Why Oil Companies May Be Our Best Hope for Climate Change Legislation in Congress

In the 21 years since the Valdez oil spill in Alaska, Exxon has been a virtual poster child for corporate environmental villainy. Tied irretrievably to the notorious March 1989 spill, the company has added other environmental offenses to their record, becoming a constant target of activists whenever they needed an oil bully to kick.

But today, ExxonMobil, however unlikely, may just be a powerful potential partner for radical environmentalists who have grown weary of the give and take surrounding "cap and trade" climate legislation and have yet to give up hope for passing a meaningful climate change bill in 2010. That is, if environmental activists will be willing to work with Exxon execs.

"Climate change is an issue we take seriously and believe responsible steps should be taken to address the risk," said Ken Cohen, the oil company's vice president of public affairs,to the Washington Post a few years ago. "We believe a revenue-neutral carbon tax is a more efficient policy option to reduce emissions...and is more able to be applied on a global basis than a cap and trade system."

Then, using terms that one might expect from suspicious middle-class families, tea-partiers, and leftists, Cohen added, "We should not be creating a complex derivatives market for a new commodity called an 'emission allowance' as the recent financial crisis demonstrates. There is no need to create an opportunity for traders to extract profits from a trading system."

Cohen's critique of the proposed "cap and trade" framework -- long the favorite of Washington DC insiders -- sounds almost identical to that of the system's chief environmental critics. Under that framework, a cap would be set on carbon emissions. Then, large emitters would be able to trade for "clean air" credits created by companies either performing activities that allegedly reduce net carbon (like planting trees or controlling emissions) or deploying new energy technologies that displace carbon, like replacing coal with wind.

"The official position of the Sierra Club was that the House cap and trade bill was an excellent start, and the goal was to strengthen and improve the legislation in the Senate," said David Bookbinder, the Sierra Club's chief climate counsel. "My personal view was that the bill was terrible."

The disappointing results from Copenhagen, and changing political dynamics in Washington, DC due to Democrats recent loss of a Senate seat in Massachusetts, means that "cap and trade" may have crashed and burned for the fourth consecutive time in Congress. "In my view, there is zero chance that any [cap and trade] climate legislation will pass this year," predicted Bookbinder. "The only thing that really makes sense is a carbon tax -- but that's the big "T" word," he concluded.

Ironically enough, ExxonMobil, which has a dubious record at best when it comes to climate change, and other large energy corporations may be the last hope for climate change legislation this year. If they see an opportunity for a "Plan B" carbon tax, they could bring with them the prized 60th Senate vote environmentalists need to avoid a filibuster against climate legislation.

But can radical environmentalists work with ExxonMobil, a company that has long personified what is wrong with corporate America?

Seasoned eco-warriors like Randy Hayes, founder of the Rainforest Action Network and former head of the International Forum on Globalization, are happy to have oil companies such as ExxonMobil supporting a carbon tax.

"Either a cap and trade or a carbon tax can be made to work to reduce the damage our society does, but the carbon tax is cleaner and my choice," said Hayes. He went on to say that "I can't imagine the version [of the carbon tax] that ExxonMobil, the Wall Street Journal, or the Financial Times want is the same one that nature needs. That said, we need the captains of industry to back a plan commensurate with the scale and timing of the problem. Governments are too often lackeys to big industry. They are more often followers not leaders. And environmental groups don't hold enough cards to make a real solution happen."

He warned that oil and other corporate interests "had better speak out loudly for bold solutions or our species is likely toast. The fate of the future is on the shoulders of industry. We cannot ask too much to support natures' needs and we had better not ask for too little."

Chevron versus ExxonMobil

Chevron has now assumed ExxonMobil's former role as the favorite punching bag for human rights activists. How does ExxonMobil compare to Chevron on human rights?

"I've been working with these two companies for about ten years," commented Bennett Freeman, a senior vice president with Calvert, one of the oldest social responsible investing companies. "Chevron is a laggard on human rights. They are viewed somewhat as a renegade, hence the focus on their operations in Ecuador and Nigeria."

In contrast, Freeman claimed that "ExxonMobil has made remarkable progress on the human rights front," ranking them at the top of all oil companies, (although Alaskans who live around the Prince William Sound may disagree). That said, he also acknowledged ExxonMobil was the only company among the Fortune 50 that has yet to ban discrimination for the gay community, a major shortcoming. "Chevron is more of a master of environmental issues, though ExxonMobil seems to have recently had a dose of reality pills, and is taking climate change seriously," continued Freeman of Calvert. "For example, they recently invested $600 to $700 million on developing biofuels from algae." Referring to Chevron's "human energy" advertising campaign, he added: "ExxonMobil does not do the warm and fuzzy thing well. They are very straight forward. If they tell you 'no,' they mean 'no.' They have a "command and control" culture that helps drive commitments through the company. With Chevron, he said, "social and environmental initiatives often get bottled up in the general counsel's office."

ExxonMobil's most unexpected position, at least from the standpoint of some environmentalists, is Tillerson's public stance in favor of a tax on carbon. In a speech on October 1, 2009, Tillerson outlined a list of principles to guide any effective carbon regulation program: simplicity; predictability; transparency; and global participation. Tillerson then argued that only a carbon tax met all of these criteria. "I firmly believe it is not too late for Congress to consider a carbon tax as the better policy approach for addressing the risks of climate. Indeed, there has never been a more opportune time for Congress pursue this course of action."

"We would welcome the support of ExxonMobil for a carbon tax," offered Bookbinder of the Sierra Club, the environmental organization whose membership often veers to the left. "It may well be up to corporations whether anything happens on the climate change front this year. Do they want a carbon tax or a complex regulatory system from EPA and all of the states going off in all kinds of direction?"

"I spoke with ExxonMobil two months ago about a potential carbon tax," revealed Freeman of Calvert. "ExxonMobil feels that a carbon tax has less clutter than cap and trade, which creates an Enron-like market that will dominated by Wall Street."

Despite these promising signs of change happening within the corporate culture at ExxonMobil, skeptics have plenty of ammunition that the company's public and private stance on climate change still appears to be in conflict. For example, at the company's last shareholder meeting in Houston, Texas, shareholders report that Tillerson refused to acknowledge climate change was real. Recent reports imply the company was still funding scientist skeptics in the lead up to Copenhagen, though a few stakeholder engagement experts claim firm evidence of ExxonMobil's involvement is lacking, going so far as to say that employees can get fired if they publicly question the reality of human-caused climate change.

Is a Carbon Tax Our Last Hope?

Elaine Kamarck, with the Kennedy School at Harvard University, and co-chair of the U.S. Climate Task Force, supports a carbon tax whose proceeds are rebated back to consumers. She thinks the political viability of such a carbon tax has actually increased over time.

"If a consensus emerges that cap and trade is just not going anywhere - and that seems to be just sinking in - then they will go back to the drawing board and examine other options," she said. "You have to realize that cap and trade was initially being pushed before the economy fell apart. Markets were God and Wall Street was still filled with heroes. In that kind of political environment, cap and trade had some 'umph' behind it. Now, Goldman Sachs and the rest of Wall Street are in the same category of bad guys as big polluters." Of course, oil companies such as ExxonMobil and Chevron are also hardly winning popularity contests these days.

Most economists also share common ground with ExxonMobil and radical environmentalists. "I view a carbon tax as Plan A, not Plan B," said Kevin Hassett, an economist with the American Enterprise Institute, a conservative think tank. "I've always worried about the danger of letting politicians design a cap and trade system, as they tend to create a parody of economic policies by giving away permits to pollute to their political campaign contributors and other evil things. Cap and trade is attractive to politicians since it doesn't sound like a tax - but it really is a tax."

Other environmental groups, such as Greenpeace, are not convinced that anything meaningful can come out of Congress, period. "The divisions within the environmental community are as bad as I have ever seen," according to Damon Moglen, Global Warming Campaign Director, Greenpeace USA. Plan B for Greenpeace right now is trying to jump-start a grassroots movement akin to the anti-nuclear movement. "Right now, there is no deep-rooted grassroots uprising, and Greenpeace is contemplating trying to spark a unified, broad-based movement that taps into the anger of the populace now turning away from Obama to create real change in the US," he said. The real test will come within the next month.

Will ExxonMobil use its substantial political muscle to push for a carbon tax? I wouldn't bet on it, but stranger things have happened inside the Beltway.