(image: Joe Heller, the Green Bay Press-Gazette via cagle.com)

It’s been cold, but has it been Elfstedentocht cold? The Elfstedentocht is a multi-city ice skating race in the Netherlands that the locals go nuts for, but it’s only held when the canal network freezes. The last one was in 1997, but it could happen again this year. What’s bringing the temperatures down far enough for this epic skating competition? According to David Hone, Shell’s climate advisor, it could have something to do with solar irradiance, which is something like the intensity or energy of the sun. Less solar irradiance might mean lower temperatures. And Elfstedentocht.

At The Oil Drum, a writer with the handle “Heading Out” explains how crude oil becomes the oil that we actually use. It’s a little technical—unless you already know about “distillation curves” and “cracking oil”—but it walks us through the steps required to transform crude oil into anything you would want heating your home.

When we think of oil imports, we often think of the Middle East, but at the Journal of Energy Security Jeremy Martin examines the relationship between the US and its third-largest oil supplier: Mexico. Martin covers the long history and fragile present of this “symbiotic relationship.”

The Center for American Progress looked at some other oil exporters, namely the ones on the State Department’s Travel Warning List. For Rebecca Lefton and Daniel J. Weiss, national security requires energy independence from such dangerous countries. At The Vine, Bradford Plumer responds and points out that since oil is bought and sold in a global market, it might not matter who the US buys oil from—adding to global demand can drive up oil prices and benefit even regimes that don’t sell to the US.

Winners and losers: low-carbon-emitting energy sources (like nuclear, top) stand to do much better under proposed climate legislation than high-carbon emitting sources (like coal, bottom). (images: legalplanet.wordpress.com, tammi.tamu.edu)

“Big Energy” has long been thought of as a monolithic interest block, presenting a united face to the world and, most importantly, to Congress. It turns out that Big Energy is indeed a monolithic interest block…except when it’s not.

As reported Monday by the New York Times, the climate bill is splitting energy firms along energy source fault lines.  Natural gas has split off from its traditional ally oil to form its own interest group. Nuclear is in bed with solar, wind, and hydropower. Everyone is aligned against coal.

The reason is cap and trade, the central provision of the climate bill, which will put a “cap” or ceiling on how much carbon dioxide may be emitted. The more carbon you emit, the more you have to pay—since to emit more carbon, you will need to purchase additional carbon allowances from those who have excess. (That’s the “trade” part of cap and trade.) Since energy sources differ wildly in how much carbon they give off—
•    Nuclear, solar, wind, and hydro emit no carbon
•    Natural gas emits the least of any of the fossil fuels
•    Oil and its distillates emit more than gas
•    Coal emits the most
—the economic costs to energy companies will also differ wildly. Companies producing or using high-carbon sources will have to pay more than ones relying on low- or no-carbon sources. That will mean lower profits and/or higher prices to consumers.

At present, no one knows exactly how much cap and trade may cost. For example, estimates of the cost to the average American family vary from less than $100 per year to almost $7,000. However, with energy being a multi-billion dollar industry, the stakes are enormous—even an increase in cost of a few percentage points translates into big money. The way the final bill is structured will allocate costs among the different industry segments—depending on how it comes out, some will pay more, some will pay less:
•    If allowances have to be purchased, high-carbon fuel loses big
•    If allowances are initially distributed to the industry for free, then low-carbon energy helps subsidize high-carbon energy, since the higher-carbon sources are not fully paying for their emissions
•    Any caps on carbon work to the advantage of the low- or no-carbon energy sources, since they won’t have to absorb or pass onto their customers as many (if any) new costs
Hence the split in the ranks. As one energy expert put it, “These fissures are happening because a policy is increasingly seen as inevitable.” Once some version of cap and trade looks like a done deal, it’s no longer about opposing the bill for energy companies—it’s about gerrymandering it for the maximum benefit to their own sub-industry. That’s why natural gas companies, longtime members of the American Petroleum Institute, have formed their own lobby—since natural gas gives off less carbon than oil (though it does have its own climate change issues, as well as contributing to smog and acid rain), cap and trade is not likely to be as costly for companies that produce or utilize it. In fact, cap and trade can help them by providing an economic incentive to shift energy consumption towards natural gas.

Similarly, nuclear is sitting in the catbird seat in regards to cap and trade, since nuclear energy is carbon free. That explains why Exelon, a company that operates nuclear power plants, quit the U.S. Chamber of Commerce over the Chamber’s opposition to cap and trade.

In contrast to nuclear or even natural gas, coal, as the highest-carbon-emitting fuel, stands only to lose under carbon emissions limits. That’s why some coal executives and lobbyists continue to fight a forlorn rear-guard action against the very concept of global warming, with the head of the largest producer of Appalachian coal asking, “How can [scientists and policy makers] be so confident that man is changing the world climate?”

The split in the energy ranks is good for the bill’s proponents. As Daniel J. Weiss, climate policy director at the liberal Center for American Progress pointed out, “It’s much harder to pass clean-energy legislation when big oil and other energy interests are united in their opposition.” The climate bill is dividing-and-conquering the energy industry. At this time, there is little doubt we will see cap and trade in some form—and someone will be paying the price for it.

There is one group that is unequivocally doing well thanks to cap and trade: energy lobbyists. More than $200 million was spent in the first half of ’09 alone on lobbying the government over the climate bill.

Douglas Elmendorf, director of the CBO, testified before Congress about the costs of the climate bill. (image: economistmom.com)

Adding more fuel to the fire that is the House climate bill—officially the American Clean Energy and Security Act of 2009 (ACES), but better known as the cap and trade bill or the Waxman-Markey bill—Congressional Budget Office (CBO) Director Douglas W. Elmendorf testified before Congress Wednesday that the House bill would slow the country’s economic growth and create “significant” job losses in the fossil fuel industries, reports Juliet Eilperin in the Washington Post. The estimates are in direct opposition with what the Obama administration and congressional Democrats have suggested about the economic benefits of the bill.

Yesterday’s testimony is yet another chapter of the ongoing saga of the purported costs and benefits of the Waxman-Markey bill. In June, the CBO released estimates that showed the bill would only cost American families $175 per year, while acknowledging that costs will rise over time as allowable carbon emissions go down. The CBO noted at the time that the actual cost per family will vary depending on income, with low-income consumers saving about $40 a year, while higher-income families seeing an increase for energy costs of $235 to $340 every year.

Since then, there have been nonstop reports on the real costs and who will benefit most from the bill. In contrast with the CBO’s June estimate, the conservative Heritage Foundation put the price tag at $6800 per family. Rep. Edward Markey, co-sponsor of the bill with Rep. Henry Waxman, put his two cents in, saying that it would cost families “roughly the cost of a postage stamp.” The EPA came up with the cost of $84 per household. The American Petroleum Institute warned of an impending drop in US oil companies refining production level, if the bill was passed. So while costs of the bill may be initially low for consumers, it would eventually drive up the price of refining operations, which get passed along to the public in the form of higher heating and electricity prices.

It remains to be seen how yesterday’s report on the effect of the bill on the economy will be received. Elmendorf did concede that there would be some growth in the renewable energy market, but not enough to compensate for all that will be lost. Republicans seized on the report to say that the country would be better off not curbing greenhouse gas emissions. For those interested in the environmental implications of the bill, Elmendorf made clear that the CBO’s estimates “do not include any benefits from averting climate change,” whether economic or otherwise.

Daniel J. Weiss, a senior fellow at the liberal think tank Center for American Progress, disputed the CBO’s employment forecast and pointed to a study done by the University of Massachusetts at Amherst that concluded that the House bill would add jobs to the US economy.

“We estimate this sustained expansion in clean-energy investments triggered by the economic stimulus program, and the forthcoming American Clean Energy and Security Act, can generate a net increase of about 1.7 million jobs,” Weiss said.