

For more on the visit, click here.

Click here to read the warning from Jeff Immelt and John Doerr that China is ahead of the U.S. on green technology innovation.

House Speaker Nancy Pelosi with Hutani's Jon Blumenauer at Spencer Glacier in AlaskaGlobal warming scenarios are generally forecasts of the conditions that will exist in the future. But on a recent trip to Alaska I was shocked to learn the extent of the impacts that have already taken place. These are not projections that may or may not come about in the future. They are here now, and Alaskans are trying to mitigate the damage.

Alaska is one of the most impacted areas on the planet by global warming. In the period between 1979-2007, Arctic ice lost 53% of its average thickness. The total area of Arctic ice lost over that period of time is over one million square miles.

Impacts are seen in many other areas. The average summer temperature in the Yukon River has increased ten degrees Fahrenheit over the past 25 years – a phenomenal increase in such a short period of time. The summer temperature is now warm enough to support a parasite that wiped out 45% of the recent salmon run in the Yukon River, killing the fish and making the rotting meat inedible.

Forests are dying off at alarming rates as warming occurs. Hundreds of thousands of acres are being killed as temperatures rise, leading to increases in forests fires. The Alaskan Boreal forests are potentially threatened with extinction.

Human populations are also threatened. Eighty-five percent of Alaska’s communities are located in coastal areas, which are increasingly threatened by erosion. Currently 184 communities need to be relocated, which will cost hundreds of millions of dollars. If this is the pricetag for the relatively few moves required in a state with less than 700,000 people, imagine the cost to relocate heavily populated communities located on coastlines in the continental U.S.

Despite this evidence right in our own backyard, many Americans still question whether global warming exists, and how much of it is due to human causes. I defer to the International Panel on Climate Change for this analysis. The IPCC consists of hundreds of scientists from dozens of countries, and it has concluded that human activity is undeniably linked to the rapid changes we are now seeing.

But others take a different approach. During our visit to Spencer Glacier (which, incidentally, has receded one mile in the past 50 years), I spoke to a park official. “Skeptics counter this evidence [of human-caused warming] with claims that the earth has gone through warming and cooling cycles for millions of years – and they’re right,” she said. “But humans have never lived through a period of global warming before. It ought to scare the heck out of everyone, because life as we know it is going to change dramatically – and it’s already started, as we see here every day. We can adapt, but it will be difficult and very costly. We should be doing everything possible to slow this change.”

The impacts of global warming are not decades away. As the residents of Alaska can attest, they have arrived. Those of us in the continental U.S. would do well to learn more about what is happening there and take action to mitigate the damage. The sooner we act, the less disruptive and costly it will be.