Upon Further Review … What did ExxonMobil Really Say at the Woodrow Wilson International Center?

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!