Chevron CEO David O’Reilly spoke out last week against the Administration’s plan to use a cap and trade system to limit carbon emissions. His stance against US policy is nothing new.
from a policy standpoint, America has been moving in the wrong direction for a very long time.
David O’Reilly
He further outlines his list of grudges against US policy: taxes, restrictions on oil and gas development, and the belief that we can drill our way to energy independence (although the latter is not policy).
With such a grudge list, his apprehension against a cap and trade system is no surprise. His call for a carbon tax after he berated US policy is.
One of the main reasons why people support a carbon tax to limit carbon emissions is because it is simple and easy to employ quickly. (For other reasons check out the Carbon Center’s rationale.) In addition, it can also reduce emissions as well as a cap and trade system because it increases the cost of CO2. (The debate has become more intense recently as cap and trade legislation is being discussed.) O’Reilly’s decision to support the tax, however, is part business calculation, part negotiating tactic.
O’Reilly wants a stable and predictable business environment. A cap and trade system, which puts a variable cost to a unit of emissions, is intended to create incentives when demand to pollute is high. But the oil and gas industry with its long-term investment does not like short-term instability. Rex Tillerson, CEO of ExxonMobil, derided Europe’s cap and trade system last year, saying it is “all about moving the money around” as people buy and sell emission credits. Although a tax may increase the cost of their products, it would reduce uncertainty in their cost structures, which may be a greater management obstacle.
Cynics argue that he is trying to forestall the debate on climate action by bringing forth unpalatable idea: a call for a tax during a recession, which the American public is loathe to support. After all, it’s highly improbable you will see him lobbying for a $.50 gas tax just as you would not see a CEO of a steel company ask to increase taxes of iron ore.
O’Reilly knows that future climate legislation is near certainty. The more supportive he appears of some type of legislation, the more likely his views will be accepted in the debate.