Carbon Tax: The Lesser Of Two Evils

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Climate Change: Exxon Mobil CEO Rex Tillerson, long reviled by environmentalists for his skepticism of extreme global warming claims, now supports a tax on C02 emissions. A new convert to the cause? We doubt it.

In a speech last Thursday, Tillerson said a carbon tax would be a “more direct, a more transparent and a more effective approach” than many of the current plans for curbing greenhouse gases, including the cap-and-trade approach favored by President-elect Barack Obama.

In supporting the carbon tax, Tillerson “has become an unlikely member of a club that includes former Vice President Al Gore, consumer advocate Ralph Nader and President-elect Barack Obama’s designated head of the National Economic Council, Larry Summers,” the Wall Street Journal noted.

In point of fact, Tillerson hasn’t joined any club.

Like many CEOs these days in energy-producing industries, he’s just afraid his company will soon be hit with a tidal wave of new regulation to curb greenhouse gas emissions — regulations that will destroy trillions of dollars of U.S. wealth.

“My greatest concern is that policymakers will attempt to mandate or ordain solutions that are doomed to fail,” Tillerson said. Like cap-and-trade. Or new Environmental Protection Agency rules that essentially seek to regulate everything in our economy that uses carbon-based fuel. Since 85% of our energy comes from carbon-based fuel, that means the entire economy.

Tillerson understands the political situation. A new president and an overwhelmingly Democratic Congress mean some form of draconian global warming action is likely, and soon — despite the fact that the Earth, rather than heating up, has been cooling for at least seven years, according to the four major global temperature data sets.

Tillerson would be a fool and probably in breach of his fiduciary responsibility to his shareholders and employees if he were to ignore this. So he has supported a carbon tax — which economists agree would be the most fair, least costly and most efficient way of reducing global C02 output.

It’s a sad commentary indeed when CEOs have to support things that aren’t in their interest, solely to survive. That’s certainly the case with global warming.

Unfortunately, many of the proposals now being considered to cut C02 and other greenhouse gas emissions would entail enormous costs with very little benefit.

Take last fall’s Advanced Notice of Proposed Rulemaking (ANPA) by the EPA, which the new president has vowed to implement. ANPA sounds innocent. But cutting C02 output by 70%, as Congress has mandated, won’t be easy. The costs will be enormous and could wreck our economy.

According to Global Insight, ANPA could cost the U.S. nearly $7 trillion in real output by 2030, or about $650 billion a year. Meanwhile, 800,000 U.S. jobs would be lost annually for several years.

This is why Tillerson says he supports a carbon tax — not because he’s suddenly seen the light on global warming. A carbon tax is the least damaging, least costly alternative available for cutting carbon-based fuel use.

Other things are at work, as well. Last year, Tillerson faced a challenge to his position as chairman of Exxon Mobil from the Rockefeller family, an Exxon Mobil shareholder that didn’t like Tillerson’s climate-change skepticism.

No doubt it’s not lost on Tillerson that Sen. Jay Rockefeller has just been named to head the Senate’s Committee on Commerce, Science and Transportation, and will be in his face very soon.

For the record, as the world shivers through a second frigid winter in a row, the U.S. is already cutting back on its CO2 output. According to Energy Department data, from 2000 to 2006, per capita output of C02 in the U.S. plunged 4.7%. Meanwhile, it increased by 3% in Europe. Yet Europe’s energy taxes are five to 10 times what they are in the U.S.

Hmm. Just a thought, but maybe we don’t need higher carbon taxes here at all.