Posted by: Matthew Hoffmann | December 5, 2013

Exxon Thinks a Carbon Price is Coming. Is it?

On December 5, 2013, the New York Times front page (!) proclaimed “Corporations Prepared to Pay a Price for Carbon Waste” and Coral Davenport’s excellent story reported on a recent CDP Report detailing how “More than two dozen of the nation’s biggest corporations, including the five major oil companies, are planning their future growth on the expectation that the government will force them to pay a price for carbon pollution as a way to control global warming” (Quote from Davenport). The CDP report describes how a number of major US corporations (e.g. Exxon, DuPont, Google, Microsoft, GE, Duke Energy, Delta) are now factoring in a price on carbon when undertaking long-term financial planning. They assume a carbon price is coming.

Davenport’s article argues that this is “significant because businesses that chart a financial course to make money in a carbon-constrained future could be more inclined to support policies that address climate change” (Davenport). This is, of course, the key question that the article and the CDP report entail. The assumption and logic is that if corporations factor in carbon pricing in their financial planning then they can or will become the foundation, or at least key members, of a political/economic coalition that advocates more stringent climate policies in the US and even internationally. This is certainly possible. But to come to fruition, the latent understanding of the likelihood or even the inevitability of regulation embedded in the financial planning must translate into active advocacy. I see two pathways for this logic to come to pass:

1. Factoring in carbon pricing catalyzes leadership from major corporations on climate policy There are hints of this optimism in the article and in the stated support of Exxon for a revenue neutral carbon tax. However, it is an open question whether major corporations are going to get out ahead of the political process on this issue. It is probably not likely unless they see clear benefits to their bottom lines (through competitive or reputational advantage). I am not sure that these are so clear…yet. Regardless of the difficulty of this pathway, the softening of corporate opposition to climate policy that the CDP report may indicate that making political progress on climate change will be easier in the coming years.

2. Factoring in carbon pricing catalyzes leadership from elsewhere on climate policy Such political progress may be easier because the move of major corporations to incorporate carbon pricing clears the path to leadership and coalition building from elsewhere. Politicians committed to climate action, climate activists, and other economic actors (especially the renewable energy industry) can use the latent acceptance of climate policy demonstrated by corporate financial planning as a political resource to build support for broader and faster action on climate change in the US. Major corporations, in multiple sectors, can now be seen as potential allies (and at least not opponents) in efforts to move climate policy forward. This should embolden and strengthen those political forces already working to reverse the decades of national inaction on climate change.

Beyond these direct pathways, the move to factor in carbon pricing amongst major corporations has more subtle effects that augur for action on climate change. It continues the process of normalizing some key understandings that are crucial for moving quickly on climate change: 1. the idea that corporations have a responsibility to measure and manage carbon; 2. the idea that regulation on climate change is coming (even if slowly) and inevitable; and 3. the idea that climate change is an everyday concern that needs a line item in regular corporate budgeting. All of these work to mainstream climate change–to turn the problem from something extraordinary into an issue that must be dealt with on a day to day basis by a whole host of people and corporations and political jurisdictions from the local to the global.


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