Exxon CEO: Create Carbon Tax.

[SirNitram]

Link

The chief executive of Exxon Mobil Corp. for the first time called on Congress to enact a tax on greenhouse-gas emissions in order to fight global warming.

In a speech in Washington, Rex Tillerson said that a tax was a "more direct, a more transparent and a more effective approach" to curtailing greenhouse gases than other plans popular in Congress and with the incoming Obama administration.

"My greatest concern is that policy makers will attempt to mandate or ordain solutions that are doomed to fail," Mr. Tillerson said.

The policy he is advocating is often called a carbon tax because it would be imposed on emissions of carbon dioxide, the most common man-made greenhouse gas. By backing it, Mr. Tillerson has become an unlikely member of a club that includes former Vice President Al Gore, consumer advocate Ralph Nader and President-elect Barack Obama's designated head of the National Economic Council, Larry Summers.

Carbon taxes have been politically unpopular. "Calling for a carbon tax could be a ploy because few observers believe such a tax is politically feasible in our Congress," says Daniel J. Weiss, a fellow at the Center for American Progress, a left-of-center think tank in Washington.

The leadership of the Democratic-led Congress and other major oil companies prefer using a cap-and-trade approach. Under this system, the government would establish economy-wide emission limits as well as limits for individual companies. There would be a market for firms to buy and sell pollution allowances based on whether they were above or below their caps.

ConocoPhillips and the U.S. divisions of BP PLC and Royal Dutch Shell PLC have all supported a cap-and-trade solution.

Mr. Tillerson said a cap-and-trade system would be costly, bureaucratic and create a "Wall Street of emissions brokers."

The speech signals an evolution in the thinking of Mr. Tillerson, who became chief executive and chairman of Texas-based Exxon, the world's largest Western oil company, in 2006. Mr. Tillerson now calls the issue complex and challenging to understand, but -- in contrast to Exxon's previous party line -- he doesn't question whether fossil fuel use has contributed to rising global temperatures.

In 2007, when he gave his last big speech on climate change, he said he didn't support any particular policy for curbing carbon-dioxide emissions.

Observers say Mr. Tillerson's endorsement of a carbon tax could have widespread ramifications. "When the biggest company in the world says this is OK, that is giving permission for a whole lot of people who have resisted carbon policy on the grounds it is bad for business to soften their resistance," says Michael Webber, associate director of the University of Texas Center for International Energy and Environmental Policy.

Did not see that coming.

[Patrick Degan]

At a guess, I'd say somebody in Exxon is exploring the possibility of the company switching to renewables and nuclear. A carbon tax would help prod along that switch in the market.

[Executor32]

I can't say I would've predicted this, either. Perhaps he was visited by the Ghosts of Christmas Past, Present, and Future?

[rhoenix]

At a guess, I'd say somebody in Exxon is exploring the possibility of the company switching to renewables and nuclear. A carbon tax would help prod along that switch in the market.

It appears this is a distinct possibility. I had thought for a while now that the oil companies would eventually switch to other forms of power, given enough public momentum - in this case, perhaps the CEO of Exxon-Mobil realizes that if they're the first of the oil companies to throw their weight behind other forms of energy, they get a large jump on the competition.

For those of you more knowledgeable about these industries than I (and please, pardon a minor, though related thread hijack): is this a likely possibility; and if so, what would the impact be to other American Oil/Gas/Power companies?

[Havok]

Seems like good business to me. They have to realize that at some point the oil is going to dry up (no matter how far off that is) and/or it is a highly marketable position to be in to be able to say you were the first oil company to endorse something of this magnitude and/or like Degan said, they finally have a real interest in switching to renewable sources of energy and want to lead the way, which goes back to the previous reason of marketing.

[Guardsman Bass]

They're certainly the late-comers - Exxon basically held out on serious investment on alternative fuels and energy up until very recently (and they still don't invest like some of the other oil companies).

[Spyder]

I couldn't be too sure why, but it's possible they prefer carbon taxation to a credit trading scheme. It's likely the US government would be lobbied to consider one or the other at some point.

[The Vortex Empire]

Didn't see that coming. It is good business sense though, if they start working on alternative energies.

[Gerald Tarrant]

I couldn't be too sure why, but it's possible they prefer carbon taxation to a credit trading scheme. It's likely the US government would be lobbied to consider one or the other at some point.

The Exxon CEO is quoted as saying that in the article. One of his stated objections was that the secondary market created would be a "Wall Street of Emissions". Maybe he objects to a jobs program for financial Wunderkinds, or more likely he's concerned about the kind of disruptions that would result from volatility and financial practices similar to what's found in the stock market. Also I can't see any particular social good that's caused by creating a middle market; i.e. some of the costs paid by Emitting companies would end up as wealth transfer into the hands of the Emissions brokers, there's no pressing social need filled by employing financial wizards.

In contrast a gas tax (or straight up emissions tax) is transparent and has no middle market. If regulators wanted to ease or tighten restrictions the tax could be manipulated directly, whereas the Cap and Trade system would have distortions introduced by secondary markets, and Cap and Trade would likely have policy lags between implementation and effect, whereas gas taxes can be tweaked literally overnight.

On the other hand, the cynic in me thinks that a gas tax is probably more responsive to lobbying efforts, which might make this attractive to EXXON.

edit: edited the wording of my parenthesis.

[Teleros]

Not bad. It gives Exxon some good PR (especially if Guardsman Bass is right), may well help push companies into investing more in other sources of energy, and of course the costs all get passed on to the consumer, perhaps along with a little stealth rise in prices anyway just to keep the profits looking healthy.

[InnocentBystander]

At a guess, I'd say somebody in Exxon is exploring the possibility of the company switching to renewables and nuclear. A carbon tax would help prod along that switch in the market.

It appears this is a distinct possibility. I had thought for a while now that the oil companies would eventually switch to other forms of power, given enough public momentum - in this case, perhaps the CEO of Exxon-Mobil realizes that if they're the first of the oil companies to throw their weight behind other forms of energy, they get a large jump on the competition.

For those of you more knowledgeable about these industries than I (and please, pardon a minor, though related thread hijack): is this a likely possibility; and if so, what would the impact be to other American Oil/Gas/Power companies?

Well if Exxon wanted to they could; they have a huge cash reserve right now (40bn cash; over 200bn in bought back stock src). However Exxon is generally considered to be very conservative and my guess is that they'd rather buy another company to increase their reserves. ExxonMobil does not like risk, and if they're headed towards renewable energy then there has been a major shift in thinking (I'd call renewable energy high risk with oil being <50$bbl), or there is real money to be made; in which case everyone would be doing it (hint: they aren't).

Frankly, this news suggests to me that they don't want to go green. If they did, they'd stand to make some money on carbon credits. My guess would be that Exxon knows it is coming, and they would rather pay less to Uncle Sam directly than paying a premium to buy extra carbon credits.

[Phantasee]

I hate the cap-and-trade program anyway, and if Exxon's CEO realizes it's a bad idea himself, then great. Carbon tax is simpler and more effective, for reasons already stated. I'd had a thought about the "Wall Street of emissions brokers" but I've never really formed it into a complete one until now. The idea of a bunch of guys running around Manhattan in green suits made me chuckle.