Why would Exxon donate $1 million to a carbon tax initiative?
On Wednesday, The Wall Street Journal reported that ExxonMobil had committed $1 million to a Republican-led carbon tax initiative called Americans for Carbon Dividends (AFCD). The story is a bit surprising on its face: it seems counterintuitive that an oil company would want to give money to an initiative that would tax its (considerable) carbon contribution. The other surprising factor is that some Republicans, who have traditionally resisted both climate policy and tax increases, are advocating for both.
But dig a little deeper and the story isn’t terribly surprising. For ExxonMobil’s part, the company has been fighting an image battle in recent years: it’s facing significant lawsuits alleging that its scientists knew about climate change for decades and actively misled investors about it through advertisements and other public denials. Consequently, Exxon has made choices in recent years to reflect a more “eco-conscious” oil company, pledging to reduce methane emissions by 15 percent by 2020, for example.
Furthermore, Exxon’s $1 million commitment is a drop in the company’s considerable bucket. The donation to AFCD is just 0.00027 percent of ExxonMobil’s $366 billion market capitalization, suggesting it isn’t reflective of any serious change of course for the company. Additionally, that donation will be split up into two payments of $500,000, so the burden is even less significant.
Small moves, big moves
That said, what’s just a little money for ExxonMobil is likely a goldmine for AFCD and its parent organization, the Climate Leadership Council, of which Exxon Mobil is a founding member. The logic behind Exxon’s support is that it can’t prevent states or regions in the US from making more and more restrictive carbon emissions policies, and regulatory uncertainty is costly for a company as big as Exxon. With a simple carbon tax replacing a thicket of restrictions, the oil company can, in theory, more accurately estimate its costs and the political risks that its wells and refineries are exposed to.
The Climate Leadership Council and the AFCD specifically call for a national carbon-tax scheme named the Baker-Schultz Plan. This plan would initially institute a tax of approximately $40/ton of carbon dioxide released and ratchet up progressively. To protect Americans against oil companies raising prices in response to the carbon tax, all of the plan’s proceeds would be returned to Americans in the form of a carbon-tax dividend, starting at about $2,000 per household. In theory, more expensive fuel is a relatively good way to curb fuel use: households that don’t need to use as much will stop buying expensive gas and receive extra money at the end of the year, and households that can’t curb their fuel use would see their extra expenses covered with the refund from the tax.
In addition, the plan comes with import and export restrictions that would prevent countries without comparable taxes on their carbon-emitting products from selling at a cheaper price in the US.
The ultimate upside for this Republican-led group? “The final pillar is the elimination of regulations that are no longer necessary upon the enactment of a rising carbon fee whose longevity is secured by the popularity of dividends,” AFCD writes on its website. That includes eliminating the power of the Environmental Protection Agency (EPA) to regulate carbon dioxide emissions.
That’s the downside as well: the plan would make it harder for a well-meaning EPA to regulate carbon dioxide emissions aggressively, which will almost certainly be necessary given recent dire warnings about the dramatic changes necessary to halt climate change. On the flip side, the plan would also take the power to relax carbon emissions standards out of the hands of an EPA with more cynical intent.
Exxon’s intention may well be to implement a tax like this while there’s political support to curb an EPA that’s exceedingly cavalier about climate change and before a more stringent and carbon-serious EPA takes over in a future administration. Indeed, at a state level, Exxon’s support of carbon tax policies has been inconsistent. The company seems to have supported California’s cap-and-trade system through industry-association lobbying, but according to Bloomberg, it disavowed Washington state’s attempts at implementing a carbon tax in 2016. Exxon did not respond to Ars Technica’s request for comment.
One significant criticism of the Baker-Schultz Plan is that it could well operate like Alaska’s Permanent Fund: give people a share of the carbon-tax profits and they’ll never vote for more aggressive carbon restrictions because doing so will reduce their dividend at the end of the year.
Could it ever work?
Currently, only a small part of the Republican Party is in favor of any carbon tax plan, even if it means limiting separate regulations. Far more members of the party want no carbon tax and no carbon regulation. Over the summer, Rep. Carlos Curbelo (R-Fla.) introduced a bill to institute a carbon tax. At the same time, the House introduced a resolution calling a carbon tax “detrimental to American families and businesses.” That resolution passed 229-180, with only six Republicans, including Rep. Curbelo, breaking with their party. (Seven Democrats also broke party lines and declared a carbon tax detrimental.)
Still, Bloomberg writes that it’s not just Republicans and Exxon putting money behind this carbon tax initiative. “Power generator Exelon Corp. already committed to giving $2 million to the effort over the next two years. Renewable-power manufacturer First Solar Inc. and the American Wind Energy Association are each contributing $100,000 per year.” With major energy companies on board, momentum for a major carbon tax may just be getting started.
Correction: The name of the Climate Leadership Council has been corrected.
