(Bloomberg Businessweek) -- A few weeks ago, Exxon Mobil Corp. announced that it had joined a group called the Climate Leadership Council. Founded by Ted Halstead, who's been described as "a serial think-tank entrepreneur," and launched in February, the council is devoted to free-market ideas for slowing climate change. Its membership includes oil-and-gas majors such as Exxon, BP Plc, Royal Dutch Shell Plc, and Total SA; conglomerates like PepsiCo Inc. and Procter & Gamble Co.; and such prominent individuals as theoretical physicist Stephen Hawking and Michael Bloomberg, the owner of Bloomberg L.P.
In its founding statement, the council outlined a plan, designed as the basis for a potential legislative package, that would combine a tax on greenhouse gas emissions with a "climate dividend" that would redirect the revenue gathered to taxpayers. The proposed initial tax rate of $40 per ton of carbon dioxide produced would add an estimated 36 cents to the cost of a gallon of gasoline and raise more than $200 billion a year to be refunded directly to taxpayers. Raised gradually over time, the tax would diminish demand for fossil fuels. Simultaneously, the plan would end most federal regulation of greenhouse gas emissions, a goal that President Donald Trump is already pursuing via executive order.
In his own statement on the council's website, Exxon Chief Executive Officer Darren Woods says, “A national revenue-neutral carbon tax ... would promote greater energy efficiency and the use of today's lower-carbon options, avoid further burdening the economy, and also provide incentives for markets to develop additional low-carbon energy solutions for the future.”
A cynic might suggest that Exxon is engaged in a convenient form of greenwashing, at a moment when New York Attorney General Eric Schneiderman is accusing the company of manipulating its carbon numbers to facilitate climate-unfriendly oil extraction. Indeed, Jamie Henn, strategic communications director of the environmental group 350.org, writes in an e-mail that, given the Republican-controlled Congress, “Exxon is signing onto this carbon tax proposal because they know it's dead on arrival."
Woods, for his part, maintains in his statement that the company has favored the idea of a revenue-neutral tax since 2009; now it's merely signing on to a specific plan. And there is a self-interested economic reason Exxon might truly want to see a tax enacted: It would most hurt the most carbon-intensive energy producers, which are coal companies. If coal, which is already slumping, were driven from the electricity marketplace, the primary beneficiary would be lower-emission natural gas, which Exxon produces in abundance. That's what Woods means when he cheers the carbon tax promoting "use of today's lower-carbon options."
There's also a legal reason for Exxon to endorse the council's plan: It seeks to bar lawsuits over carbon emissions. To date, climate-liability suits haven't succeeded, but Schneiderman, New York's activist attorney general, clearly aims to change that. Rather than rely on tort law, he's using the state's expansive securities-fraud statute to pry open Exxon's books. Schneiderman, who has been investigating the company since late 2015, has said he's seeking to prove that it misled investors about how it calculates the potential effect of climate change on its business. (I wrote about the investigation on separate occasions last fall.) Some legal experts have predicted that if other states join in the hunt, an assault on fossil fuel companies could rival the state lawsuits against tobacco companies that led to multibillion-dollar settlements in the 1990s.
Schneiderman hasn't actually filed suit yet. His office and Exxon are mired in disputes over the disclosure of company documents. But the prosecutor said in one recent court filing that the evidence he already has "suggests not only that Exxon's public statements about its risk management practices were false and misleading, but also that Exxon may still be in the midst of perpetrating an ongoing fraudulent scheme on investors and the public." Specifically, Schneiderman has alleged that the company uses two sets of numbers to account for the potential costs of climate-change regulations: a higher public figure that makes the company look more responsible, and a lower one that's secret and used internally to justify drilling for more oil.
Exxon and its lawyers have vehemently denied Schneiderman's allegations, saying in one court filing that the company "truthfully and consistently" revealed that it "addresses potential impacts of future climate-related policies." An Exxon spokesman told Bloomberg: "This investigation is about politics and publicity, not law enforcement."
With a small army of lawyers behind it, the company is sparing no expense in defending against the New York investigation and a parallel one by the Massachusetts Attorney General's Office. Exxon has even launched its own federal-court lawsuit seeking to shut down Schneiderman's probe, based on the allegation that he's abusing his government authority—a claim he denies, of course. It can't have escaped Exxon's attention that if the carbon tax plan, complete with its liability shield, were ever enacted, headaches such as the New York imbroglio wouldn't arise in the first place.
To contact the columnist of this story: Paul Barrett in New York at pbarrett17@bloomberg.net.
To contact the editor responsible for this story: Jeremy Keehn at jkeehn3@bloomberg.net.
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