Soon-to-be Secretary Tillerson might support a carbon fee
By Mary Gable
After gaining the support of a few key Republicans this weekend, it looks all but inevitable that Rex Tillerson will be our new Secretary of State. Others have written thoughtfully and thoroughly about what appointing the former chief of ExxonMobil implies for our world and the United States’ place in it.
The fact remains that Tillerson, as Secretary of State, will have a unique opportunity to embrace a carbon fee for the benefit of the economy, the environment, and America’s international leadership position. Here’s why he should.
A possible voice of reason
Secretary Tillerson accepts the reality of climate change. This alone sets him apart from President Trump and much of his cabinet and senior staff. He has supported America’s participation in the Paris climate agreement (which Trump has vowed to “cancel”).
He’s also in agreement with CCL and other leading climate researchers on the most effective solution: a revenue-neutral price on carbon, reiterating his support as recently as his confirmation hearing this month. “Let’s simplify the system,” Tillerson said. “[A carbon fee] replaces the hodgepodge of approaches that we have today, which are scattered.”
Yet as CEO of ExxonMobil, one of the world’s largest emitters of greenhouse gases, Tillerson largely failed to move beyond rhetoric. ExxonMobil has not lobbied in favor of carbon pricing bills in Congress. In 2015, the company declined to sign a letter, signed by other oil companies, urging Paris climate negotiators to put a global price on carbon. And Exxon is currently facing legal action for allegedly misleading its shareholders and the public regarding its knowledge of the threats of climate change.
As the Trump era begins, the strength of Tillerson’s climate convictions will be put to the test. He understands the science and economics of burning fossil fuels perhaps better than any other member of the new administration. He weighed the evidence and publicly supported a carbon price as a businessman. Will he do so as America’s top diplomat?
The business case for pricing carbon
To determine the answer, it helps to understand why an oil giant would support a carbon fee in the first place.
Many fossil fuel companies have called for regulations on their activities in the form of a carbon fee. The reason is predictability. Because a carbon fee would be implemented transparently and would increase reliably, companies could make investments with a clear sense of future prospects.
“Other regulations, like cap and trade schemes, don’t provide a level playing field,” explains Bill Bray, a CCL chapter lead and member of CCL’s Conservative Caucus, as well as a former engineer at ExxonMobil. Regulations can also change with political tides. “That’s a nightmare for companies trying to plan projects that last 20 or 40 years.”
By contrast, a carbon fee would be predictable in its implementation. As Tillerson himself explained in 2009, “It avoids the costs and complexity of having to build a new market for securities traders or the necessity of adding a new layer of regulators and administrators to police companies and consumers. And a carbon tax can be more easily implemented. It could be levied under the current tax code without requiring significant new infrastructure or enforcement bureaucracies.”
A carbon price would also help mitigate climate impacts. A steadily increasing price would send a strong market signal that it’s time for fossil fuel companies to shift their business model away from emissions-heavy practices—otherwise, their bottom line will be affected.
What about Tillerson’s new role? As Secretary of State, Tillerson is responsible not for planning drilling investments, but managing America’s relationships with the world.
The reasons to support a carbon fee remain compelling. For one, putting a price on carbon would send a signal to the world and position the United States as a leader in addressing climate change. “No one country is going to solve this alone,” Tillerson said of the Paris agreement during his confirmation hearing. “I think we’re better served by being at the table than leaving the table.”
He’s absolutely right. And if the U.S. exits the Paris accords or fails to meet its climate pledges, Tillerson will have far less leverage when it comes to negotiations on other global issues.
Fighting climate change with a carbon fee would also help protect our national security. Both the Pentagon and the United Nations recognize climate change as a security risk, as conflicts over land and resources trigger mass migrations and disrupt global economies. A carbon price could help keep these outcomes in check by reducing emissions and moving the climate toward more stability.
In addition, a carbon fee would strengthen American businesses and promote energy independence. The Carbon Fee & Dividend proposed by Citizens’ Climate Lobby would impose a tariff on imports from non-carbon-taxing nations, which would discourage businesses from relocating overseas. By increasing the price of burning carbon, a carbon tax would incentivize development of renewable energy sources. It would also stimulate the domestic economy, creating an estimated 2.8 million jobs, according to a study by Regional Economic Models, Inc.
An influential position
Rex Tillerson helped grow ExxonMobil into one of the most profitable companies in the world. Now, he is the leading international envoy for the world’s most powerful nation.
Pricing carbon aligns with Tillerson’s roles as an engineer, a businessman, and a diplomat. By supporting a carbon fee as Secretary of State, he has an opportunity to help bring about a climate solution supported by scientists and economists; provide certainty for industry, including the one in which he built his career; and elevate our country’s reputation on the global stage.
But will he? The best analogy could be Tillerson’s ascent to the helm at Exxon. When he inherited the organization, it didn’t seem to see any need for climate action. Bray says, “Tillerson didn’t make climate action a priority, but he did reverse the company’s public position on climate change. Three years later, he came out in favor of a carbon tax. I’d expect about the same with him leading the State Department.”
Even this mild stance could be significant. “President Trump won’t pay attention to activists,” says Bray. “But he’ll listen to Tillerson. If he speaks out on pricing carbon, Tillerson could make more headway with Trump than all the environmentalists put together.”
It’s a long shot, which is one reason we’ll continue our crucial work building relationships and educating every member of Congress on this issue. But if Tillerson does speak out, the impact could be immeasurable.