Exxon Mobil is supposed to be the biggest “climate criminal” of all, and so it discombobulated the environmental Left in 2009 when CEO Rex Tillerson — now Donald Trump’s pick for secretary of state — endorsed a carbon tax to discourage greenhouse-gas emissions and mitigate climate change. Exxon holds that position to this day.
Environmentalists posited cynical reasoning behind Exxon’s support for taxing carbon dioxide: Exxon is supporting a measure they know will never become law as cover for opposing more popular legislative solutions, such as a cap-and-trade scheme like the one Democrats were trying to pass through Congress at the time.
Cynicism is always appropriate when analyzing corporate lobbying. Maybe Exxon really has supported a less flexible, scarier-sounding carbon tax because they know it will have a harder time becoming law than a more flexible more business-friendly cap-and-trade scheme.
But if you study that 2009 cap-and-trade legislation, an innocent and civic-minded explanation of Exxon’s stance also presents itself: Cap-and trade, like other clever schemes for reducing greenhouse gasses, is absurdly inefficient. Such systems rapidly devolve into crony corporate-welfare boondoggles in which everyone rushes to figure out how to cash in on them. If your policy goal were to reduce greenhouse-gas emissions, then you would simply tax greenhouse-gas emissions.
This more innocent explanation (Exxon supports carbon taxes because they are more efficient) is tied to the cynical explanation (Exxon supports a carbon tax because it won’t pass) by a corrupt fact about Washington: The more inefficient a policy proposal, the more supporters it has, because inefficiency means free profits for some politically connected middleman.
Waxman-Markey was the 2009 climate bill that passed the House. It was a cornucopia of corporate welfare, which is part of why it cleared the lower chamber. Each subsidy and carve-out won the support of some corporation or industry lobby.
Cap-and-trade was the central feature of the bill. In brief, cap-and-trade means that the federal government requires manufacturers, power plants, and other emitters to “pay for” their greenhouse gas emissions with carbon credits. The boondoggle comes from how the credits are doled out to whom, or which activities the government rewards with free credits.
“If you didn’t auction the permits,” former White House budget director Peter Orszag explained back then, “it would represent the largest corporate welfare program that has ever been enacted in the history of the United States.”
Waxman-Markey of course, would not have auctioned the permits — it gave most of the away to the industries who lobbied hardest, thus buying their support for the bill. Coal giant AEP, for instance, endorsed Waxman-Markey because of how many free credits the bill gave to coal-fired power plants.
General Electric’s John Rice explained in a letter to other executives, “On climate change, we were able to work closely with key authors of the Waxman-Markey climate and energy bill, recently passed by the House of Representatives. If this bill is enacted into law it would benefit many GE businesses.”
The bill promised profits for GE wind energy businesses, carbon-capture businesses, and natural-gas businesses, among others.
Monsanto loved the bill, too, because it would provide carbon credits for an agricultural practice called no-till farming. It turns out that no-till farming requires extra spraying of herbicides, a product whose market Monsanto dominates. That in turn requires seeds genetically engineered to withstand herbicides, another Monsanto specialty. And — surely no surprise — this provision was crafted by a consulting firm tied to Monsanto.
Nike supported Waxman-Markey and earned great plaudits for quitting the Chamber of Commerce’s board of directors over the Chamber’s opposition. Nike’s manufacturing is almost all overseas, in poor countries with lower labor costs and worse environmental controls than the U.S. has. Nike’s smaller competitor, New Balance, manufactures in the U.S. and would have been subject to the new law.
So Waxman-Markey would have hurt Nike’s smaller competitor, barely dinged Nike at all, and driven market share towards Nike’s Asian plants, which are likely dirtier and certainly require more carbon-fueled shipping.
The pattern is this: Proposals in Washington generally only pass into law (or get close, as with Waxman-Markey) if they have the support of the companies most affected by them. And the best way to ensure that support is to load the legislation with goodies or complexities that reward those companies, even at the expense of undermining the stated purpose of the bill.
Cap-and-trade’s inefficiency was its greatest virtue to those on K Street and on Capitol Hill.
Which brings us back to Rex Tillerson’s preferred climate-change legislation. Tillerson and Exxon didn’t ask for special subsidies for green fuels, or regulations that would crowd out all but the biggest oil companies. He asked instead for a uniform, simple rule.
If you want less of something — in this case, carbon dioxide — tax it. The political flaw of this approach is that it doesn’t butter anybody’s bread.
Tillerson may be wrong that reducing greenhouse gases is worth the cost to consumers and businesses that a carbon tax would impose. Tillerson may have other cynical motives for supporting a carbon tax. But when liberals in coming weeks attack Tillerson as a polluter and then wave away his carbon tax support as cynical, they are using “cynicism” to mean opposition to corporate welfare.
Timothy P. Carney, the Washington Examiner’s senior political columnist, can be contacted at [email protected]. His column appears Tuesday and Thursday nights on washingtonexaminer.com.
