2 October '09
12:23 PM UTC
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More on Exxon’s Tillerson and The Carbon Tax

WSJ’s Environmental Capital, riffing on our earlier post on Exxon Mobil head Rex W. Tillerson, . If so many influential players support a carbon tax, can it be all bad?

A movement, like the call for a carbon tax, that can gather Al Gore, James Hansen, Rex Tillerson, Peter Orszag and Greg Mankiw under one roof must have something going for it.

One thing that a carbon tax has going for it: simplicity (though, again, Joe Romm at Climate Progress argues that is a fallacy). You need only look at the doorstops that are Waxman – Markey and Kerry – Boxer – which is amazingly vague, even at 800-plus pages – to see that cap-and-trade is not simple.

A particularly of the cap-and-trade v. carbon tax comes from, of all places, ESPN.com’s Tuesday Morning Quarterback column, which is written by policy wonk Gregg Easterbrook. It bears the catchy title, “Al Gore Heartbroken That World Refuses to End”, and please note, Easterbrook is, in most respects, not a conservative:

The current House-passed greenhouse gas bill, stalled in the Senate, is nightmarishly bad legislation – more than 1,400 pages of special-interest favors for political donors, command-and-control bureaucracy and handouts to the privileged. If enacted, it will do little to reduce greenhouse gases, while discrediting the notion of climate change legislation. Artificial global warming stands a better chance of being prevented if the House bill is mulched for recycling and a simple carbon tax enacted.

Which brings us back to Rex Tillerson, “that the American people want climate policy to be transparent, honest, and effective.” It’s certainly a fair point, but until Exxon starts lobbying (read: throwing lots of dollars around) for a viable carbon tax, it will be tough to believe that the company wants climate change legislation of any sort.

2 October '09
8:11 AM UTC
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Tillerson on cap and trade: volatile prices, too much complexity

Exxon Mobil Corp. Chairman and CEO Rex W. Tillerson on Thursday saying that the price volatility of the system will “carry a heavy cost for both the economy and the environment.”

Speaking at the Economic Club of Washington, D.C., Tillerson called, instead, for a carbon tax “that can create a clear and uniform cost for emissions in all decisions.” Here’s the .

Exxon has already made clear its preference for a carbon tax, but when the world’s most important corporate leader gives a speech on policy, it’s important to take note.

In particular, we should be watching for his point-by-point takedown of the cap-and-trade approach to resurface in arguments by conservative and industry opponents of the Waxman-Markey bill and, once they work out the details, of Kerry – Boxer.

Here are his criticisms of cap and trade, boiled down to their essence.

Unfortunately, experience indicates that a cap-and-trade system will result in volatile prices for emissions allowances — and this volatility will carry a heavy cost for both the economy and the environment.  For businesses and industry, price volatility undermines the ability to invest in advanced technologies. 

For businesses and entrepreneurs, the added complexity and lack of a predictable cost for emissions make it difficult to plan — especially over the long-term. 

And as we discussed earlier, steady and disciplined investment is needed to develop and deploy new technologies.

Cap-and-trade schemes create another potential cost: opportunities for market manipulation. 

Tillerson has some distinguished company – NASA’s James Hansen for one – in his call for a tax. But he likely has some different motivations. Tillerson surely knows that a carbon tax would be dead on arrival in Congress for any number of reasons, mainly because legislators are already a long way down the road on cap-and-trade and it would be almost impossible to change course now.  See Joe Romm of Climate Progress on .

We think it’s fair to view Exxon’s opposition to cap-and-trade – Tillerson’s reasonable critiques notwithstanding – as a tactic meant to delay passage of meaningful legislation.