Publications: Notes at the Margin

"Never Let a Serious Crisis Go to Waste"; Tapping Investors to Support Carbon Sequestration (September 27, 2021)


This report covers two subjects. First, we examine the energy crisis in Europe. Last week, the Energy Intelligence Group published a short paper by this author titled “Europe’s Energy Crisis Can Speed Transition.”[1] For fifty years, energy policymakers, company officials, and economists have asserted that rising energy prices lead to recessions. In that article and here, this view is shown to be wrong. Governments and central banks can offset the economic fallout from rising energy prices just as they offset the Covid?19 impact with a combination of “helicopter money” and taxes on energy producers’ rents. Italy’s selection of the former European Central Bank head Mario Draghi as its prime minister increases the likelihood of rational energy policies that allow price increases while moderating their impacts. For the first time in fifty years, high energy prices may not cause recessions. However, absent moderating actions, the price impact could rival that of the 1973 oil crisis—European GDP declined almost three percent—if prices remain high for a year.


In our second section, we discuss how to fund carbon sequestration. We suggest the BP Prudhoe Bay Royalty Trust created by former BP CEO John Browne offers a model for a financial instrument—carbon sequestration royalty trusts or CSRTs—that might attract significant sums for sequestration projects.


Finally, in the market section, we describe how the rest of this year could see high distillate prices and distillate cracks along with wide crude spreads. Low-sulfur distillate may become the substitute for natural gas for those who can switch fuel or shift between generating facilities. This development would be a “spillover effect” from the gas disruption, especially if policymakers pump substantial cash into their economies.

[1] Philip Verleger, “Europe’s Energy Crisis Can Speed Transition,” Energy Intelligence, September 24, 2021 [].



To receive the full report along with futures issues of Notes at the Margin, please Contact Us or send us aInformation Request for subscription information.