Exxon Puts $1 Million Into Quest for Carbon Tax and Rebate

(Bloomberg) -- An effort to put a tax on carbon dioxide emissions just won an unlikely underwriter: a top producer of oil and gas.

Exxon Mobil Corp. is putting $1 million into a political campaign that, if successful, would effectively spawn a tax tied to the company’s core products.

The move is consistent with Exxon’s longstanding support for a price on carbon dioxide, imposed instead of an array of environmental regulations that already elevate the cost of fossil fuels. But it marks the very first such contribution by a major oil company to the effort, known as Americans for Carbon Dividends.

With Exxon’s donation, the biggest U.S. oil company is joining the nation’s largest nuclear power generator and major renewable energy boosters in bankrolling the political campaign to put a tax on emissions, with revenue the levy raises redistributed to U.S. households.

“This is the first time a U.S. oil and gas super major is putting real money behind a carbon pricing effort; it’s just never been done before,” said Ted Halstead, chief executive of the Climate Leadership Council that developed the underlying plan. “A million-dollar gift is not small money for this type of thing.”

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. The donations are helping pay for a robust lobbying campaign led by former senators John Breaux and Trent Lott and advised by several political operatives.

The effort comes as scientists warn that action is urgently needed to arrest carbon dioxide emissions and stave off the most catastrophic consequences of climate change. The United Nations Intergovernmental Panel on Climate Change insisted that countries must take “unprecedented” action to combat climate change, warning in a report Sunday that existing global efforts are insufficient to keep warming under a critical 1.5-degree Celsius threshold.

And on Monday, a Nobel Prize was given to a pair of economists who have studied sustainable growth, including one -- William D. Nordhaus of Yale University -- credited with arguing that uniformly imposed carbon taxes would be the most efficient strategy for addressing the problems caused by greenhouse gas emissions.

Exxon’s $1 million pledge represents the amount it generated about every two minutes last year, based on revenue data compiled by Bloomberg. But the commitment appears to stand out from the company’s other political spending. For instance, Exxon reported $11.4 million in total lobbying expenses in 2017. And it disclosed giving just $510,000 to state-level candidates, state committees and national political organizations representing governors and state attorneys general last year.

“We’ve been supportive of a revenue-neutral price on carbon for a decade,” said Exxon Mobil spokesman Scott Silvestri, referring to a tax or fee that does not actually raise revenue for the government. “Applying a uniform cost across the economy is consistent with our principles on how to manage the risk of climate change.”

Exxon and other oil companies had already signed on as advocates of the underlying carbon plan, which has the backing of a broad coalition of prominent conservatives, corporations and economists, including former Federal Reserve Chair Janet Yellen.

Under the Climate Leadership Council’s blueprint, every ton of carbon dioxide would be hit with a tax, potentially starting at $40 per ton and rising over time, with revenue redistributed to households in the form of quarterly dividend checks. In exchange, regulations aimed at cutting carbon dioxide emissions -- and much of the Environmental Protection Agency’s authority to regulate them -- would be eliminated.

The carbon tax would boost the cost of energy derived from oil, natural gas and coal, thereby discouraging the use of those fossil fuels and encouraging the development of low-carbon power alternatives. The resulting carbon cuts would exceed reductions the U.S. had promised as part of the Paris climate accord, according to an assessment by Resources for the Future, a non-partisan think tank.

“This is corporate America saying not only do we want a solution, but coming together around a very concrete end game” and a very specific plan, Halstead said. “The carbon tax is matched with a regulatory simplification which is appealing to Republicans and the businesses. That is matched with a dividend for the American people, which makes it very popular with the public.”

Although Exxon Mobil has long endorsed the idea of a fee on carbon, that hasn’t always translated to support for specific proposals.

For instance, the company stayed out of a fight over a 2016 Washington state ballot initiative to impose a statewide carbon tax, which was ultimately defeated. When organizer Yoram Bauman asked Exxon for its backing, the company declined to help fund the initiative or even publicly endorse it.

“Does that call into question their commitment? Absolutely,” Bauman said in a phone interview. “It’s like St. Augustine: Lord, give me chastity -- but not yet.”

Exxon’s decision to steer clear of the Washington state effort aligned with the company’s focus on broader policies, beyond those putting a tax on carbon in a single state or region, Silvestri said.

Many of the companies advocating the carbon tax-and-dividend plan stand to benefit from policies encouraging low- and no-emission energy. Notably, no coal mining concern has yet signed up to offer support.

And for oil and natural gas companies, a carbon tax could be good for business in the short term, by helping propel electricity generation away from coal.

“The short-term beneficiary of a carbon tax is going to be natural gas,” said Eli Lehrer, president of the R Street Institute, a free-market think tank that supports such a tax. “There is an excellent reason for Exxon Mobil to do this, solely from a commercial standpoint.”

©2018 Bloomberg L.P.