 Good morning. For those of you who don't know me, I'm Jessica Matthews. Now I've distinguished fellow here at Carnegie and a co-author with Deborah Gordon of the study that we are releasing this morning called Smart Tax, Pricing Oil for a Safe Climate. I want to just, our plan for this morning is I'm going to make just a couple of remarks Deborah Gordon's going to present the core findings of our study. I'm going to make a few comments on how and why we think this is politically a viable idea right now. And then we're going to have a discussion with the two distinguished commentators who've looked at this study and going to give their comments on it. And then we will open it to the room. And I think and hope to have a vigorous discussion about it. Let me just begin by framing this by saying that we began this on the basis of four, not assumptions, but core convictions. First, that it is highly unlikely that we can meet even the near term Paris goal and certainly not the longer term one with just the measures that are currently either underway or contemplated. Secondly, that trying to achieve a safe climate, either nationally or globally, without actively using the marketplace is an enormously costly mistake and one that's likely doomed to fail. And third, that of all the fossil fuels, oil poses the most difficult set of problems to intelligently control. And Debra's going to explain why that's true and does require a specific tailored strategy for reduction. And finally of these four beliefs was that in the oil climate index, which we have previously published, methodology developed by a team here Carnegie at Stanford and at the University of Calgary, that we had a new tool that made an intelligent approach to climate possible. So with that, let me turn the mic over to Debra Gordon and then she will present these results. Then we will continue to the discussion. Thank you, Jessica. This morning I was like taking stock and thinking that Jessica and I have collectively spent what, 50 years? Maybe more, I hate to say. Collectively, working on transportation and climate issues, this has been such a thorny sector to manage. And there are challenges that will take time to solve. But we're thrilled to share with you today what something relatively similar that I think once you've done the work to see where the carbon is embedded in the oil supply chain, which is the bulk of the work in the oil climate index, relatively simple to apply it to of smart tax to price oil. So why is oil different? Jessica just alluded to this. To my mind, oil is the other fossil fuel. It's really quite different from coal and gas. They also have challenges, mind you, but different challenges than oil does. So chemically, oil is much more diverse than coal and gas. I would probably even venture to say geologically as well. Its supply chain is extremely complex, mainly because you can't use oil. You need to convert it into petroleum products. So that puts a huge centerpiece into the supply chain called refining. And then out of crude, you get a whole slate of petroleum products. So it's a much more complex supply chain. Its economics, while coal and gas's economics are capitalized in large, oil is massive compared to the other two. Its end uses are very wide ranging. As you can see here, with coal, you have power and heavy industry. With gas, you add to that petrochemicals, residential, commercial. But with oil, you end up having over 90% of transportation worldwide depends on oil. But oil is also petrochemicals and industry residential. It's all over commercial because there's so much residual fuel that comes out of the oil barrel. And it also forms a solid substance in a heavier oil called petroleum coke that goes as a substitute for coal. So it really is a very, very wide ranging end use. And when it comes to substituting other sources for oil, it's impossible. Oil's a very difficult fuel to commercially substitute quickly. As we've seen, whereas with coal and with gas, we've got each other, they're substitutes for each other, but you also have renewables. So it opens up the door for a lot more market action with coal and gas that you don't get easily in the oil sector. So a picture paints 1,000 words. I have a couple of slides on that. Hydrocarbons are the basis of oil fossil fuels. But oil is different, as I just said. And this is a picture of some of these differences with oil, just in terms of their chemical and physical nature. You've got conventional oils at the top left. You've got very gassy oils and into condensates in the middle left. You have depleted oils. A whole oil over time starts to deplete in the reservoirs. And it changes everything about that. It changes their chemical structure, but it also changes how you get them out of the ground and the products they make. So that complicates everything. Then you have oils that get heavier with more and more carbon in them and extra heavy. You have ultra deep oils physically located, sometimes miles under the ocean floor. We have tight oils now, as we've seen with fracking. They've always been there, but now we can technologically get to them. And then you get into things that aren't really even oil. It's just that you can make products out of them. And that I would put in the category of the oil sands, the bitumen, the caragin. These are ancient and premature oils that have either gone beyond the oil stage or they have not yet become oil. They haven't cooked in the ground long enough. So when you look at all of these, you ask yourself if you're thinking climate, well, if these are so different, what are their climate impacts? Because we have to imagine they're not gonna all be identical. It's oils not one thing. So just to walk through this oil supply chain that I alluded to in terms of tracking and pricing carbon, because this is how you get to the real heart of the matter in terms of pricing carbon, you've got upstream and that's the production and the exploration and production of oil, whole range of ways to get oil out of the ground. Whether you do the conventional drilling or you frack as the second one down, you go into offshore and ultra deep or you go into the Arctic and permafrost, very different. Again, unconventional oils, very different. The top right is depleted oils. You have to drill a whole different way with enhanced oil recovery. And then you have to start mining oil when it's bitumen or draining it out of the ground by heating it up. And then you get to retorting kerrigan, which is a whole different process still. Then you go into this midstream. First you've got to move oil around and the ways that you decide to move it around to have different climate impacts. The last mile in a truck is usually the most greenhouse gas intensive. And then you have different ways to refine oil. You have hydra skimming, simple refineries to petrochemical plants, to complex coaking refineries that are all not just different themselves in their greenhouse gas emissions. Those different techniques for turning oil into product mean that you have very different downstream products that come from different oils. You've got petrochemicals. Some oils have a lot more petrochem than others. Of course, gasoline and diesel and jet fuel. And then you start getting into bunker fuels that have your shipping oils. Then you get residual fuels that go into industry, not even transportation, and then the petroleum coke for power that I mentioned before. So with all of this, you can see that an ability to track these emissions and take into account the whole value chain of oil opens the door for the question, what are oil's real climate impacts? And to what extent are these impacts different from one another? And that's where we created the oil climate index, which we released last year. The OCI is contained to track that supply chain. I just showed you three models. The upstream extraction model is called OPGIE. It's the model, the oil production, greenhouse gas emissions estimator. It's out of Stanford University and our colleague Adam Brandt developed that and the California Air Resources Board uses it in policy making. But we knew that that wasn't enough because you have this middle stream refining link that links you to end use. And so we know that we needed a model on that. So our colleague, Jewel Burgesson from the University of Calgary was already working on and we brought her onto the team to develop Prelimb, the petroleum refining lifecycle inventory model. These are all engineering models that take inputs for what you have to do to these oils to get them out of the ground and refine them optimally or sub-optimally, or find them in order then to give you OPEM, the Oil Products Emissions Module, which takes all of the outputs of Prelimb, all of those products, and says what do these various products, how do these various products add up in terms of their greenhouse gas emissions? The fallacy here to four on oil, and I think we all know this but I don't know how much we really reconcile in our brains, is that oil isn't just gas salinity. A lot of people slip and say, oil is gasoline. So if we have a gas tax, we've solved it. But the reality is you saw in the slide before, oil's not just gasoline. In fact, a lot of oils are only maybe 20, 30% of the barrel is gasoline. A lot of other things come out of the barrel and that changes their emissions. So here's from the Oil Climate Index and you'll see this in the Smart Tax Report. Using the OCI, here are five examples of the range of both total emissions from these barrels of oil, coming from extra heavy oils that are upgraded, heavy oils that are depleted, light oils that are highly flared, light oils that are not highly flared, the well-managed, and ultra light oils that are those gas oils I was showing you. So you can see on the bottom, X-axis, these emissions in their totality range a lot, like almost a factor of two between barrels of oil. There's a tremendous variation in emissions, but what's also interesting about this, if you look at the green bar is the upstream emissions to get the oil out of the ground and produce it. Look how wide-ranging those are. I mean, just in terms of how you extract oil and produce it, there's a huge, maybe factor of 10 in the emissions. So that means if you were gonna convey a price, there's gonna be a factor of 10 in the price of one production technique versus another. The silver bar in the middle is the variance in emissions for refining the oil, the greenhouse gas emissions that come in refining the oil. Again, a factor of 10. And then the blue bar has always been the assumption that, again, oil makes gasoline, so we're all set if we deal with gasoline, we dealt with oil. The reality is, like I showed you before, it's not the case. And if I broke those blue bars down, which vary by about 50% high to low, if I broke those down, you would see then varying amounts of different petroleum products for these different oils. Some oils make a whole lot of bunker fuel to go into ships. Some oils make a lot of petrochemicals, as I said before, so there really are differences. And all of this means that you can actually design a fair tax on oil because you can actually make the oil industry, producers green, refiners silver, and all of the different end users responsible for the emissions that they actually produce. You're not sticking it to any one part of the industry. You're basically saying you pay for the emissions that you're responsible for, and that does some pretty amazing things. Once you've actually assigned these prices, you're kind of opening the door for competition. And it changes a lot of where the oil companies have been. The oil industry has been in the 20th century and moves it into a race to the top 21st century. So here is getting to the heart of the matter. Blunt versus smart taxes. We have and can continue to consider a flat tax on oil that just charges per barrel and say every oil is gonna have a fee of $10 placed on it. And that's the first graph here. And we would call that a blunt tax. Or you can design a tax as we've imagined them before that says we're just gonna tax product like a gas tax or maybe even we're gonna put product tax on all the products in the end use. But we're only gonna tax what consumers use, what's used in the end use. And you could see with both of those, there are some flaws. Either there's no variation whatsoever in this reality that oils are quite different from each other or they very lowly necessarily underpriced if you're doing end use only on the consumption of products. And they're also not varying in any kind of systematic real way. So if you look at the bars to the right, you see with my examples I just showed you in the prior slide how a carbon tax using the total embodied emissions from these oils starts to play out. And so from an Eagleford condensate that's not flared, you will get a much lower tax. Say this is for a $20 per ton example, carbon tax. You'll get an $8 per barrel fee and they'll range all the way up to a depleted oil like California Midway Sunset that has a $15 per barrel fee associated with it. And again, spread out through the boil value chain. This isn't only on producers, it's not only on refiners, it's not only on end users. I'll show you at the end, we have a tool to show you where this splits out to. But what this does is if you go to the Swartax on the right and you price the carbon where it is, you're now saying to the producer of Midway Sunset, which is a high steam enhanced oil recovery depleted oil. You're saying to them, and actually Chevron is starting to do this anyway, why don't you use solar to generate the steam? That will cut down emissions. So now you're creating an economic incentive for changing the way that you reduce the emissions in your entire supply chain. And you are rewarded financially because that $15 a barrel tax will come down when you don't generate those emissions by generating the steam and you use solar to do that. So the heart of the matter then, just to review, a smart tax must differentiate between the very different chemical entities that today go by the name of barrel of oil. If we're going to really deal intelligently with the sector, it needs to deal in reality with how different these oils have always really been, but how much more different into the 21st century, we've seen it with fracking and beyond, how much more different they're going to continue to be. The differentiation of oils is only gonna get, it's going to accelerate. A smart tax has to account for greenhouse gas emissions along the entire oil supply chain, production, refining, the transport of oil and product and end use. It cannot be attached to any one part of that supply chain. The most efficient way to do it is to have everyone bear their responsibility and share it. And a smart tax must include emissions from oil byproducts, not just the gasoline and diesel we loosely associate with oil, but like I said, the pet coke, the residual fuels, the bottom of the barrel and the top of the barrel. Asphalt and petrochemicals, when consumed in the economy, don't put out greenhouse gases directly because we don't burn them. So those become less intensive greenhouse gas products that are associated with oil. So how would you do this? Jessica and I actually started to think about how would you administer a smart carbon tax? Again, everyone's responsible, but there are a lot of actors in this industry, as we know. So if you look at the US oil industry as an example, there are 137 refineries and 59 entities, corporate entities that refine in the US. So clearly the smallest circle here in the industry is the refining sector, and I would argue they're probably the most important part of this industry because they are the group that turns oil that has no value to us into product, which has a lot of value to us, and they also communicate up and down the supply chain. They choose who they buy their oil from in terms of producers, they have great information about what that oil is, they need to know to safely handle it, and they also have every connection economically down the supply chain to end users because if they make product that people don't want, it's not of value to them, it has to enter the market. They need to make what the market wants, they need to make innovations to give to the market, so the refiners are in this very special and very powerful position in the oil industry. So our idea was that you would want to actually attach the carbon tax to the refining and have the refiners be the conveyors of the prices up the chain and down the chain, and in so doing have them communicate the opportunity for innovation that goes up to the production end. You know, if you're a refiner and you'll say, I will deal, I'll buy your oil if you don't flare it. I'll buy your oil from the Balkan and right now about a third of the operators in the Balkan are not flaring very much gas at all, much lower greenhouse gas emissions, and those refiners can buy from different producers. So if you manage your oil well, there's a premium for me, this is great. And if you don't manage your oil well and you flare it highly, I'm gonna give you, I'm gonna pass the cost of that smart tax to you. So the refiners can have that type of a conversation. But what really underlies all of this is data. And we cover this in our report as well. In order to design a smart tax, you need basic data. And this is data that's not proprietary. This is data that's in the market now, often for safety and for economic, again, use of this resource. So what we really want is we want information on the production side, which we have built into the OptiModel. We were able to model coming out now 75 global oils. There are hundreds of not thousands of global oils plus prospective resources to be modeled. So we really would like to see open source data here. And this comes and underpins a smart tax. So you want well-based and production-based data. We need to get oil assays, which are the chemical composition of oils. They're on the web. Any time an oil is for sale, its assay is on the web. It's not a secret. And the industry needs it. And refiners need it. They're just not consistently collected and reported. So this would be a huge benefit. We use the assay data in that preland model that I told you about. And then in terms of the end use, you want to know product volumes. You want to know origin destination to see where things are flowing. So this is the type of information that could actually make a smart tax work. It just underpins it. I get the question a lot, where are you getting your greenhouse gas emissions from? And the answer is we're not getting greenhouse gas emissions. What we're doing is we're providing a check and balance on greenhouse gas inventories by we've designed engineering models for upstream, midstream and downstream that allow us to estimate the greenhouse gas emissions based on certain operations that happen in the oil field and how you can change those operations to reduce your emissions. So I just wanted to show you lastly, we've developed a smart tax calculator. And this is gonna be live on the web. So for about 25 North American oils and all of the 75 global oils will be online with the oil climate index. But for these is just a calculator for at a $10 per metric ton carbon tax, that's the responsibility that these oils end users in blue, refriners in dark gray, producers in silver, at $20 a ton, at $30 a ton, at $40 a ton, and at $50 a ton. And in the web tool that we have for the oil climate index, you can put in your own price, but we use those. And then in terms of let's pick on, since I spoke about midway sunset, this is that depleted field that uses concentrated solar. Some producers in the field, it's a massive California field that's 130 years old. Been producing forever. It's heavy, needs a tremendous amount of steam to get it out of the ground. You sometimes wonder why it's even still coming out of the ground. It's just that there's still oil there. And all of that capital has been sunk so long ago that it's gonna keep producing. But look at these numbers below for a smart tax versus one taxes. So if I were to do a smart tax on this oil, I would do, and this is on a $50 per barrel. This is maybe unfair, because I'm gonna make you freak out if I show you. Let me put it back down to $20, which I think is the number we use in the record. So it would be, well let's go the other way to the right. Producers would pay $3.60 of that $20 per ton. They would pay $3.60 per barrel. If they keep injecting steam and not using concentrated solar and doing certain things that are energy-intensive to that oil, they would pay $3.60 premium carbon tax on that oil. The refiners would pay $1.65 per barrel to refine that oil. And then they would produce, if they produce the products they're producing today, and there's pet coca comes out of this oil, then there would be associated with all of the end users there would be a sum of $9.25 per barrel that would pass down to the end users of this oil. And it would be something the refiners can convey and change, pass up the chain and down the chain and change if the refiners decided not to make pet coke with the bottoms of that oil, this price would go down. And it would go down probably about 20% to the end users. So there's innovation that you can build into the system because you have an economic incentive to do so. So really in a nutshell, that is what we've done and I will turn it over to Jessica. What you've seen is the design of a tax that's fundamentally different from any that we have discussed in the US or globally for the last many decades. I should add something that Debbie, Senator, nice to see you. Something that Debbie didn't say, but which she illustrated which is that those blunt taxes in today's world of unconventional oils and with the range of substances that we are now producing are not just blunt, but they're perverse. Because the dirtier oils produce emissions that escape taxation completely under the current system. And so you have a system which rewards in effect the dirtier oils and which a smart tax aims to correct. But let me just say a couple of words before I turn to our guests, our commentators about why we think this is, now is the time to begin to be seriously working on this and what such a tax might look like politically. The first reason, of course, is that impacts are beginning to be felt, to be increasingly obvious to the general public. There is a clear shift in people's recognition that this is a real threat that needs to be addressed. Secondly, there is a growing unease in about the possibility of waves of regulation that would follow if the Clean Power Plan stands on other sectors, on manufacturing cement, glass, plastics, whatever, a whole new wave of regulation. I think third, there is a feeling in the private sector that we haven't seen so much in the public sector, a post-Paris that we've moved from a question of if to a question of when. That the future holds a need to address climate emissions in a major way and the question is when it will happen, not if. And finally, for the fossil fuel industry, there is the all but nagging and growing threats of divestment, the very bad PR that comes with it, the wave of shareholder activism that grows every year. And then finally, in industry, for many, many, many corporations, what they most want is clarity and certainty about where they're headed. So for all those reasons, by the political polarization that we are all very much aware of that is so profound in our system, subterranean now, but perceptible movement in the direction of needing to add to regulation and R&D spending, a third leg of the triad if you will. In our view, this becomes politically conceivable under certain conditions. First, whatever proposal surfaces has to be bipartisan. This is the most overused and under-realized word in the English language in Washington. What we mean by it is not votes, but credit and concept. Secondly, we think such attacks would have to be revenue neutral. Doing that does two big things. One, it minimizes the impact of attacks on what is not your target. And two, it moves the prospect for an unending battle over shares of the revenues. A carbon tax is going to produce massive, any realistically large enough carbon tax to make a difference is going to produce massive amounts of revenue. And a member of Congress's job is to fight for a share of those revenues on the issues or locations of use. So unless you have the discipline of a fixed boundary for the revenues, which is maintained with strictness, you're going to have an unending battle and those who lose the battle for a share of the revenues are going to be, as we saw with capital trade, happy with the process. And so finally, we think that paired with not finally, but third, with this discipline of a fixed boundary revenue neutrality, the mechanism for returning the revenues to the economy needs to be simple and transparent and readily understandable by the American public. And if it isn't, so. So from our point of view, there are two big uses that would be the political and perhaps, and I mean, the necessary and just passage would be to divide the revenues between lower corporate tax rates, growth initiative, strongly favored by the Republican Party, and two, to use other half to make whole all those who are paying higher energy costs as a result of the tax. One thing this cannot do from the point of view of the Democrats would be to worsen the economic inequality that's already pervasive in ours. So finally, for the element of a deal that we think has political legs to it would be to suspend regulations specifically our plan for enough time to see whether this measure does what we think it will do say five years. And if you're getting bigger, better bigger cuts in emissions as a result of the tax then you would have by by regulation you're a step ahead. So bipartisanship, revenue, neutrality, the suspension, not the removal of all regulation, of course, but the suspension of new measures and these very simple uses is what we, what seemed to us and would argue in this study as a package that makes the idea of a smart tax politically feasible. So that said, we have made our case. We have two distinguished commentators to give you views of both of this study and of our thinking on it. Senator Whitehouse to my immediate right is the Senator from Rhode Island. He is before that US Attorney in Rhode Island and Attorney General of the state. He's had a distinguished career legal. And in the Senate, no, Congress. He has been most certainly the most knowledgeable member on climate, the most determined and the most persistent and committed advocate of action on body and the legislative body. He represents, I think, determination on this issue, the very best that our legislature can. Right, we have Walt Minnick, a former member of the House from Idaho, a distinguished businessman who has built two financial companies and very different. And someone now co-founder of the Partnership for Responsible Growth, which is working to establish active use of the marketplace on climate. So we've asked each of them to give us their thoughts and then we will open the floor to the group. Thank you. Well, let me start with two thank yous and then offer two thoughts. My first thank you is to Carnegie for hosting this and for, frankly, a lot of great work in a lot of areas and for bringing your institutional credibility and credentials to bear on this problem. I think it's very helpful and important and I'm delighted to be here and I come with great appreciation. As somebody who battles on this field on a fairly regular basis, there aren't very many joyous moments right now, but we had a joyous moment yesterday when the climate-denying horror of an editorial page that the Wall Street Journal runs had an advertisement right on its editorial page pointing out that they're actually even worse than ExxonMobil in denying climate change and that was supported by a very thorough report that Climate Nexus has done on the Wall Street Journal's editorial pages, Climate Denial Record and Operation. So you don't often get to see that on the editorial page and I've got to say, well, thank you. That was a great move and I gather there'll be more to come. The two points that I want to make, first is that setting aside the economics and setting aside the environmental consequences of a robust carbon fee, I live in the Senate. That's my habitat and as I look around at the way in which that habitat behaves, what's very clear to me is that every single Republican who has walked through the climate change problem and thought it through to a solution has come to the same place. Every single one, whether it's economists like Greg Mankiew and Art Laffer, whether it's former cabinet members like Hank Paulson and Ed Schultz, whether it's former members of Congress like Bob Inglis, you can put out the list. If they get to a solution, they get to the same one, which is a revenue-neutral carbon fee. And that's my bill and I'm here to say that from the Democratic caucus in the Senate, we are totally willing to engage with Republicans on the only solution ground that they have ever offered or accepted. Now, there's a problem getting there. Everybody I mentioned is a former member of Congress or a former official or an economist. They are all people, and this is my second point, who are out of harm's way in the political contest over this. The political fact of life in the Senate is that there are probably between 12 and 20 Republican United States senators who would be helpful, thoughtful, productive, useful members of a group engaged to come together on a climate solution. Many are privately very much for a climate solution, whether it's because of constituency demands at home or because they sense that this is a looming peril to the planet or whether from a more partisan point of view they're afraid that their party is about to get caught wildly on the wrong side of history for the worst possible reasons. So there's a real group of Republicans who are willing to get to work on this. The problem is that there's no safe passage for them from where they are in their hearts and on their policy basis to actually having a public engagement. And the reason for that is that the fossil fuel industry's lobbying and electioneering presence is an absolute disgrace and very powerful and effective. So when the Koch Brothers Front Group, Americans for Prosperity, says, we are going to spend $750 million in the 2016 elections. And then they also say, by the way, if you cross us on climate change, I'm quoting them here, severely disadvantaged or, and I'm quoting them here again, in political peril, you don't have to be a very adept member of Congress to figure out the message in that signal. And when it's backed by a $750 million political club, it comes through loud and clear. And API and the U.S. chamber and Exxon and the whole rest of the sort of Republican political electioneering establishment has been co-opted by the fossil fuel industry into climate denial and into absolute opposition to any action. So that's the world that they're in. And talking to them about climate change is like talking to prisoners about escape. The first thing they do is look around to see who's listening and then the question is, how do I get there? You know, can we tunnel? Can we make a mad dash at the fence? Can we shut down the guard towers? Will somebody escort us out? How do we get there? But one point is clear. When we can get them over the fence, the getaway car, that's going to be the car they ordered. It's going to be a revenue neutral border adjustable carbon fee. We are ready on the Democratic side for that. And I think that the fossil fuel industry is under increasing pressure to try to remediate what is a really baleful presence in Congress right now at peril of their reputations. And so when that happens, then there's going to be a very abrupt collapse and we're going to have a lot of people to work with and there's a real political opportunity. It's the hydraulics of political power that are in play right now with relentless pressure from the gun decks of the fossil fuel industry. Well, I would like to start by saying Senator Whitehouse, fortunate to have you here, Sheldon, clearly the most thoughtful, intellectual, and I suspect sometimes most frustrated, I have my moments, member of Congress, I was more than a member of Congress, public figure. And he has led the challenge in the most articulate spokesman for why we need to address the problem of climate change through a revenue neutral fee on carbon emissions and you notice I say Jessica, I say fee because tax is one of those majority of words that make it harder for our Republican friends to do the jailbreak. I am a Democrat from Idaho but they don't get elected very often to Congress and we don't tend to last long but I was the bluest of the blue dogs. I voted as often with John Boehner on policy issues where parties split as I did with Nancy Pelosi so I understand a little of the Republican mentality and I'm quite good friends with many Republicans as a former colleague. I did about 200 congressional meetings over the last year and a half to try to understand how we could get Republicans to vote for something that many of them do think makes a great deal of sense. Before Senator Whitehouse mentioned his figure in the Senate I was going to say I can identify 14 Republican Senators who based on conversations either with them or their offices will tell you that climate change is real, it's serious, it's man-caused, we need to deal with it and the solution you're talking about makes a lot more sense than another layer of government regulation. I can identify 50 to 60 members of the House that are essentially have that same conversation but the conversation is private. So the challenge is not that elected Republican officials are climate deniers, elected Republican officials believe it or not are just as smart by a margin whether some foolish ones at both parties just as smart and articulate and thoughtful as Democrats and they understand the problem. So the problem is not convincing Republicans that they can vote for what they think is the most sensible solution. The problem is to make it politically safe and some of you in the audience might challenge the numbers that I was talking about because we had a party line vote day before yesterday in the House where there wasn't a single Republican that voted this least resolution was one condemning a carbon tax and saying we'll never support a carbon tax. There wasn't a single Republican including any of these 50 or 60 on my list that opposed that. So the challenge we have is let's make it safe for those 50 or 60 in the House to join with John Delaney who is the Sheldon White House in the House a very intelligent former businessman and congressman from Maryland who has a bill quite similar to Senator White House's bill to join with him in the House and the 18 Republicans in the Senate to join with Senator White House to join this in the next Congress. So let's talk about what is necessary to make that happen. Those Republicans who believe in a fee on carbon in the House who voted against it day before yesterday did so for a couple of reasons. We need to understand what those reasons are. One is very short term. And that vote, I'm convinced that Paul Ryan allowed it to vote to happen both because he's a prisoner of the freedom caucus with respect to process. He does not act yet at least like a typical speaker of the House and I'll decide what the House votes on. Let them dictate we'll have a vote on something that he personally I think had great reservations about. Because he wanted to put they're very, very concerned and could be given the Trump candidacy that they're not going to be here. They're going to be a minority party after November. And voting against the carbon tax was a way to do two things. One, to ingratiate themselves with their political right that doesn't want any more taxes on anything ever. At least that's the mantra. And two, to put Democrats on record for something that in 32nd attack ads will be conceived as voting for a sporting attacks increase. So it was very November focused. The second reason that they voted for it is that oil industry, the opponents of a carbon tax know that momentum is growing inside the Republican Party to vote for it. And it's very hard it's harder to vote for something in the next Congress that you voted against in the last Congress and they wanted to put people on record to make it harder to pass next year. But it can pass I think in if one thing that hasn't happened yet does happen and that is if we can provide political cover so that a Republican Senator or Congressman can say that he's responding to constituent pressure as opposed to leading with his or her chin. And that political cover needs to come from business primarily. It needs to come from large energy producers, large energy consumers and businesses that are concerned for the quality of life that we're creating for our children and grandchildren. And business so far has been largely silent on this issue. And they've done so because they have not wanted for that. They've done so because they have not wanted to get involved in an election here in something that's perceived in partisan where certain sets of their constituencies internal and external will be on both sides of an issue that makes a CEO's job more difficult. But we have to break through and get businesses to speak up. And we need to get them to speak up if possible at least some of them before the election because that's when your policy initiatives are being made, decisions are being made in the policy advisors, but the policy advisors are both presidential candidates. And if not before the election, immediately after the election indicate this is a priority that needs to be addressed ahead of some other major priorities in the next Congress. So that's... Do I have a point on that? Yeah, please. What I have heard from the general counsel and CEOs who I've talked to about this problem and very major corporations is that on their own the cost-benefit calculation of stepping up on climate change as a lobbyist, to apply a little pressure in Congress was not a very positive one. A, they didn't see much of an upside in making a difference and B, they worried that alone on the belt the hyenas would get them. You don't want to be the only antelope with the pack of hyenas there to take you down. What has changed dramatically since Paris is the assemblage of corporate leadership that came together to support a really strong Paris deal. That now gives the business community two things. One, some real confidence that they can make a difference. A major difference. And two, safety in numbers against retaliation from the fossil fuel industry or the Republican Party adherents of the fossil fuel industry. And that, I think, is a very big shift. It happened recently. And if we can keep that team together or even a significant cohort of that team it gets really hard to punish Walmart and Target and GM and Ford and Cargill and General Mills and Apple and Google and on and on and on and on through that list of 160. So we have a new opportunity in the corporate sector that we didn't have until that organization emerged, until that collective emerged. And now they've got the capacity to both on the upside make a difference and on the downside protect themselves against retaliation. And that is what is new and different now about soliciting corporate interest. And by the way, they are totally AWOL. Just weeks ago I had Clean Tech in which is not only the Apple, Google, Big Tech folks but also green energy companies. I had the lumber industry in. What could possibly be happening to lumber with the pine beetle and with the hardwoods in the northeast. And I had the property casualty industry in who write the checks after stream weather events caused damage. They all had their lobbying lists of all three. Do you know how often climate change precisely zero? So, you know, you can't win a game when you don't show up on the field. Now there's an opportunity to show up on the field and not only stay safe but actually win. Well, this is precisely why my organization Partnership for Responsible Growth sponsored that series of ads. The first one appeared yesterday in the Wall Street Journal. Senator referenced it as remarks. I will tell you there's going to be 11 more. We're doing two ads. We're doing ads on the editorial page of the Wall Street Journal twice a week for six weeks. It's going to end right before the Republican Convention. We're also doing a very extensive social media campaign and we have bought a time on Fox Evening News in Cleveland and Washington during the Republican Convention. And what we are trying to do is reach the audience that needs to be persuaded. It's not probably anybody in this room. And it's really not the Congress. It's businessmen who either haven't prioritized the issue because other things are more immediate and more important or who frankly are information deficient because in our society today unfortunately your sources of information determine the content of your information. And we've always thought that the key to democracy was you're entitled to your own position but you're not entitled to your own separate set of facts. In the 21st century people have their own set and very divergent set of facts and if we can advertise through the Wall Street Journal their readership, their conservative, their under sourced for reliable information on climate change and get to them through a vehicle they read we can break through basic facts and when we'll start with the facts for the end of it we'll talk about the solution that we've all been talking about this morning. So we're trying to do that we're also trying to get the editorial page of the Wall Street Journal to reassess its own position because since the Murdochs bought them they have been climate deniers and we it's okay to it's okay to be opposed to a carbon tax but it isn't okay to deny the facts on your editorial page and that's what we're trying to get them to reassess that and we're trying to get a conversation started that will facilitate and give courage to these businesses that have made very ambitious and very good pledges at Paris that they're going to facilitate to translate those pledges into corporate action and once that happens the the businesses that come in to talk to Senator Whitehouse Congressman Delaney are not going to be silent on this issue and if we can get enough of them to speak up they will provide the political courage to make this bipartisan solution one that Republicans can vote for in the Senate and the House I think that's going to happen in the context of corporate tax reform comprehensive tax reform because both parties already want to do want to reform the tax bill we haven't done so since 1986 it's it badly needs to be reformed and past experiences to do it indicate you need a source of revenue and politically it'd be better to have a new source than to have to close loopholes and make every beneficiary of a loophole come in and compete against it so we're thinking there's a possibility for a grand bargain in the next Congress where instead of a next round of regulation section 115 extending the clean power plans authority 111D sections to refineries and other sources more stringent federal rules with respect to access to federal lands and methane and so forth to trade off the next round of regulation for a fee on carbon which lets the market do all of these things and provides Republicans a revenue source to lower the corporate tax rate which they've been promising to say they have paired back the ever expanding role of the EPA and give them some political victories and give us the votes to get a bipartisan bill through Congress and I hope that by the later stages of the Wall Street Journal series let me open the floor to questions now and please wait for a mic to start right here. Thank you. My name is Rudra Kapilam from the University of Edinburgh. Thank you very much to the panel for your insights. My question is related to actually this technology called carbon capture and storage industrialisation and storage and I was just wondering if the panel could answer A the political side is this a technology that is considered bipartisan? I was under the impression as a Brit from the outside that this is something that brings Republicans and Democrats together to the table and B the second half is has this oil index been applied or tested in the context of potential CCS technologies? Thank you. Let me address the first part of that question since you are asking about my world. Carbon capture utilisation sequestration and storage as a concept is I think very bipartisan. The problem has been that we have a fairly complicated machine in order to make that happen. I have been up to the one in Saskatchewan it cost them over a billion dollars to build it. If you are going to build a billion dollar piece of equipment it is generally considered important to have a revenue stream that will pay you back for that investment. The problem right now is that there is no revenue stream for that unless you can for instance put it on an oil field and use the pressure to push up more oil a very localised consideration. But the mere fact that you are sequestering carbon and taking carbon out of the atmosphere creates no revenue whatsoever. And the problem has been that even when I have tried to work with colleagues on not necessarily a carbon fee or a social cost but a social cost of carbon benefit for successfully sequestering carbon that is the bridge too far and it is just really hard to get an industry moving when it requires a significant investment and there is zero revenue stream available to it which is why we have only done a couple of energy department basically funded exploratory ones and they haven't been much of a success. Saskatchewan is located on the oil field so they had a revenue stream and they told me when I visited it that if they were paid $42 per ton which was then the social cost of carbon out of OMB they'd be happy customers and they'd be making money and they could do it. So if they can do it there for that they could do it in the United States for that. We could actually have a pretty robust industry that helped coal plants have a longer life without creating environmental harm and support in the industry but we have a very short-sighted fossil fuel industry that doesn't even want to go there. So they do a very significant extent I think are shooting themselves in the foot. I should have said in introducing her that Deborah is a petroleum engineer by training. So on the coal side CCS has been discussed as the senator said as a coal solution but in the oil climate index and on the oil side we have considered it and will continue in the next phase of the OCI. So on phase 2 particularly with the oil sands. So the oil sands are the heaviest highest carbon oil resource right now that is coming out of the ground. So upstream Canada has to think of different pathways to get these oil sands out of the ground and one pathway that they're working on now it's not modeled yet but it's definitely on the vanguard is microbial. So if you have microbes in the ground to actually convert the resource underground it's CCS because you're leaving the carbon in the ground and you're producing the lighter hydrocarbons and gas. And that's definitely something the University of Calgary and others are working on and it's something that we've been talking a lot to the researchers and the oil companies in Canada about what are your pathways and you'll see this in the report actually because the US has to choose whether we actually import synthetic crude oil from Canada now where they upgrade the oil sands and do, you know, remove the carbon up there and then we get a synthetic crude oil that's kind of a man-made, better, easily refined crude oil. That means Canada owns the carbon. Canada has to account for the carbon under their NDC under the Paris Agreement or if the US takes diluted bitumen. If the US takes diluted bitumen which basically blends the bitumen with a diluent, the US owns the carbon. Because the diluted bitumen means that it goes to a refinery in the US and then we have to take the pet coke off and sell the pet coke and now the US's NDC has to deal with that. So the other part of CCS I think that's in the oil sector for these extra heavy oils is petroleum coke. If you don't sell the petroleum coke, you have a moratorium and just don't sell this coal substitute or if you as Canada is starting to do reclaim it for reclaiming mines and you lock it in the ground like an activated carbon and you don't burn it. That's like CCS. So there are avenues that are there and then the last one that we're going to do in phase three that I was going to mention is CO2 enhanced oil recovery. So carbon dioxide is used for enhanced oil recovery as Senator was talking about and that's going to be coming for these depleted fields more and more likely. We already are injecting steam and sometimes CO2 and nitrogen but if you can put it in reservoirs and lock it in then it's for oil that's a CCS technology. So I think this is where a smart tax forces the market to go in very creative ways because if you know you're going to pay a certain price for something and it's going to cost you less to reduce it and you're actually going to have a benefit by being a more competitive industry now you'll go to that next 21st century technology whereas in the present day it's much harder to justify it. I mean the common thread that you heard in both answers many things become possible when you have a price on carbon and that there is still a long way to go on the R&D front but again that will be vastly accelerated right now we're using push for R&D right? Government funding. When the market is pulling it's a much stronger thing than the federal government push. If Adele Morris who is from Brookings who is probably the foremost at least the most outspoken economist on this topic we're here she would be jumping up and down and insisting that we must address the market failure and the market failure that we have in our for enterprise system is not pricing by making it free to pollute and not charging the $42 that Senator Whitehouse was talking about for the price all of us pay indirectly and higher flood insurance and damage from more extreme weather the kinds of things that are easily calculable we have removed the market incentive for businesses which if they're going to invest a billion dollars have to get a return on that billion dollars to do the things that will solve the problem and when you recognize that in addition to the $42 that we're not charging polluters there's another about $15 a ton of carbon of subsidies to hydrocarbon production in our tax structure you've got nearly $60 incentive for every decision maker in business whether it be an individual deciding whether to buy a more fuel efficient car or whether it's their home or for a business to invest in CCS or in any other kind of carbon reducing technology to make the wrong decision for enterprise works really really well but it doesn't work at all unless you remedy the market failure and that's why we need to have a smart tax and garbage out yes we'll try to be quicker thank you for running this panel day very informative clarification on the smart tax application the presentation had the three bubbles and obviously it's easier to tax a small group of refiners and apply the smart tax there because it's easily to identify that one was that actually what the proposition is is that where the tax would apply and secondly when you speak of revenue neutrality certainly easy to corporate tax reduction I'd be interested to hear how the downstream social impact of that revenue neutrality is because at $10, $20, $30 per barrel obviously impacts people who are driving a truck or delivering there's one very quick answer to your the first part of your question is yes we are proposing and believe that you can in fact apply this tax in the extraordinary simple and very tiny universe of refiners because of the way the refining industry works with respect to both its upstream suppliers and its downstream clients I don't know if you feel like you need to add any more to that but I think it's fair to say that we have not gotten deeply into and I'm happy offline to talk to you about how you would make the return for lots of complicated ways I have a personal favorite which is a very simple way but and I don't know if any of the other panelists want to comment on it we didn't get into that part of the question in the report our bill reduces corporate income tax from 35 to 28% gives a $500 annual contribution to anybody who pays social security tax or receives veterans or social security benefits payroll tax and it leaves a $200 million fund left over to go to states or local adjustments for places like Wyoming that get a third of their $3 billion state revenue from oil leases and gas and coal and so forth and need to manage the transition and I think we pretty close to meet revenue neutrality and I think we help the lower quintiles of the population the lower two so they don't come out negative and potentially we buy very big allies particularly in the retail sector who would like to pay 28% once they saw that this was real and starting to move yes yes he's on his way on mayors with resources on mayors with resources kind of as a producer didn't get actual gas and I would assume that we have a carbon gas and so you got in effect some rather so the netback pricing works like this when you're a finer buying oil the two things that you then adjust for are your sulfur content and your gravity so you end up blending things in the refinery but physically they just refine their separate streams and so right now the refiners have an economic relationship with the producers they're getting information and they're trading dollars for oil based on what that oil is so I wouldn't say that the refiners need to know everything that's happening at every production site but those producers that they're choosing to do business with and that has to do with the type of refinery they have there's a select number of oils they want for that refinery based on what design the refinery has that from those producers they have choices and I gave the example that you raised of if you're going to go if you have a hydro skimming refinery and you want to refine a light oil and you're going to go to the Balkan you have every ability to find out from that producer whether they're flaring their associated gas which means they're not selling it and about 60% of the producers in the Balkan right now are wasting their gas they're throwing it away they don't have good access or good operating practices and so they're not utilizing the gas the other 40% of the producers that are actually selling the gas then you're right that goes into an economic stream that's a different one called natural gas but you're also not paying a premium for having wasted that gas and turned it into CO2 and that's what happens in a flare and that gas and turning it into CO2 so it's not as if the refineries need to know everything out there they already have a smaller bubble of the oils they want and then within that bubble of the oils they want for their refinery they have information and economic relationships to find out how if the producers are operating well or if they're operating poorly and with a tax a smart tax they have every incentive to build that in and to encourage the producers to operate as best they can could there be an opportunity for some sort of carbon leakage trying to get around, get around the rules let me very briefly say and then I'll address this and others we are in an unusual situation right now where 80% of the US oil supply comes from North America 50% of it comes from domestically and then massive amount from Canada and less from Mexico both Canada and Mexico are ahead of us with respect to price and carbon and now we have a federal government in Canada that is interested in taking the provincial initiatives that exist already and tying them somehow into a national policy Mexico has a national tax that is small but we have the natural place to begin and that is with the North American continent in making this that doesn't solve the big problem of border tax adjustments which is an essential part politically at least if not economically of doing this we do have a border tax adjustment built into our bill we have talked to a lot of former WTO officials and people who are expert in that area and we've received I think fairly strong assurances that it would be WTO compliant and it is very important everybody says that what we want is a revenue neutral carbon fee they really also want a border adjustable revenue neutral carbon fee and we have that to take the conversation just one level up if you are trying to do border adjustment between different nations economies and you're trying to adjust for what the cost or penalty is related to some type of regulatory activity that's hard to find the equivalency for and there's lots of room for growth and confusion if you've moved to a carbon fee you can pretty much know on its face whether you and the other country are equivalent or not and that both helps simplify the transactions between those two economies but it also helps encourage everybody else to move to that same platform because now it's simpler for them as well so once you start to see global changes in carbon fee the international border adjustment problems I think will drive people more towards a carbon fee that's much easier to match and much simpler to manage the trade relationship through but there will be leakage there's no question there will be leakage these are very complex issues but what it does it's job protection for those of you who work in the state department and traded a new tool and the real reason for having border tax border tax adjustment provisions in a climate change bill is to give you the tools bilateral negotiations with India or some other country you give the politicians in those countries a reason to do the right thing and equalize the fees and make this truly global and it's a tool that you in the state department the US government needs badly right now because we have more diplomatic leverage because of our our trade the world's largest market than any other nation and we're not using it because we don't have a tool that gives you the opportunity to do your job and help the whole world get to a price on carbon there's one in the very back and then I'll come up here Hi Dan Welch the senator for climate energy solutions I wanted to quickly first say that thank you for talking about businesses something we're very involved with and we work with many fortune 500 companies to try to get them to make a difference and there is some action there we're working up towards it at least so I wanted to quickly follow up on two points that were made Senator Whitehouse you're saying that having border adjustments requires some simplicity I noticed in this document that is very similar to the idea of a low carbon fuel standard which sets a cap on emissions and then allows price to figure itself out is the advantage of a smart tax that it's a little simpler rather than having a much more complicated system and then with regard to consumer facing issues that in here you also present how a smart tax would interact with the with fuel economy requirements with the cafe standards and I was curious if the cafe standards will be were used as a measure of how effective a smart tax could be or is there an implication that the smart tax will also affect how consumers behave and how cafe standards will apply do you want to go first? Yeah very quickly so on your second point first that last figure in the report was just a way of showing that there are two sides of the climate equation when it comes to transportation there's the car, the vehicle and cafe has long been a regulation there but there's also the oil and that's what the oil climate index is about and there's this climate forcing capacity that if you put a low carbon oil one that's well managed has innovation built into it in a fuel standard and on your first question the low carbon fuel standard is really quite a different approach to all of this it basically goes to that downstream as I would say almost product backward approach where you're taking the fuels yeah that's what I'm talking about that's what I'm talking about that's what I'm talking about that's what I'm talking about that's what I'm talking about where you're taking the fuels gasoline and you're saying to refiners you know do other things to make this fuel better and the oil climate index is what we've called a barrel forward so you're really seeing everything that's in that barrel climate wise the oil the production of it the refining and then all of the end use products that the low carbon fuel standard doesn't touch residual fuels it doesn't touch fuel oil it doesn't even apply to some of those things so it's a broader beyond transportation it's really oil centric I guess would be a good way to say it so it's really not an either or it's just a different approach than what California has done yes great hi thanks a lot Kathy Mulvey with the Union of Concerned Scientists I had a question about the limitations of the data and if you can speak a little bit for what the mechanisms would be for collecting the data what kind of additional mandatory disclosures might be required at which on which entities at which point in the supply chain and how to ensure that that data is comparable and standardized I have to say when our partners at Stanford and Cal University of Calgary and I worked for two years and then did the oil climate index we were shocked we really thought once we came up with this approach knowing that this option model was already used by the state of California and had analyzed California oils that it would be pretty simple to compare like all of these global oils it took us two years to get enough data on 30 global oils and then it took but we were also developing the tools so then it took us like another nine months to get enough data on 75 global oils so you could see that you're getting better at but certainly out of this exercise and moving it into application on a smart tax data is so important here but it's not just important in this sector but it's going to be incredibly important it's also important for safety safe handling what's in the pipeline what's in the rail car there's just not a lot of data the oil industry has been very opaque for a very long time and I think that this is an invitation to open that open that door up and the oil industry won't really speak out and say it's against transparency so it's a matter of just making it happen and that's but protocols agency responsibilities I wish it were so easy to say that DOE could do this and the energy information administration but I don't know if each of you are aware that in order for OMB to actually collect data on anything energy for EIA rather OMB has to authorize that EIA collect that data and there needs to be a notice of proposed rulemaking and you need to go through a long you know costly process so it's not right now for the government to get this information and if that was made and streamlined and made easier I think it would be a benefit for the oil climate index it would be a benefit for carbon pricing it would be a benefit for safety it would be a benefit for a lot of things that I think have been ailing us in these last you know we've seen it 2005 with the oil industry changing our sense I mean right now you've got EPA you've got DOE the energy information you've got U.S. geological survey you've got the state department with international responsibility and data collection is spread all over the government this is not unique and as Debbie said there are big restrictions on adding to it it probably is going to take legislative action to say let's give one agency the capacity and the authority to collect and publish this data and that by and large it appears to us that the those problems are much tougher than the proprietary issues that most of this data does not pose a substantial occasion of proprietary well I should just very quickly add that very little data is needed to run these models that underpin the OCI industry model only needs five points of data and there's a lot of smart defaults that have been designed in because the model's been around for about eight years and there's been a lot of meta-analysis underpinning it so there's really not a lot of data that's that must be had in addition to an oil assay which is very necessary it can be done but it can be done better and more accurately with better data and why I think the oil industry will come to the fore is because they want it to be if all of this passes they want it to be done they want it to be to give them the best competitive advantage that they have yes Mitchell Coversmith with the American Road there would be some logic having a carbon fee supplement the gas tax or perhaps even replace the gas tax as a source for infrastructure investment at the moment I think the most interesting to me the dominant imperative is to find a use for the revenues from a carbon fee in the case of my bill it's a little over $2 trillion over ten years so it's a very significant slug of revenue to do things that will galvanize getting the bill passed so maybe it's going to be and we've offered the proposal out there reducing the corporate income tax rate that would be very hard to do without this source but it could be that as the politics shift in this election that the best thing to do is to say look with that kind of money you can take I see a lot of young people in this room you can take everybody's college loan payments and for every dollar that they pay the government pays a dollar too that effectively cuts everybody's college loans in half in the country and you'd have plenty of money left over and that might get a lot of people out and voting coming in and demanding that this get done to their members of Congress so you know we're trying to balance the right use for the money with having it be something that will actually drive the change that we need to take place we are out of time I want to both thank Senator Whitehouse and well Minnick for joining us and thank you for coming let me just say in closing I think you are sensing a moment of movement despite everything in the external environment that seems so unpromising on this issue our bottom line conviction is it's going to be right and what we have discovered through this work is in this universe of new oils a blunt tax does not do it right it both gets massive amounts of emissions and sends a perverse signal that favors dirtier oils for three months so that's the bottom line here that we are hoping to to leave thank you for coming thank you very much