A Few Companies are not Waiting for the Government on Carbon Pricing

Congress has not been able to put aside partisan wrangling and pass a carbon tax yet. Although it is essential for a successful national climate and energy strategy, it is not likely to happen any time soon. In the mean time, a few large companies have shown leadership by setting their own internal carbon price.

In June at the Energy Summit at Stanford University, I heard Bill Mitchell of Microsoft explain how they now assess a carbon tax to departments for emissions related to proposed projects. Initiated in 2012, the tax, a modest $6 to $7 a ton, is changing behavior. It is part of Microsoft’s strategy to achieve net zero emissions for their data centers, software labs, offices and employee air travel, by increasing efficiency and purchasing renewable energy.

 Mitchell shared how the tax helps the company to identify cost savings and also fund important carbon reduction projects.  Microsoft is purchasing the entire output of RES Americas’ new 110-megawatt (MW) Texas wind farm that is expected to come online by June 2015. The project is being partially funded by their carbon tax.

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Former Secretary of State George Schultz, who was also at the conference, reported that we may not be as far from a carbon tax as we think.  He pointed out that ExxonMobil recently came out in favor of a carbon tax.

 ExxonMobil’s website says:

 “If policymakers do move to impose a cost on carbon, we believe that a carbon tax would be a more effective policy option to reduce greenhouse-gas emissions than alternatives such as cap-and-trade. And to ensure revenues raised from such a tax are indeed directed to investment, and to assist those on lower incomes who spend a higher proportion of their income on energy, a carbon tax should be offset by tax reductions in other areas to become revenue neutral for government. It is rare that a business lends its support to new taxes.” More

For years Exxon funded a disinformation campaign about climate science and efforts to address global warming (see Climate Progress), so you may well be skeptical of their intentions. But their statement underscores the fact that there is no real scientific debate that climate change is happening and that it is caused by human behavior, primarily the burning of fossil fuels and deforestation.

 One might speculate that Exxon wants a more predictable policy environment for carbon and energy in the U.S to plan for future investment. That they see the writing on the wall and probably see a carbon tax as a policy vehicle that they can maximize their influence in steering toward their interest, where a cap and trade policy might be harder to soften the impact of and leave them more exposed to market competition. 

There has been a lot of debate on the relative merits of a carbon tax, cap and trade or a cap and dividend policy. Without weighing in on that here, setting a price on carbon through almost any means would be a huge step forward.  It is important that businesses are showing leadership and proving that carbon pricing is not too costly to the bottom line. Let’s hope a few policy makers in Congress are paying attention.

Barry Vesser

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