Wall Street Journal: Exxon Touts Carbon Tax to Oil Industry

By Amy Harder & Bradley Olson

Exxon Mobil Corp. is ramping up its lobbying of other energy companies to support a carbon tax, marking a shift in the oil giant’s approach to climate change as the industry faces growing pressure to address the politically charged issue.

Exxon’s official position has long been the same—a carbon tax is the best way to address the risks of warming temperatures—but it has done little to actively advocate for that goal in recent years. Lately, Exxon has been making the case with its U.S. counterparts to support a carbon tax, arguing that the industry must not oppose all climate policies, according to people familiar with Exxon’s thinking.

Top Exxon officials have been more vocal about their support for a carbon tax and have met with Capitol Hill offices about related legislation, according to the company’s recent lobby disclosure forms.

For the past six months, Exxon has been asserting its position more in meetings within trade associations, including the American Petroleum Institute and American Fuel and Petrochemical Manufacturers, according to multiple reports from people who have attended meetings with Exxon officials.

“Of the policy options being considered by governments, we believe a revenue-neutral carbon tax is the best,” Suzanne McCarron, the company’s vice president of public and government affairs, wrote in May in the Dallas Morning News.

A straightforward carbon tax that is revenue-neutral—meaning other taxes should be lowered to offset the impact—is far preferable to the patchwork of current and potential regulations on the state, federal and international levels, according to Exxon spokesmanAlan Jeffers.

Mr. Jeffers said Exxon’s position hasn’t changed and pointed to a recent House vote on a resolution condemning a carbon tax and the global climate deal in Paris agreed to last December as reasons for the increased debate within the industry.

A carbon tax would put a price on each ton of carbon emitted. Where in the production and consumption process the tax would be levied depends on individual proposals.

“Previously Exxon’s positioning on a carbon tax had been passive—‘Hey, we’re not loving it, but we’re not going to get in the way of it,’ ” saidMichael McKenna, president of the energy lobbying firm MWR Strategies, whose clients include oil and refining companies, but not Exxon. “In just the last six months, there’s been an uptick in how they are asserting themselves in meetings about how to address this issue.”

Exxon, the world’s largest publicly owned oil company, arguably faces more pressure than other firms to show concern about climate change. At least two Democratic state attorneys general are investigating whether the oil giant has conspired to cover up what it knows about the impact of global warming.

The U.S. Virgin Islands attorney general agreed to withdraw its subpoena, according to a legal filing Wednesday. Exxon is challenging these investigations and has described them as politically motivated attacks that violate its constitutional rights.In actively pushing for a carbon tax behind the scenes, Exxon becomes the first major American energy company to move closer to the positions of European energy firms, including Royal Dutch Shell PLC and BP PLC, which have publicly advocated for a price on carbon.

Congress has made it clear it is unlikely to consider a carbon tax soon, especially under Republican control. But some in the energy industry believe a serious debate on additional climate measures isn’t far off, especially if Democrat Hillary Clinton wins the White House in November.

The House vote in early June to condemn a carbon tax accentuated a widening rift within the industry over how, or whether, to engage on climate policy. The split is pitting smaller companies, especially domestic refiners, against multinational and European firms.

One senior U.S. oil executive said Exxon, like some other oil and gas companies, could also have a financial motive for supporting a carbon tax. Such a tax would make coal more expensive compared with natural gas. Exxon, beyond its oil business, is the U.S.’s largest natural-gas producer.

Mr. Jeffers, the Exxon spokesman, said his company has invested in gas in anticipation of climate policies that make coal more expensive.

Few, if any, U.S. companies other than Exxon have called for a carbon tax, and many oppose any plan designed to cut emissions. Chevron Corp. CEO John Watson, for example, is one of several outspoken opponents of a carbon tax.

Exxon’s shift is unfolding against the backdrop of a landmark deal to cut greenhouse gas emissions struck by roughly 200 nations last December in Paris. Energy companies are also facing increasing pressure from federal regulators, and their own shareholders, to disclose potential business risks from the global efforts to reduce greenhouse gas emissions. Exxon shareholders in May narrowly voted down a resolution calling for a stress test to determine the risk that efforts to curb climate change pose to its business.

Exxon first publicly supported a carbon tax in 2009, presenting it as preferable to cap-and-trade, a market-based system for controlling carbon emissions that the Democratic-controlled Congress then appeared ready to enact. Cap-and-trade died in the Senate, the Republicans later captured Congress, and President Barack Obama has since pursued regulations to cut carbon emissions instead.

Some advocates of strong climate policy are skeptical Exxon’s shift signals a deeper change. “We’ve seen so little movement out of any of their lobbying front groups,” said Sen. Sheldon Whitehouse (D., R.I.), who introduced a bill last summer to impose a carbon tax. The measure hasn’t advanced in the Senate.

Mr. Whitehouse’s staff recently met with Exxon lobbyists, but the senator said, “The meeting was more just an exploratory feeler to see about further conversations.”