Effective strategies must include putting policies in place that start the world on a path to reduce emissions while recognizing that addressing GHG emissions is one among other important world priorities, such as economic development, poverty eradication and public health.
While pursuing the long-term objective to minimize risks, near-term objectives should include the following:
- promoting energy efficiency,
- deploying existing technologies that reduce greenhouse-gas emissions cost-effectively,
- supporting research and development of new low-emissions technologies, and
- supporting climate research to help inform the ongoing policy response.
Throughout the world, national and regional policymakers are considering a variety of legislative and regulatory options to mitigate GHG emissions. In our view, assessing these options requires an understanding of their likely effectiveness, scale, and cost, as well as their implications for economic growth and quality of life. Within ExxonMobil, we analyze and compare the various policy options by evaluating the degree to which they meet the following principles:
- Ensure that any cost of carbon is uniform and predictable across the economy
- Let market prices drive the selection of solutions
- Promote global participation
- Consider priorities of the developing world
- Recognize the impacts of imbalances among national policies
- Minimize complexity to reduce administrative costs
- Maximize transparency to companies and consumers
- Adjust in the future to developments in climate science and the economic impacts of climate policies
These principles are intended to minimize overall costs to society and to allow markets, not regulators, to determine technologies that best meet consumer needs. They recognize that long-term policies must align with differing national priorities and with evolving knowledge if they are to be sustainable. Cost minimization is important because the scale of the challenge is enormous. Estimates indicate that costs of policies under consideration in the U.S. alone can easily run to hundreds of billions of dollars per year. Consequently, climate policy will compete with other major policy priority areas including health, education, infrastructure and security. Poorly designed policies will needlessly channel funds and human resources into higher cost energy investments that could be used to address other pressing priorities.
Strategies should promote fundamental shifts toward energy-efficient technologies and practices across the economy, and the more prominent use of fuels with lower carbon intensity — such as natural gas, nuclear energy and renewable fuels — within the overall energy mix. These actions already are making headway in many countries, including the United States. U.S. emissions of energy-related CO2 are reaching a plateau and are expected to begin declining soon. By 2030, U.S. CO2 emissions are expected to be about 15 percent lower than in 2005.
Industry and governments should pursue an integrated set of solutions that include developing new energy supplies, increasing efficiency and advancing energy technologies. For example, new technologies will allow more energy-efficient homes, vehicles and businesses. In 2030, improved efficiency will not only have curbed energy demand significantly, but also reduced related CO2 emissions by approximately 17 billion metric tons.
Throughout the world, policymakers are considering a variety of legislative and regulatory options to influence technology development and consumer choice to affect GHG emissions. If policymakers do move to impose a cost on carbon, we believe that a carbon tax would be a more effective policy option to reduce greenhouse-gas emissions than alternatives such as cap-and-trade. And to ensure revenues raised from such a tax are indeed directed to investment, and to assist those on lower incomes who spend a higher proportion of their income on energy, a carbon tax should be offset by tax reductions in other areas to become revenue neutral for government. It is rare that a business lends its support to new taxes. But in this case, given the risk-management challenges we face and the policy alternatives under consideration, it is our judgment that a carbon tax is a preferred course of public policy action versus cap and trade approaches.