Former BP Chief Changes Stance on Carbon Trading

John Browne, a former CEO of oil giant BP, doesn’t sound like the most likely person to support climate-based governmental regulations. Yet the career engineer and member of the House of Lords was once an enthusiastic backer of government-mandated carbon trading, helping to initiate the first scheme while still an oil executive.

Ever ahead of his time, Browne is now backtracking on his support for trading, saying that more regulations are needed. “When you issue free permits, it undermines the system,” he told an industry summit last week, referring to the European Union’s policy of parceling out yearly credit allocations to many companies.

Similar complaints are on the rise as other countries, principally Australia and the United States, think about instituting their own systems. Warren Buffet, for one, recently warned that a badly-designed trading system could sharply raise prices for consumers, while actually increasing the profits of the companies emitting GHGs.

But the EU has also done its Atlantic neighbor a favor by showing off the weaknesses in a carbon trading system. A strong plan would involve auctioning all the permits instead of giving away large numbers of free ones; the government would thus be in closer control of the price. The failures of the EU’s system could also help the US better distribute the proceeds of the auctions, sending most of the proceeds back to consumers hurt by higher energy prices. The Obama administration says it is working on a more watertight plan than the EU’s, while the latter is re-examining its own regulations.

Confusing matters is a proposal in the US by Rep. John Larson to institute a straightforward tax on carbon. The New York Times calls Larson’s efforts a “lonely quest” destined for a “steep climb”.

At least one member of their own staff appreciates the long odds; the Oregonian reports that the NYT’s Thomas Friedman is calling for a carbon tax in his public presentations. Other coverage, like this column at Forbes, show that Friedman isn’t the only member of the media interested in a tax.

It’s often suggested that Republican efforts toward a carbon tax are actually a blocking tactic, intended to split support between two pieces of legislation and thus delay either from passing. But with commentary like Browne’s increasing, carbon trading backers may find more of a fight than they expected.