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Big Oil's Effort To Tax Carbon and Your Family's Finances

The opinions expressed by columnists are their own and do not necessarily represent the views of

As world leaders gathered in Paris last month for the United Nations climate summit, many seemed surprised that several large oil companies, including BP and Shell, endorsed a carbon tax as a “key element” of any international climate deal.

Less surprising was the preference of those in the renewable energy sector to see a tax on carbon. The implication was of course that if major companies – oil companies in particular -  want to tax themselves, who are we to stand in the way? It must be an indication that the climate crisis is so acute that even they have seen the light.

While most of the oil companies endorsing a carbon tax are international, even here at home, ExxonMobil published a blog post explaining the company’s “long-standing” and “well known” support for taxing carbon. These oil companies join a short but distinguished group companies pushing for a carbon tax(Thank God Chevron stayed principled) . But is support for a carbon tax among oil companies a sign that even they have seen the light on climate, or might there be something else going on?

Bank on the latter.

For renewable energy companies, it's self-evident what they desire: a tax on their competitors—namely, fossil fuels. Renewable energy executives like Elon Musk want a tax on carbon so that oil, gas, and coal become artificially more expensive and in turn make wind and solar alternatives more financially attractive in comparison. And they want the money raised from this tax to be steered to investments in their products.

This sort of cronyism leads to dramatic market distortions that generate higher costs across all sectors, because energy is literally the fuel for the economy.

But what about these oil companies – have they finally had a climate epiphany?

Hardly: their motivations are no different from renewable energy companies. Today, big oil companies are not just big oil companies anymore – they are big oil and natural gas companies. For them, a carbon tax gives them an edge over their primary competitor: coal.

For a century now, coal has been America’s fuel of choice for electricity generation, thanks to its low and stable prices. Natural gas, on the other hand, has historically had higher and unreliable prices.

If these companies are ashamed of their naked rent seeking, they don’t seem to show it. In their May letter, the six companies (BG Group, BP, Eni, Shell, Statoil, and Total) admit a carbon tax would “help stimulate investments in the right low carbon technologies and the right resources at the right pace.” Not surprisingly, they suggest their products are the “right” ones.

The simple fact is that a carbon tax would hit coal harder than natural gas. Coal is abundant, affordable, and reliable, but since it also emits a lot of CO2 when burned, climate activists hate it. (The pro-carbon tax oil companies are apparently oblivious to the fact that climate activists also hate natural gas.)

The industry isn’t especially concerned about the higher prices a carbon tax would impose because they won’t be paying it. Once a carbon tax is levied, it will be baked into every company’s production cost and passed along to consumers. That's to say it's you—the single working mother, the senior hovering on the margins, or the family of four—who will shoulder this burden.

So how much pain would a carbon tax cause? A study by the National Association of Manufacturers found a carbon tax would reduce household consumption by as much as $860 per year by 2033.

This tax would be regressive, harming low-income families the most. It would also slow broad economic growth and destroy tens of thousands of jobs, especially in the energy-intensive manufacturing sector.  But no mind to big oil companies.

In reality, taxing carbon dioxide would enrich Big Oil at the expense of hardworking American families. Time and again we’ve seen congressional Republicans rail against entitlements only to sell out to corporate interests. These big oil companies are pushing for a carbon tax in exchange for a reduction in their corporate income tax, but it's important to remember that the carbon tax gets passed on to everyday consumers.

If Republicans want any credibility to reform entitlement spending, they must first reject this type of corporate welfare. Killing any attempts to tax carbon would be a great place to start.

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