Tillerson on cap and trade: volatile prices, too much complexity
Exxon Mobil Corp. Chairman and CEO Rex W. Tillerson gave a detailed critique of cap-and-trade on Thursday saying that the price volatility of the system will “carry a heavy cost for both the economy and the environment.”
Speaking at the Economic Club of Washington, D.C., Tillerson called, instead, for a carbon tax “that can create a clear and uniform cost for emissions in all decisions.” Here’s the press release.
Exxon has already made clear its preference for a carbon tax, but when the world’s most important corporate leader gives a speech on policy, it’s important to take note.
In particular, we should be watching for his point-by-point takedown of the cap-and-trade approach to resurface in arguments by conservative and industry opponents of the Waxman-Markey bill and, once they work out the details, of Kerry – Boxer.
Here are his criticisms of cap and trade, boiled down to their essence.
Unfortunately, experience indicates that a cap-and-trade system will result in volatile prices for emissions allowances — and this volatility will carry a heavy cost for both the economy and the environment. For businesses and industry, price volatility undermines the ability to invest in advanced technologies.
For businesses and entrepreneurs, the added complexity and lack of a predictable cost for emissions make it difficult to plan — especially over the long-term.
And as we discussed earlier, steady and disciplined investment is needed to develop and deploy new technologies.
Cap-and-trade schemes create another potential cost: opportunities for market manipulation.
Tillerson has some distinguished company – NASA’s James Hansen for one – in his call for a tax. But he likely has some different motivations. Tillerson surely knows that a carbon tax would be dead on arrival in Congress for any number of reasons, mainly because legislators are already a long way down the road on cap-and-trade and it would be almost impossible to change course now. See Joe Romm of Climate Progress on other problems with the carbon tax.
We think it’s fair to view Exxon’s opposition to cap-and-trade – Tillerson’s reasonable critiques notwithstanding – as a tactic meant to delay passage of meaningful legislation.