ExxonMobil vs The State: How Governments Can Lower Corporate CO2 Emissions

First published in UCD College Tribune

Updated 15/10/2019

A report released in 2017 found that over half of all global emissions since 1988 have been produced by just 25 companies. When you take into account the 100 most environmentally damaging companies, known as the ‘Carbon Majors’, that figure rises to over 70%. In October of 2019 (during rebellion week), the Guardian reported that just 20 companies have been responsible for 35% of all emissions since 1965; the point at which experts say that both government and industry were fully aware of the dangers of fossil fuels.

Even so, we are constantly told that individual actions like using canvas bags and taking the bus will be enough to avoid the catastrophic effects of climate change. The truth is that the onus is on the major greenhouse gas emitters like Exxon Mobil and Shell Oil to simply stop extracting and distributing fossil fuels. Unfortunately, the pressures of the competitive market mean that they are not going to do this without a push.

As things stand, it makes more financial sense to use fossil fuels than renewable alternatives. However, there are many ways that governments can curtail the emissions of Carbon Majors through financial and legal incentives. A fundamental of the modern nation state is that the legislator should tax practices which they aim to discourage in society. This is why smoking is so expensive. Governments realised that by taxing cigarettes at an extremely high rate, they could better public health and make some serious dough while they were at it.

By raising the price of smokes, governments can gradually decrease the number of smokers which in turn decreases the amount they have to spend on the treatment of diseases like lung cancer and emphysema. In theory, this increase in revenue can be put towards things like medical services and anti-smoking campaigns. This essentially means that governments can shift the costs that smoking imposes upon society onto those who actually smoke.

Similarly, governments can tax the use of dirty fuels which emit CO2 and use the extra cash to invest in renewable energy research. Some form of ‘carbon tax’ has already been introduced in 46 countries, including Ireland, Canada and Australia. Carbon tax means that fuels which result in higher carbon dioxide emissions are taxed at a higher rate, a policy which is all ‘stick’ and no ‘carrot’.

By taxing carbon, governments can cut into the profits of companies who would otherwise be making a killing on fossil fuels. The hope is that Carbon Majors will then be incentivised to move toward renewable energies like solar and wind power. While a higher carbon tax would mean an increase in the prices of fuels like petrol, coal and gas for the consumer, it would also mean that clean energy sources could become more competitive.

The other side of the coin is renewable energy subsidies; the ‘carrot’ to the ‘stick’ of carbon tax. The government invests money in order to lessen the costs of energy from sustainable sources. The top 6 countries that subsidize renewables spend a combined total of 40 billion dollars a year. Unfortunately, we spend more than 5 trillion a year globally to subsidize fossil fuels. That’s 6.5% of the global GDP.

Subsidies can go a long way towards decreasing the financial loss Carbon Majors and consumers suffer when switching to cleaner sources of energy. By both taxing fossil fuels and subsiding renewables, governments can gradually make it so that renewables are the sounder investment. Since financial considerations are the only considerations corporations are likely to take on board, the use of both of these policies could go a long way towards reducing the footprint of Carbon Majors.

While straight-up carbon taxes are gaining popularity worldwide, there is a similar but more widely used group of policies called carbon ‘cap and trade’ schemes. These schemes involve setting a limit on how much CO2 can be produced in total then either giving or auctioning ‘credits’ to companies which equal that limit. If companies exceed their allowance, they are liable to incur very serious fines or even legal action. One way that companies can exceed their allowance is by buying (or trading) credits from other companies who are using fewer fossil fuels than they are allowed.

With a carbon tax, companies can just take the hit and produce as much CO2 as they can afford. The advantage of cap and trade schemes is that while Carbon Majors still take a huge financial hit by using fossil fuels, there is a fixed upper limit on how much they can produce. Another advantage is that companies which can reduce emissions cheaply can then sell their remaining credits to companies which are struggling to meet their allowances and make a profit. In this sense, cap and trade schemes combine the carrot and the stick into one efficient bundle.

The main criticism of cap and trade schemes is that it allows Carbon Majors to carry on polluting as they’ve always done since it is still cheaper to pay for extra credits than to switch to 100% renewable energy sources. However, smart legislation such as lowering the upper limit on carbon emissions and thus raising the price of credits at auction should be enough to make these schemes workable. The main obstacle to these amendments, as with all climate-protecting plans, is that the companies who are profiting from the destruction of the environment can use their astronomical profits to lobby for the weakening or outright removal of cap and trade schemes in the countries in which they operate.

Perhaps the main issue with putting a price on carbon is that the costs will be incurred not by major polluters but rather by the poorest people in society. When governments make it more expensive to sell fossil fuels, fossil fuel sellers make it more expensive to buy them. This kind of ‘climate austerity’ means that the plumber who needs to drive their van all day for work takes a huge financial hit while the bottom lines of the companies who sold the plumber the petrol remain despicably intact.

A possible response to this line of reasoning is that the consequences of leaving climate change unchecked will affect working class people far more severely than an increase in tax. The CEO of Exxon Mobil will not suffer from the food or water shortages brought on by climate change. Truckloads of water will be delivered to their mansion to hydrate their petunias while the working class people die of dehydration. The question becomes whether we are willing to die for our principles, deeply held as they might be.

Another consideration is that only about 10% of the emissions from carbon majors come from the extraction and transport of the fuels. The remaining 90% comes from ordinary people like you and me burning those fuels to power our cars and heat our homes. Given the catastrophic consequences of climate change, I have to say that any government action which reduces energy consumption is positive in my books. Yes, we need system change like building renewable energy infrastructure and getting rid of fossil fuel subsidies, but system change takes time. In the meantime, we must all do our best to reduce our individual consumption.

A more useful response to the problem of climate austerity is that revenue from the tax should be given as rebates to people who cannot afford to pay. Tax the carbon majors and they will raise their prices. Those who can afford to pay extra for fuel do (i.e. those above a certain income threshold) while those who cannot afford it are given rebates which could more than cover the extra cost. This would mean incurring all the benefits of carbon pricing described above without hurting the plumber who is simply trying to make a living.

It is imperative that we do everything we can to curb the power of Carbon Majors to continue their crusade against the environment. Carbon taxes and cap and trade schemes are just two ways in which we can do this and must happen in tandem with every other tactic we can think of. In an ideal world, we would simply make it illegal to extract and burn fossil fuels. Unfortunately, no government is willing to take such drastic measures against entities that in many cases have more money, and thus more power, than the governments themselves.

The CEOs of Carbon Majors are not necessarily evil people. In their eyes, the livelihoods of their many employees rests on their shoulders. What we need to convince such people is that while workers can probably find new jobs, it is very nearly too late to reverse the catastrophic effects of global warming. The question they must ask themselves is whether they would rather be responsible for a few lay-offs on one hand, or the deaths of hundreds of millions of people on the other. The fact is that those are the only options.

3 Comments on “ExxonMobil vs The State: How Governments Can Lower Corporate CO2 Emissions

  1. Re: “…fuels which result in higher carbon dioxide emissions are taxed at a higher rate…”
    You known that’s stupid, because CO2 is NOT a pollutant!
    It’s a lifegiving gas that without which all life on earth would die! All humans, animals, fish, and all plants on earth would cease to exist.
    Due to China and India building and using more coal fired electrical plants there has been a increase of trees and other vegetation which uses CO2 and expels Oxygen which all humans and all creatures need.
    If you don’t believe me, check it out yourself.
    Hey, but I was where you are when I was younger and believed the wrong people; Rachel Carson, Al Gore, etc.
    I was responsible for 60 Million deaths because I believed them and failed to check their lies out!
    I can’t undo those deaths.

    Like

    • Thanks for commenting! One of the purposes of these articles is to open up a dialogue.
      CO2 is not a direct pollutant like carbon monoxide but it is considered a kind of pollutant because it is a greenhouse gas, meaning that it traps heat from the sun inside the earth’s atmosphere.
      Yes, CO2 is indeed necessary for life. However, the amount of extra CO2 and other greenhouse gases that we humans have put into the atmosphere is causing the average temperature of the earth to rise at a very alarming rate.
      For millions of years, CO2 has been around 180-280 parts per million in the atmosphere. Right now, that figure has risen to over 400 parts per million. It’s a classic case of too much of a good thing.
      If CO2 levels rose over the course of millions of years, life on earth would be better equipped to adapt and survive. Unfortunately, humans are causing an increase in CO2 which is so sudden on an evolutionary scale that scientists expect a devastating effect on earth’s biodiversity.
      It is also true that trees remove a huge amount of CO2 from the atmosphere. One of the many ways that humans have raised CO2 levels is by cutting down huge swathes of dense forests which were helping to keep CO2 concentration in check. Often, the wood from those trees is burned, releasing all the CO2 the tree accumulated in its lifetime right back into the air.

      Thanks again for the comment!

      Like

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