Wednesday, June 3, 2009

Higher and More Stable U.S. Energy Prices Will Result in Long-Term Benefits, According to New Harvard Study

A price on U.S. greenhouse gas emissions must be established – either through a cap-and-trade system or a carbon tax – as part of the country’s overall energy policy, according to the Belfer Center for Science and International Affairs at Harvard University.

This recommendation is part of a policy brief, “Acting in Time on Energy Policy,” just published by the John F. Kennedy School of Government at Harvard. The report “outlines priorities for U.S. energy policy at the dawn of the Obama administration, and recommends specific steps that the U.S. government should take to address the numerous energy-related challenges facing the United States.”

According to the report, "Higher and stable energy prices would help achieve all the policy objectives in the longer term – improved oil security, lower greenhouse gas emissions, more efficient operation of the electricity system, more incentives for private sector innovation in energy technologies, and more incentives for consumers to purchase cleaner and more energy efficient products.”

As part of addressing the greenhouse gas emissions issue, there must be a long-term goal for global emissions reductions, the report said.

Other key findings and recommendations:
The U.S. should subsidize the building of 10 to 20 commercial-scale projects involving carbon capture and storage. Longer term, carbon capture and storage should be adopted at all large fossil fuel-based stationary power plants.

Legislation should be enacted to set a “variable tax” when oil reaches a certain price. For example, a tax could be established that sets an oil “floor price” of $90 per barrel. When oil has a market price of $80 per barrel, a $10 tax would increase the cost to $90 per barrel. Once the price hit $90 a barrel, the tax would be suspended. In effect, the tax would eliminate the possibility of huge downward trending oil prices.

Additional investment is required for energy infrastructure projects.

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