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ExxonMobil's Tillerson Still Pushing for Carbon Tax

October 5, 2009
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Far be it for ExxonMobil Corp. to follow the crowd. Congress is well into the debate on how to limit greenhouse gas (GHG) emissions through cap-and-trade schemes, but the CEO of the world's largest public company thinks policymakers should reverse course and instead debate the benefits of a revenue-neutral carbon tax.

CEO Rex Tillerson has been advocating carbon taxes for months now (see NGI, Jan. 12), and even though the odds don't appear to be in his favor, on Thursday he asked Congress to take another look.

"As a businessman, I have to take a deep breath every time I speak about this because it's hard for me to speak favorably about any new tax," Tillerson told an audience at the Economic Club of Washington, DC. "I hope you see it shows how serious we are about this issue. A revenue-neutral carbon tax has the advantage of being well focused for achieving our society's shared goal of reducing emissions over the long term. It can be predictable, transparent, and comparatively simple to understand and implement."

Unlike a cap-and-trade scheme, ExxonMobil's chief said a carbon tax would create a "clear and uniform cost for emissions in all economic decisions." This, he said, would encourage "every business, every industry and every consumer to become more efficient and do their part to increase efficiency and reduce emissions through other choices they might make."

A carbon tax, he said, would be applied directly to the carbon content of fossil fuels or to other GHG emissions, and thus, "there is no need for a government to pick winners and losers in industry through complex allowance allocation processes as we have witnessed" in Congress (see related story).

Without price volatility, there would be predictability, Tillerson said. In addition, the costs and complexity of building a new market for emissions allowances or the necessity of adding more bureaucracy to police the market would be avoided.

"It could largely be built on the existing tax infrastructure," said the CEO. "We pay a lot of taxes, excise taxes, federal taxes. We'll just add this to the list."

Another potential advantage would be "a more viable framework for engaging participation by other nations. A tax framework is easier to implement and it does not cap economic growth...Given the global nature of the greenhouse gas challenge, and the fact that the economic growth in developing economies will account for a significant portion of future greenhouse-gas emissions, policy options must be flexible in order to encourage global engagement."

Some have suggested that a revenue-neutral carbon tax has no chance to gain enough support in Congress, but Tillerson disagrees.

"I believe the American people want climate policy to be transparent, honest, and effective," he said. "Economists generally agree that achieving a given emissions target costs less under a tax or fee approach than under a cap-and-trade system. I firmly believe it is not too late for Congress to consider a carbon tax as the better policy approach for addressing the risks of climate change. Indeed, there has never been a more opportune time for Congress to pursue this course of action."

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