Rex Tillerson, the CEO of ExxonMobil, gave a speech to the Economic Club in Washington last week in which he laid out the case for a revenue-neutral tax on CO2 and other greenhouse gases (GHGs).

Tillerson reminded his audience of the stubborn fact that fossil fuels will continue to supply almost 60% of the of the worlds’ energy through 2030. Tillerson sees free markets and technology as the best means to bring about change in the world’s energy systems.

He noted that the technology improvements that have allowed natural gas, which was previously unreachable, to be recovered in a cost-effective way. And, while natural gas is not a renewable energy, many see it as a bridge from oil to renewables. In addition, Exxon is investing heavily in algae algae, a next generation biofuel. http://greenlegals.com/2009/06/algae-still-attracting-the-green/

A successful policy to reduce carbon and GHGs, according to Tillerson,
should have:

• Uniform and predictable cost for emissions;
• Government policies that do not arbitrarily picking winners and losers;
• Markets that pick the best methods to reduce emissions through new investments and technology;
• Minimal administration complexity.
• Cost transparency so companies and consumers can assess costs themselves; and
• Global participation.

The current cap & trade legislation does not have those attributes. Tillerson raised concerns not only that the cap & trade system results in volatile prices for emission allowances, (which will undermine investments in advanced technologies), but also that the emission market could be manipulated.

Instead of cap & trade, Tillerson endorses a revenue-neutral carbon tax because:

• Under a carbon tax policy, costs can be uniform and predictable;
• The government doesn’t pick winners and losers among industries and technologies;
• Corporations and consumers are all encouraged to reduce their GHGs to reduce their taxes;
• A truly revenue-neutral policy will end up lowering the tax burden of other taxes, such as payroll taxes; and
• It may be a more “viable framework to win participation from other nations.”

Tillerson acknowledges that no one in Washington wants to discuss a new tax, but the cap and trade approach is, at the moment stalled in the Senate, and although cap & trade may not be called a tax but it will undoubtedly result in higher costs for everyone.

Further reading:

Also published at Environmental Headlines Examiner - http://www.examiner.com/x-17018-Environmental-Headlines-Examiner

Tillerson speech - http://www.exxonmobil.com/Corporate/news_speeches_20091001_rwt.aspx

GreenLegals - “Algae still attracting the green”  - http://greenlegals.com/2009/06/algae-still-attracting-the-green/

Video:  http://www.cleanskies.com/videos/rex-tillerson-talks-carbon-pricing
Photo: http://www.sxc.hu/photo/462560/

Sunset at oil rig - http://www.sxc.hu/photo/434372/