Yes, you read that correctly
A group of the world’s largest oil companies is calling for the United Nations to issue a carbon tax on hydrocarbon development.
All based in Europe, the six chief executives who were signatories to the letter to the United Nations are:
- BG Group (ticker: BG),
- BP plc (ticker: BP),
- Eni Corp. (ticker: E),
- Royal Dutch Shell (ticker: RDS.B),
- Statoil (ticker: STO),
- Total SA (ticker: TOT)
The statement acknowledged climate change as an issue and expressed their devotion to limiting emissions and exploring new energy technologies.
“For us to do more, we need governments across the world to provide us with clear, stable, long-term, ambitious policy frameworks. This would reduce uncertainty and help stimulate investments in the right low carbon technologies and the right resources at the right pace. We believe that a price on carbon should be a key element of these frameworks.”
The supermajor consortium offered to open direct dialogue with the United Nations and “willing governments,” hoping to reach “an appropriate ground for public-private dialogue on how to price carbon into energy.”
The Carbon Disclosure Project, a carbon emissions watchdog based in the United Kingdom, published a report in 2013 that disclosed several of the larger oil companies were already incorporating carbon taxes into their long term plans.
Not All Participated
Noticeably absent from the list are the largest oil and gas companies in North America.
ExxonMobil has addressed the issue before, and began including a carbon proxy price in its business planning in 2007. Ken Cohen, Vice President of Public Affairs for ExxonMobil, said, “the risks of climate change are real and the risks warrant action.” However, Cohen believes fixing the emissions issue is a market-related matter rather than relying on various government-implemented regulations or standards. The world’s largest oil major has publicly said it prefers a cap-and-trade scenario to provide predictability and transparency.
John Watson, chief executive officer of Chevron, told the Financial Times that his company had “no intention” of signing the United Nations bill. His reasoning was not to brush off climate change (CVX is the largest renewable producer among oil companies, according to Watson), but because the taxes will cause the price of resources to increase.
He concluded, “For policy makers to have as the premise for their strategy to combat greenhouse gas emissions raising the cost of energy worldwide for the people who can least afford it is, I think, not a policy that is going to be effective because customers want affordable energy.”
XOM and CVX shareholders both rejected the idea of adding climate specialists to the compaies’ respective boards in their recent annual meetings.
Trouble for Coal
The increasing abundance and affordability of natural gas is wrestling market share away from coal, which has been the target of President Obama’s Clean Power Plan. Certain executives have accused the President of deliberately trying to kill the coal industry.
A recent article by The Telegraph detailed how a “misjudged” carbon tax in Great Britain ultimately put two of the country’s largest coal power plants out of business.
The article explains: “In 2010, however, the government saw an opportunity to raise billions in new tax revenue. It unilaterally made British carbon prices much higher, to be collected in tax, by adding a top-up to the EU price. It would deliver a rising price curve for the electricity-generating sector, far higher than that faced by similar plants across the EU.”
The mark-up ultimately made coal uneconomic, forcing the closures of the coal plants. If the issues are not addressed, “It will mean the final collapse of the domestic coal industry as its customer power stations refuse to forward-purchase coal due to uncertainty, thereby inhibiting any proposed new mining investments,” the Telegraph said.
How Do Carbon Taxes Go Over with Voters?
Australia is one country that had put forth a carbon tax in 2012 only to repeal it in 2014.
“Today, the tax that you voted to get rid of is finally gone: a useless, destructive tax which damaged jobs, which hurt families’ cost of living and which didn’t actually help the environment,” Prime Minister Tony Abbott told reporters in Canberra, as reported by the Associated Press.
