Shell Oil Self-Imposes Carbon Pollution Tax High Enough to Crash Coal, Erase Natural Gas’s Value-Added

Royal Dutch Shell includes a high price for carbon dioxide when evaluating new projects. The $40 a metric ton price that Shell uses would — if widely adopted — reshape domestic and international energy consumption and investment trends.

Shell discussed this policy in its 2012 Sustainability Report, but it hasn’t received much attention. CDP (aka the Carbon Disclosure Project) is putting out a report next month detailing the efforts of many companies to price carbon internally, which may help spur coverage of this important topic.

That carbon pollution price, if it were a national carbon tax, would add about $0.35 a gallon to the price of gasoline.  More importantly, it would add $0.04 a kilowatt hour to the price of coal power, which would have a huge impact.  Overall, that price level might cut U.S. CO2 emissions more than 20% below current levels, which are already more than 10% below 2005 levels. The vast majority of that CO2 reduction would come from a drop in coal use.

It’s worth noting that $40 a tonne price for carbon pollution also means that the harm natural gas does exceeds its value added to the economy by more than a factor of 4! With a serious (and rising) carbon price, natural gas would truly be a bridge fuel, since it would displace coal but not carbon-free sources like renewables.

Shell Oil Self-Imposes Carbon Pollution Tax High Enough to Crash Coal, Erase Natural Gas’s Value-Added