Exxon Mobil’s Carbon Tax Follies

by Myron Ebell on March 1, 2013

in Blog, Features

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It was a busy week for promoting and opposing a carbon tax.  Two studies on the economic effects of a carbon tax that draw opposite conclusions were released by the National Association of Manufacturers and the Brookings Institution.  Kevin Hassett, Ph.D., director of economic policy studies at the “pro-business” American Enterprise Institute, continued his advocacy of a carbon tax at a Resources for the Future forum.  And most interestingly, former EPA Administrator William K. Reilly, said at a conference that, “The strongest advocate on our task force for a carbon tax was ExxonMobil.  I had previously thought that was a public relations thing — I didn’t think they were quite interested in it.”

The National Association of Manufacturers released a study by NERA Consulting on the Economic Outcomes of a Carbon Tax. The NAM study concludes that a tax starting at $20 per ton of carbon dioxide emitted and increasing by 4 percent per year would have a range of negative effects that would ripple through the economy.  In particular: “The negative impact of a carbon tax on total manufacturing output would be significant, with output from energy-intensive manufacturing sectors dropping as much as 15 percent and output from non-energy-intensive manufacturing sectors dropping as much as 7.7 percent.”

The NAM study also argues that: “A carbon tax would have a net negative effect on consumption, investment and jobs, resulting in lower federal revenues from taxes on capital and labor. Factoring in lost revenue from reduced economic activity, the net revenue from a carbon tax available for deficit/debt reduction and lower tax rates is relatively small.”

The Brookings Institution released a study by Adele C. Morris on The Many Benefits of a Carbon Tax.  The Brookings study proposes a tax starting at $16 per ton of carbon dioxide emitted and increasing by 4 percent per year to reduce the deficit and to lower the corporate income tax rate from 35 percent to 28 percent.  The study proposes 15 percent of the revenues from a carbon tax go to benefits for poor people who would be hurt most by higher energy prices.  Morris also argues in the study a carbon tax would make at least some EPA regulations of greenhouse gas emissions redundant and unnecessary.

The details of a carbon tax were discussed on Feb. 27 at a Resources for the Future seminar on Comprehensive Tax Reform and Climate Policy.  A video of the seminar can be viewed here.  Participants included Kevin Hassett of the American Enterprise Institute, Billy Pizer of Duke University, Joe Aldy of Harvard University, Larry Goulder of Stanford University, Rob Williams of the University of Maryland, and Ian Parry of the International Monetary Fund.  Aldy worked as an adviser on climate policy in the Obama White House.  Pizer worked in the Treasury Department during the George W. Bush (when Henry Paulson, former CEO of Goldman Sachs, was Treasury Secretary) and Obama Administrations to devise a model carbon tax.

William K. Reilly was one of the speakers at the Climate Leadership Conference this week.  The conference was hosted by the Climate Registry, the Center for Climate and Energy Solutions and the Association of Climate Change Officers.  It was sponsored by a long list of companies and organizations, including Bloomberg BNA News.  The “headline sponsor” was the Environmental Protection Agency.

Erica Martinson filed several short reports for Politico Pro, which is available to paid subscribers only.  In one of Politico Pro’s e-mails to subscribers dated 2/28/13 12:01 PM EST Martinson wrote:

Oil companies are expecting — and sometimes advocating for — a carbon tax, former EPA Administrator William Reilly said today. Two companies, ConocoPhillips and Shell, “have a virtual tax they append to their [internal rate of return] calculations when making new capital expenditures,” he said. “It’s $25 a ton for Conoco; $75 a ton for Shell. So Congress may not be acting, but companies are anticipating somebody will someday,” Reilly said.

The George H.W. Bush-era EPA leader recently participated on an energy policy task force and found ExxonMobil’s position interesting, he said. “The strongest advocate on our task force for a carbon tax was ExxonMobil. I had previously thought that was a public relations thing — I didn’t think they were quite interested in it,” he said.

The task force Reilly refers to is the Bipartisan Policy Center’s Strategic Energy Policy Initiative, which released its report at a press conference on Feb. 27.  Reilly was one of four speakers at the press conference, along with his three fellow co-chairmen: former Sens. Byron Dorgan, D-N.D., and Trent Lott, R-Miss., and Gen. James Jones, former National Security Adviser to President Obama.  Other members of the task force include William Colton, vice president of ExxonMobil, and Ralph Cavanaugh of the Natural Resources Defense Council. The task force’s 50 incoherent energy policy recommendations can be read here.

In other carbon tax news, Senator Orrin Hatch (R-Utah), ranking Republican on the Senate Finance Committee, asked Treasury Secretary nominee Jacob Lew during his confirmation hearing about the Obama Administration’s position on a carbon tax.  Lew responded, “The administration has not proposed a carbon tax, nor is it planning to do so.”   The Senate confirmed Lew by a vote of 71 to 26 this week.  Senator David Vitter (R-La.), ranking Republican on the Senate Environment and Public Works Committee, followed up on Lew’s statement by sending a letter to President Obama asking him whether he opposes the carbon tax bill introduced by Senators Bernie Sanders (Independent Socialist-Vt.) and Barbara Boxer (D-Calif.).

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