A Free-Market Energy Blog

Exxon Mobil and the Carbon Tax: ‘Upon Further Review’

By Robert Bradley Jr. -- January 10, 2017

“With a new political outlook in Washington, DC with climate and energy policy, Exxon Mobil should formally reject both cap-and-trade and a carbon tax.”

Rex Tillerson, whose confirmation hearing is scheduled for tomorrow, presided over a major public policy change while CEO of Exxon Mobil, reversing the prior policy of the principled realist Lee Raymond. Political forces, as well as a doomed attempt at appeasing its enemies (ending up in the state State Attorney General investigative war), led Exxon Mobil to reluctantly embrace a tax on carbon dioxide (CO2) emissions.

My interpretation of Rex Tillerson et al.’s (failed) policy shift finds support for “it was just PR” rather than a fundamental belief in climate peril. As such, this shift is easily reversible by Exxon Mobil’s new CEO, Darren Woods.

ExxonMobil’s aboutface came with Obama’s victory in 2008, as well as the contentious political battle over cap-and-trade the next year. In a recent article in the New York Times, “At Exxon, Leading Shift In Its Stance on Climate; Some Say ‘It Was All P.R.,” author John Schwartz tells this story.

At a retreat in October 2008, [Bennett] Freeman spoke with executives about human rights and climate change. With the election close at hand, he recommended the company support cap and trade.

In an interview, Freeman … recalled telling [Exxon Mobil’s Ken] Cohen that [CEO Rex]  Tillerson needed to give a major speech in Washington shortly before Mr. Obama’s inauguration that would lay out a strategy in line with political reality.

Mr. Cohen, he said, told him that the company would support action, but that it would back a carbon tax, not cap and trade.

Mr. Freeman said he pressed the point: “You guys don’t have the credibility to put forward a carbon tax when that’s not on the table. You’re going to have to embrace cap and trade if you’re going to be seen as credible.”

But Mr. Cohen, he recalled, told him that cap and trade, by creating marketplaces for fuel producers, utilities and other large businesses for exchanging carbon credits, would create a windfall for emissions traders.

Ask James Hansen about cap-and-trade, or what should be called cap-and-cronyism. Exxon Mobil’s Cohen had the support of the scientific father and leading activist behind the climate scare; Bennett Freeman did not.

Back to Tillerson

That major speech was given at the Woodrow Wilson International Center in early 2009. In the telling of the climate activists, Tillerson’s presentation was nearly as important as BP CEO John Browne’s ‘Beyond Petroleum’ talk at Stanford University in 1997. But a closer review of his talk (see the repost from 2009 below) reveals support for a carbon tax as a lesser-evil stance–and one that allowed Exxon Mobil to fight–and fight hard they did–against cap-and-trade.

After all, a $50 per ton carbon tax would equate to about $0.45 increase in the cost of a gallon of gasoline. EXXON MOBIL PUSHES GASOLINE TAX is hardly a headline that the post-Tillerson brass would want.


Here is my original post at regarding Tillerson’s Woodrow Wilson speech (MasterResource: January 15, 2009).

Last week I blogged about the news accounts of ExxonMobil’s coming out in favor of a carbon tax. I was too hasty. I should have read Rex Tillerson’s speech first–and very carefully. Mr. Tillerson did not call for a carbon tax as reported in the Wall Street Journal. Deep in his speech, Tillerson argued that carbon taxation is better than cap-and-trade as a regulatory program.

If given the choice between the two, most economists, and even most free-market types, would say the same thing. But a lot of us would also say we want neither cap-and-trade nor a carbon tax by government. Keep the lid shut on that Pandora’s Box. Do not call CO2 a pollutant. The planet is not in peril, judging by the best science, and climate challenges can best be addressed by market adaptation and wealth creation rather than by political (non)solutions. Thus, Ken Green of AEI has shifted his position from positively favoring a revenue-neutral carbon tax to favoring such a tax as preferable to a cap-and-trade regulatory program. There is a big difference.

Now back to the speech. Tillerson’s preference for a tax (“There is another policy option [than cap-and-trade] that should be considered …”) did not preclude the option of the status quo. And in the context of the rest of the speech, there is nothing to suggest that the only choices are between less preferred and more preferred regulation.

Tillerson talks about “managing the risk of greenhouse-gas emissions” in the context of providing affordable energy to a growing population, particularly in the developing world. But managing the risk does not necessarily mean going beyond no-regrets reductions in energy-related emissions. Cost/benefit analysis can conclude that adaptation to climate change is more effective than government mitigation policies, particularly given the temperature trends indicating a lower climate sensitivity to GHG forcing than some or many climate models suggest.

The speech is forceful: Energy and political realities point toward a continuing primary role of fossil fuels for the next decades. There is an imperative for economic recovery and future economic growth. This means producing and using a lot more of our best energies.

My earlier post “Has ExxonMobil Bought Into Climate Alarmism” answered in the negative. And having spent more time studying Tillerson’s nuanced speech, I believe the policy option of unregulated CO2 remains a viable option in the minds of the great majority of the energy community. I also believe that the majority of the public is thinking just the same way: be realistic, and give us our energy!


  1. John W. Garrett  

    As a shareholder of ExxonMobil, Royal Dutch Shell, Chevron and BP (among other hydrocarbon producers), it disgusts me to see them pandering and groveling before the purveyors of pseudoscience.

    The work done by Anthony Watts, Richard Lindzen, Andrew Montford, Steve McIntyre, Judith Curry, Roy Spencer, Bill Gray, John Christy, Willis Eschenbach, William Happer, Jo Nova and a host of others has been an enormous service to the well-being of humanity. If you haven’t seen this series of articles “The Greatest Scientific Fraud of All Time” by “The Manhattan Contrarian” (Francis Menton, a retired partner of Wilkie, Farr, Gallagher), I commend them to your attention:


  2. Potpourri  

    […] Rob Bradley talks about Exxon and its support for a carbon tax. (Did you know […]


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