Exxon Is Actually Entirely Correct: A Carbon Tax is Better Than Cap-and-Trade

Takver/CC BY-SA 2.0

It's not often that I can honestly say that I agree with much of anything that Exxon says or does, but (leaving any potential duplicitous motivation aside) recent statements by spokespeople for and the CEO of the oil giant on the merits of a carbon tax are actually spot on.

Exxon spokesperson Kimberly Brasington, quoted by ThinkProgress:


Combined with further advances in energy efficiency and new technologies spurred by market innovation, a well-designed carbon tax could play a significant role in addressing the challenge of rising emissions. A carbon tax should be made revenue neutral via tax offsets in other areas.

And CEO Rex Tillerson from 2009, quoted in the same source, commenting on a carbon tax versus cap-and-trade, then in vogue:

As a businessman it is hard to speak favorably about any new tax, but a carbon tax strikes me as a more direct, a more transparent and a more effective approach.

Again, leaving aside any duplicitous motives on Exxon's part (perhaps backing what it sees as an even more politically unpalatable option than cap-and-trade, so as to sink both), Tillerson is actually entirely correct here.

I've long thought that a carbon tax is the preferable option to pricing carbon than any cap-and-trade program. It gets directly at the problem of putting a price on carbon, encouraging higher prices for something we want to reduce and eventually eliminate to the greatest degree we can. Rather than cap-and-trade which, under the banner of being a so-called more market-based solution than taxation, creates a market potentially rife with volatility, whose only chief direct benefit over a carbon tax is that it keeps more financiers in work and profit. That said, cap-and-trade is better than not pricing carbon at all.

Now, I don't hold out more hope that a carbon tax will actually get passed on a national level in the United States than will a cap-and-trade program—even if there are now conferences in DC and political chattering post-Sandy and post-election seriously touting the virtues of a carbon tax as a way to reduce carbon emissions and simultaneously raise some much needed government revenue.

Nevertheless I can't help but feel a bit giddy at the notion that the possibility of a carbon tax is back in play. I'd be downright weak in the knees if James Hansen's proposal for a fee-and-dividend system (essentially a carbon tax with a potion of revenues returned to the citizenry) were equally being considered.

Tags: Carbon Emissions | Carbon Taxes | Ecological Economics | Economics | Global Climate Change | Global Warming Solutions