Regulatory Policy

The Climate Leadership Council ‘Suspends’ ExxonMobil

The ExxonMobil Baton Rouge Refinery in Baton Rouge, La., May 15, 2021. (Kathleen Flynn/Reuters)
The CLC is fundamentally dishonest, and ExxonMobil is fundamentally naive.

Let us now recall the blessed memory of Stalin-era airbrushing, the totalitarian effort to rewrite history by removing once-favored then-disfavored individuals from official memory. Modern modes of Internet communication have made such dark creativity instantaneous — a few keystrokes yield a brand-new history, however difficult to defend given the long memory of the Internet — but it remains every bit as crude and supremely amusing.

Which brings us to the recent decision by the Climate Leadership Council to “suspend” ExxonMobil, one of the Corporate Founding Members of the CLC in June 2017. One would think that the historical identities of the “corporate founding members” would be immutable; they were whoever they were. Alas, one would be wrong: ExxonMobil is no more and ostensibly never was a “corporate founding member” of the CLC, the incontrovertible evidence to the contrary notwithstanding. Does the CLC view this ruse as subtle?

As a display of cynicism and dishonesty, this is among the smaller of the myriad mendacities promoted by the CLC, which describes itself as an organization “laser-focused on promoting effective, fair, and lasting climate solutions.” The CLC policy stance can be summarized as a carbon tax combined with redistribution of the revenues as “dividends” to all Americans, a system of carbon border-adjustment rebates and tariffs, and related proposals.

The suspension of ExxonMobil took place after a Greenpeace operative secretly recorded an ExxonMobil lobbyist stating that it supports a carbon tax only because it views such a policy as very unlikely to be enacted as a matter of political reality. Put aside the implicit assumption that the offhand views of some Beltway operator represent those of the company as a whole. The more hilarious dimension of this saga is straightforward: The CLC is shocked, shocked to find machinations and insincerity in Washington, D.C. Precisely whom do they think they’re kidding?

Hence the CLC decision to “suspend” ExxonMobil. Why did they not expel them once and for all? Obviously, the CLC hopes that ExxonMobil will grovel, endorse ever-more strongly the “climate crisis” narrative and the imperative for climate policies making energy more expensive, and then — above all else — write a big check to the CLC as an exercise in the only kind of penance applauded by the political Left.

More about CLC mendacity: Despite trumpeting support from numerous prominent economists, curiously absent from the CLC analyses and other published materials is any discussion of the basic cost-benefit question: What impact on future climate phenomena would the CLC carbon tax yield? The reason for this deafening silence is clear: The effect would be trivial or small, as an application of the Environmental Protection Agency climate model predicts under a set of assumptions that exaggerates the future effects of reductions in greenhouse-gas emissions. The global temperature reduction by 2100 attendant upon the Biden net-zero proposals: 0.173°C. The Paris agreement, if taken seriously (it is not): 0.17°C. An immediate and permanent 50 percent GHG emissions cut by China: 0.184°C. Net-zero emissions by the entire Organization for Economic Cooperation and Development: 0.352°C. A global GHG cut of 50 percent (stop laughing): 0.687 degrees C. Such effects would be barely detectable given the normal variation in global temperatures and other climate phenomena, and the effect of the CLC carbon tax would be smaller still. What economic costs can be justified for such outcomes? Note that these modeling projections are independent of one’s views of the evidence on the climate “crisis” or any of the other scientific controversies.

CLC attempts to circumvent this obvious problem by claiming that the carbon tax is a free lunch: It would strengthen the economy by engendering new investment in unconventional energy and employment growth in economic sectors less related to conventional energy. Such arguments are classic manifestations of the broken-windows fallacy: A broken window makes the economy bigger by providing employment for the window-repair sector. The loss of the economic value of some substantial part of the existing energy and related capital stock would impose an enormous economic cost, and the same is true for the “new investment” — the massive consumption of scarce resources in uneconomic energy — to be stimulated by the CLC carbon tax.

The CLC “dividend” proposal — the revenues would be distributed on an equal basis to “all Americans” — is naïve in that it ignores the coalition problem in Congress, and the relative influence of concentrated and unconcentrated pressure groups. But the real CLC dishonesty is its description of the carbon tax/dividend system as “revenue neutral,” a term that always has meant a cut in one tax as an offset to an increase in another so that total government revenues would remain constant over some time horizon, typically ten years. No more. According to the CLC, a “revenue neutral” carbon tax is one whose revenues are paid largely by direct and indirect users of conventional energy and then are redistributed to “all Americans.” Obviously, that is a new spending program. Suppose that the revenues were used to pay for an expanded defense budget, or new roads, or a new entitlement program. Would the tax be “revenue neutral” in those cases also? If all that is required for so-called revenue neutrality is that the revenues are spent, then all tax increases are revenue neutral!

And round and round goes the CLC mendacity merry-go-round. Because of the complexity of international supply chains, the carbon border adjustments — rebates and tariffs for exports and imports to and from foreign markets without equivalent climate policies — would be hugely difficult to compute, even if the massive regulatory bureaucracy needed to determine the tariffs were to attempt to do so in a neutral fashion. Merely consider the effect of shifting exchange rates on such calculations; and does the CLC believe that this bureaucratized arithmetic would not be subjected to the distortions engendered by powerful political pressures? The CLC argument that an emissions tax is a more efficient method of reducing emissions relative to regulations is not correct, because the prospect of revenues from the tax would lead to larger and more costly emissions reductions than those politically possible under a regulatory regime. And it is far more likely than not that the tax would supplement rather than displace the regulatory regime, because the CLC proposes an overall reduction in GHG emissions larger than that engendered by the regulatory system. Under the CLC proposal, resource allocation by government goes up rather than down; so much for the CLC claim that the carbon-tax system would reduce the size of government.

The CLC misrepresents, blatantly, the findings of a Treasury Department study, by arguing that the bottom 70 percent of the income distribution would be net beneficiaries of the tax/dividend system. That study notes explicitly that it does not consider the employment and wage effects of higher energy costs; the bottom 70 percent are almost certain to be made worse off. Finally, the CLC refutes its own claim of policy “predictability” by proposing after five years a “Blue-Ribbon Panel” that could recommend an increase in the tax rate.

The dishonesty of the CLC is matched by the naïveté of ExxonMobil: How have years of pandering to the climate Left worked out? Has Senator Sheldon Whitehouse been kinder to you than he otherwise would have been? Has the Left softened its political attacks? Has the litigation game against fossil fuel been made less dangerous for the producers, for the economy, and for our political and constitutional institutions?

ExxonMobil and the fossil-fuel industry more generally seem utterly clueless about the reality that the leftist political campaign against fossil fuels has nothing to do with climate phenomena or environmental quality or any of the other ubiquitous nostrums characterizing this policy struggle. It is instead an ideological attack on fossil fuels, fundamentally anti-human and totalitarian at its core. Once ExxonMobil and others endorse such “climate policies” as carbon taxes, they implicitly are endorsing the “crisis” and “existential threat” assertions of the leftists; why else would climate policies be needed? The typical “insurance” response is silly given (see above) the trivial impacts of any plausible climate policy.

Merely consider the three NGO members of the CLC. Conservation International loudly applauds the Biden administration net-zero goal “to roughly halve [U.S.] greenhouse gas emissions relative to 2005 levels by 2030.” So CI endorses the subsidies, mandates, requirements, central planning, and authoritarian coercion that are the essence of the Biden policy, even as it pays lip service to the illusory “market-based approach” promoted by the CLC. The World Resources Institute does not bother even to feign interest in markets, satisfying itself instead with the infantile assertion that “bold climate action” will yield “economic prosperity,” “millions of clean energy jobs,” and “position the U.S. as a serious player on the international stage.” The World Wildlife Fund urges the creation, apparently in a fashion similar to that of the Book of Genesis, of a “climate-resilient and zero-carbon world, powered by renewable energy,” even as it endorses on the CLC website “a nationwide price on carbon with smart complementary policies.” Has ExxonMobil asked for the specifics of those “smart complementary policies?” Does ExxonMobil actually believe that such organizations are its allies? Perhaps more to the point: Does ExxonMobil believe that they view ExxonMobil as one?

The real existential threat is to the fossil-fuel sector generally, ExxonMobil in particular, and to the wealth, freedom, and human well-being yielded by fossil fuels. If ExxonMobil understood that it is in a long twilight ideological struggle, it would not have joined the CLC in the first place or endorsed any of the “climate crisis” or other nostrums of the climate left, as doing so leaves it utterly without defenses against their falsehoods, their anti-human ideological objectives, and their blatant objective to destroy the fossil-fuel sector.

So bad at ideological battle are ExxonMobil and many others in the fossil-fuel sector that they remain convinced that a stance of “Me Too, But Less” is politically viable. If ExxonMobil understood how to engage in an ideological battle — like most businesses, it does not — it would not have issued such drivel as the statement from the ExxonMobil spokesman that “CLC’s decision is disappointing and counterproductive,” or the CEO’s reiteration of “support for a carbon tax.” If ExxonMobil understood how to engage in an ideological battle, it would have issued a loud statement as follows upon being “suspended” by the CLC:

There is no need for CLC to suspend us; we resign, enthusiastically, from the CLC, effective one hour before said suspension. It was a major error in our judgment to have joined previously as a Founding Member, regardless of the CLC effort to rewrite history. Notwithstanding the blatant CLC effort now to induce us to write them a big check and to endorse destructive polices so that they will pretend to respect us again, we will not rejoin under any circumstances. We have learned over the past four years what we should have understood from the beginning: Like all of the climate left, the CLC is fundamentally dishonest, a premise that we are prepared to support in detail, about the science of climate change, about the evidence on climate phenomena, and about the effects of the CLC policy proposals.

Fossil fuels have served to lift billions of humans out of grinding poverty, have saved countless numbers of lives, have provided the inputs for myriad products without which life would be solitary, poor, nasty, brutish, and short, and have helped to create the vast increase in wealth that allows for huge social investment in environmental improvement. The ideological crusade against fossil fuels, now masquerading as an effort to “save the planet” from a “climate crisis,” is fundamentally anti-human, and henceforth ExxonMobil will stand proudly in opposition to such an imperative. We will defend ourselves, the production of fossil fuels, and capitalism without hesitation, without compromise, and without apology. We urge the other members of our industry to join us in a renewed pursuit of truth and analytic rigor.

Successful businessmen and businesswomen are skilled at producing things that other people value. They are not typically adept at engaging in ideological battle, while that skill is the very essence of the political Left. Successful businessmen and businesswomen should not pretend that ideological battle is a central component of their competence or allow themselves to be oblivious about the ideological nature of the battle that has been forced upon them. They would do themselves, and all of us, a huge service by standing up for themselves and for the basic principles underlying capitalism and human freedom.

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