Why Big Oil Wants A Carbon Tax
Let’s assume for the sake of this discussion (despite real-world evidence to the contrary) that all corporations only act in rational ways they think will maximize profits. How, then, might we understand the moves by multinational oil conglomerates in favor of a tax on carbon?
Late last month, six oil companies, including BP and Royal Dutch Shell, wrote a letter to the United Nations (UN) in which they argue that “a price on carbon should be a key element” of inter-governmental action to address climate change: “Pricing carbon obviously adds a cost to our production and our products – but carbon pricing policy frameworks will contribute to provide our businesses and their many stakeholders with a clear roadmap for future investment, a level playing field for all energy sources across geographies and a clear role in securing a more sustainable future.”
So one clear advantage of governments pricing carbon through a tax would be stability and predictability. Even though the cost of the products these oil companies produce would be increased, such increases would be transparent and relatively forthright, as opposed to the uncertainty that comes with, as the companies put it, “participating in existing carbon markets and applying ‘shadow’ carbon prices in our own businesses to test whether investments will be viable in a world where carbon has a higher price.” Corporations certainly like predictability and stability in legal and regulatory regimes, and it is prudent for them to be proactive in shaping those regimes wherever possible.