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Commentary & Reference
Documents
Excerpts from
(2)CERA Interview with Michael Dolan
Senior
Vice President of ExxonMobil
(Cambridge Energy Research Association 2009)
Cap & Trade or a Carbon Tax
(This
text is an edited excerpt from a recent CERA video taped interview with
Michael Dolan, Senior Vice President of ExxonMobil)
You can view and listen
to the complete interview at this link:
http://www.exxonmobil.com/Corporate/news_downloads_video_cera2009.aspx
When questioned about his support for a carbon tax policy
instead of the Obama Administration's push for the Cap & Trade policy, Dolan
said:
"A good way to look at policy is transparency. We've been living under the
Cap & Trade systems in Europe, so we have experience with that.
As we look at the system in America we have to ask ourselves what would be a
good way to design a policy.
We look at transparency - things people can
understand, you know, our customers the energy consumers - things like what
the cost of carbon is, and we have to take that information and make
changes.
We think things that go broadly across the whole economy - not just target
one industry or the other - are going to be more effective than perhaps some
targeted things that rely on anticipating some of the unintended
consequences, and then designing policy around them.
So we think the policy
has to be transparent with ease of administration.
For example; You look at Cap & Trade systems in general with the complexity
of the economy we have on record, and it's tremendously complex - there's
going to have to be huge growth in government agencies to provide oversight
- and a huge growth in Wall Street markets to market and trade credits.
There's going to be opportunity for "carbon leakage" - because they'll find
ways to get around the system, ways to get around the well intended things,
because, you know, they're people.
We think that if you put a carbon tax far upstream - if you put it at the
well head, at the refinery gate, put it at the mine, put it at the gate of
the power plant, then that cost of carbon, that's what the economists say is
important, you get that cost of carbon out there, and if you do that,
natural gas, carbon, and coal, the three main fossil fuels, as they go out
into the economy in ways we can't even write down on a piece of paper, those
costs will follow them into the economy and people in every corner of the
economy will have to think about what we think about, and what we think is very
important, that is, energy efficiency.
If you think about where the technology is available - where the low hanging
fruit is - with the cost of carbon out there, we would see tremendous gains
across the economy in energy efficiency. That's what we do in our own
operations.
We have been improving the efficiency of our refinery and chemical plants by
2 and 3 percent a year, year after year. While that is of course a very
important business drive for us, and we save a lot of money, and over time
it adds up because we're using processes we used 25 years ago that today use
half as much energy - which translates into about half as much CO2.
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So we feel very strongly that the transparency, the ability to permeate the
whole economy and not just segments - the ability for people out there, our
customers, to understand, that this is the cost of carbon. It is something
they need to understand.
For example, the ease with which companies like ExxonMobil collects tax
money. We collect tax money and send it to the government all the time. We
do it at the pump, we do it in our own operations.
The infrastructure is there for us, and for other coal and gas producers to
do that: Send it to the government with very little carbon leakage in the
system...very little leakage of dollars to some financial market...or what
have you...and it unleashes the whole economy in a free market way to find
responses.
There's nothing magic about Cap & Trade, it's just another way to put the
cost of carbon out there. It's not the free market solution. In our view,
it's just a solution, and a solution with great potential for inevitable
problems.
So if you put the tax high enough up the value chain, it will permeate the
economy, and, you know, the innovation of people, whether here in America or
overseas, when they see those higher costs, when they appreciate the cost of
carbon on the environment, that will foster the innovation we're looking
for, and industry will know.
The good thing about a carbon tax - you can play it out over a period of
time.
The government can say, this is it for three years and in three years
its going up 10 percent. And you as a business can plan on that. I mean, we
have a very hard time making investments when the risks are unknown and
undefined, and we can't mitigate them - and this is the problem we see in
Europe.
The cost of carbon in Europe has gone from 30 Euros a ton to today, I think
its 12...so you ask...are you happy you made an investment in energy
efficiency...and if that was your reason...probably not.
You need something
businesses can plan on; For example, if the price of carbon drops when
something happens to the economy, like the cycle in the economy today, the
economic cycle drops and all of a sudden there's lots of credits to be
purchased at a low price...so are you going out and make that
investment?...which is what you need to do for the long term. We're talking
about the investment to reduce CO2 emissions...so we think the carbon tax
is a much more efficient way. We hope that policy makers around the world
think like that.
The only argument you hear is...no one likes a tax. We appreciate that. I
really think that, if the cost of carbon is the same, what the economist
say, we still have to explain it to the public. Whether we explain it with a
very complicated Cap & Trade, or with a carbon tax at the well head or the
refinery gate, it has to be explained first."
Other material from the CERA interview with Michael
Dolan will appear in the TwentyTwelve Section of this website
during the second quarter.
Note:
To better understand
why Mr. Dolan says what he says about "Cap & Trade" we
strongly encourage you to
read closely what the Governor of Indiana says about what that proposed
legislation would do for the economy of his state.
Click here: LightBookproductions
Quotes Page 3
