Corporations Unite to Support Carbon Tax: How Does It Stack Up?

Harold Hedelman

Director of Engagement - Business Climate Leaders at Citizens' Climate Lobby

BP, Exxon, GM, Johnson & Johnson, Procter & Gamble, PepsiCo, Santander, Schneider Electric, Shell, Total S.A., and Unilever.

What, you ask, has brought these companies together at just this moment? Clearly, they all recognize the need for the US to join the rest of the world in addressing climate change. But the the most likely proximal cause is President Trump’s withdrawal from the Paris Agreement, which has catalyzed a massive groundswell of voices at every level pushing for effective action on climate change. 

And so, on June 20, eleven major corporations joined together as Founding Corporate Members of the Climate Leadership Council to support its carbon tax proposal

The Council’s plan is quite similar to a proposal from the Citizens’ Climate Lobby (CCL). Both plans call for:

  1. A gradually rising and revenue-neutral carbon tax;
  2. Carbon dividend payments to all Americans, funded by 100% of the revenue;
  3. Border adjustments to level the playing field for American businesses.

The CLC plan includes two additional features:

  1. The elimination of regulations that are no longer necessary upon the enactment of a rising carbon tax whose longevity is secured by the popularity of dividends. Much of the EPA’s regulatory authority over carbon dioxide emissions would be phased out, including an outright repeal of the Clean Power Plan.
  2. An end to federal and state tort liability for emitters.

Although not directly necessary to reduce US GHG emissions, these business-friendly features clearly encourage the support of carbon taxation by fossil fuel companies.

Looking beyond their high level similarities, the following compares fundamental details of the two proposals. CCL's stats appear first:

Initial price per ton CO2e: $15.00 / $40.00

Annual increase per ton: $10.00 / 2% above inflation

Fee after 20 years (2017$): $205.00 / $59.44

Use of revenue: Return to households / Return to households

GHG’s covered: Many, including methane / Only CO2

Border adjustments: Yes / Yes

Impact on existing regulation: None / Rollbacks on GHG regulations

Tort liability immunity: None / Yes

Both proposals embody conservative principles of free markets and limited government. Both offer an equitable, popular and politically viable way forward, paving the way for a much-needed bipartisan climate breakthrough.

Unlike any other country in the world, climate change is highly politicized in the US. It is therefore very encouraging to see major Republican and corporate support for simple, market-based solutions that will encourage significant reductions in US GHG emissions. The leadership shown by these eleven companies sends a signal to other business leaders that they should seriously consider following suit.

Read about Citizens' Climate Lobby and its proposal here.

Authors Harold Hedelman and Sarah Macgregor are volunteers with CCL.