Large Companies Prepared to Pay Price on Carbon

More than two dozen of the nation’s biggest corporations, including
the five major oil companies, are planning their future growth on
the expectation that the government will force them to pay a price
for carbon pollution as a way to control global warming.

The development is a striking departure
from conservative orthodoxy and a reflection of growing divisions
between the Republican Party and its business

A new report by the environmental data
company CDP has found that at least 29 companies, some with close
ties to Republicans, including ExxonMobil, Walmart and American
Electric Power, are incorporating a price on carbon into their
long-term financial plans. 

Both supporters
and opponents of action to fight global warming say the development
is significant because businesses that chart a financial course to
make money in a carbon-constrained future could be more inclined to
support policies that address climate change.

But unlike the five big oil companies —
ExxonMobil, ConocoPhillips, Chevron, BP and Shell, all major
contributors to the Republican party — Koch Industries, a
conglomerate that has played a major role in pushing Republicans
away from action on climate change, is ramping up an
already-aggressive campaign against climate policy — specifically
against any tax or price on carbon. Owned by the billionaire
brothers Charles and David Koch, the company includes oil refiners
and the paper-goods company

The divide,
between conservative groups that are fighting against government
regulation and oil companies that are planning for it as a
practical business decision, echoes a deeper rift in the party, as
business-friendly establishment Republicans clash with the Tea

Tom Carnac, North American president of
CDP, said that the five big oil companies seemed to have determined
that a carbon price was an inevitable part of their financial

“It’s climate change as a line item,”
Mr. Carnac said. “They’re looking at it from a rational
perspective, making a profit. It drives internal

Companies do
not know what form a future carbon price would take. Congress could
one day vote to directly tax emissions. President Obama is moving
forward with plans to regulate carbon pollution from coal plants,
with or without action from Congress — and states could carry out
those regulations by taxing carbon polluters. At climate change
talks at the United Nations, State Department negotiators have
pledged that the United States will cut its carbon emissions 17
percent below 2005 levels by 2020, and 80 percent by

Mr. Carnac said: “Companies see that
the trend is inevitable. What you see here is a hardening of that

Other companies
that are incorporating a carbon price into their strategic planning
include Microsoft, General Electric, Walt Disney, ConAgra Foods,
Wells Fargo, DuPont, Duke Energy, Google and Delta Air

During the 2012 election, every
Republican presidential candidate but one, Jon Huntsman, questioned
or denied the science of climate change and rejected policies to
deal with global warming. Opponents of carbon-pricing policies
consider them an energy tax that will hurt business and

Mainstream economists have long agreed
that putting a price on carbon pollution is the most effective way
to fight global warming. The idea is fairly simple: if industry
must pay to spew the carbon pollution that scientists say is the
chief cause of global warming, the costs will be passed on to
consumers in higher prices for gasoline and electricity. Those high
prices are expected to drive the market away from fossil fuels like
oil and coal, and toward low-carbon renewable sources of

Past efforts to enact a carbon price in
Washington have failed largely because powerful fossil-fuel groups
financed campaigns against lawmakers who supported a carbon tax.

In 1994, dozens of Democratic lawmakers
lost their jobs after Al Gore, who was vice president at the time,
urged them to vote for a climate change bill that would have
effectively taxed carbon pollution. In 2009, President Obama urged
House Democrats to vote for a cap-and-trade bill that would have
required companies whose carbon-dioxide emissions exceeded set
levels to buy emissions rights from those who emitted less. The
next year, Tea Party groups spent millions to successfully unseat
members who voted for the bill.  

But ExxonMobil,
which last year was ranked by the Fortune 500 as the nation’s most
profitable company, is representative of Big Oil’s slow evolution
on climate change policy. A decade ago, the company was known for
contributing to research organizations that questioned the science
of climate change. In 2010, ExxonMobil purchased a company that
produces natural gas, which creates less carbon pollution than oil
or coal. 

ExxonMobil is now the nation’s biggest
natural gas producer, meaning that it will stand to profit in a
future in which a price is placed on carbon emissions. Coal, which
produces twice the carbon pollution of natural gas, would be a
loser. Today, ExxonMobil openly acknowledges that carbon pollution
from fossil fuels contributes to climate change.

“Ultimately, we think the government
will take action through a myriad of policies that will raise the
prices and reduce demand” of carbon-polluting fossil fuels, said
Alan Jeffers, an ExxonMobil spokesman.

Internally, ExxonMobil now plans its
financial future with the expectation that eventually carbon
pollution will be priced at about $60 a ton, which Mr. Jeffers
acknowledged was at odds with some of the company’s Republican

“We’re going to say and do what’s in
the best interest of our shareholders,” he said. “We won’t always
be on the same page.”  

It remains
unlikely that any climate policy will move in today’s deadlocked
Congress, but if Congress does take up climate change legislation
in the future, Mr. Jeffers said ExxonMobil would support a carbon
tax if it was paired with an equal cut elsewhere in the tax code —
the same policy that Mr. Gore has endorsed. “ExxonMobil and many
other large companies understand that climate change poses a direct
economic threat to their businesses,” said Dan Weiss, director for
climate policy at the Center for American Progress, a liberal
research group with close ties to the Obama administration. “They
need to convince their political allies to act before it’s too

Koch Industries maintains ties to the
Tea Party group Americans for Prosperity, which last year
campaigned against Republicans who acknowledged the science of
climate change. The company also contributes money to the American
Energy Alliance, a Washington-based advocacy group that campaigns
against lawmakers that it claims support a carbon price. This year,
the American Energy Alliance says it has spent about $1.2 million
in ads and campaign activities attacking candidates who it says
support a carbon price.  

Robert Murphy,
senior economist at the American Energy Alliance, said his group
was not concerned that it had taken a different position from the
major oil companies. “We’re not taking marching orders from Big
Oil,” he said. 

In fact, Koch
has a longtime resentment of the biggest oil companies.

According to company history, Koch’s
founder, Fred Koch, the father of Charles and David, invented a
chemical process to more efficiently refine oil but was blocked
from bringing it to the market by John D. Rockefeller, the owner of
Standard Oil — the company that was later broken up to make some of
the major oil companies of today, including ExxonMobil.

People at Koch say sore feelings remain
to this day.

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