ENVIRONMENT - Exxon's Cookbook

"Exxon Works Up New Recipe for Frying the Planet" by Eric Pooley, Bloomberg

Exxon Mobil Corp. is trying to put one over on you.

The world’s biggest publicly traded oil company wants you to believe that it actually supports the fight against global warming. But its tactics, which have been unfolding on opposite sides of the globe, are just another recipe for cooking the planet in three easy steps.

Exxon’s old formula wasn’t working anymore. The oil giant used to bankroll scientists who claimed all that stuff about starving polar bears and melting ice caps was just mumbo jumbo. In a 1998 memo, the American Petroleum Institute -- the industry group in which Exxon has long been dominant -- said it would achieve “victory” when doubts about climate science become “part of the ‘conventional wisdom.’” That helped create a noisy minority of skeptics, but it won’t block climate legislation forever.

So now Exxon is playing a more subtle game. It runs plenty of ads featuring people in lab coats talking about clean energy. It spent $15 million on Washington lobbyists in the first half of this year -- more than all the solar and wind companies combined. And it has created its new three-step program, which is based on bad economics instead of shady science.

Step One: Gin up some frightening numbers, and use scare tactics and lobbying muscle to kill the Obama administration’s proposed mandatory cap on carbon emissions.

Job-Killer

As the U.S. Senate begins work on the climate-change bill, which squeaked through the House of Representatives in June, Exxon is among those denouncing the plan to cap emissions as a stealth tax that would destroy jobs and drive up energy costs. How does the oil producer know this? Because think tanks funded by Exxon and others say so.

The company announced last year that it had stopped giving money to global-warming skeptics who “divert attention” from the need for clean energy.

Instead, it supports groups such as the American Council for Capital Formation and the National Center for Policy Analysis, which issue industry-friendly research. One study released in May by the Heritage Foundation, which received at least $50,000 from Exxon last year, claims that by putting a price on carbon, the measure will kill millions of jobs and send gasoline soaring.

The study has been criticized for making wildly pessimistic economic assumptions -- no energy efficiency gains, no increased use of renewables -- and for ignoring the bill’s many cost containment provisions. The non-partisan Congressional Budget Office found that middle-class households would pay only $175 a year more in 2020 because of the legislation.

Doomsday Study

But let’s look closer. This doomsday study claims the measure would drive gasoline prices to $4 a gallon -- in 2035! If we don’t develop alternative energy, which is the whole point of climate legislation, a gallon of gas will cost a lot more than that in 25 years. The price of inaction is far higher than the cost of acting now, though that’s not a discussion Exxon wants to have.

Step Two: Organize demonstrations. On Aug. 18, about 3,500 people rallied in Houston against the bill -- the first of some 20 such “Energy Citizen” events sponsored by API and other industry groups. The participants were energy industry workers, many of whom wore T-shirts saying, “I’ll Pass on $4 Gas.”

How did they come to be there? A leaked memo from API president Jack Gerard asked the group’s member companies to send employees to the rallies to “focus our message” against “Waxman-Markey-like legislation, tax increases, and (energy) access limitations.” He also asked them to keep it quiet.

Legislative Caricature

Royal Dutch Shell and BP refused to participate in the events because they support cap and trade, but Chevron, ConocoPhillips and Anadarko Petroleum are involved, along with more than 60 other businesses and associations. Exxon advised its workers that attendance was “at their own discretion and not required,” spokesman Rob Young told me, while saying that Exxon “opposes this deeply flawed legislation” and agrees with the rally’s job-killer message. How could it not? It helped pay for studies that “prove” the point.

Step 3: Offer a seemingly sensible alternative policy. Having caricatured the legislation, Exxon then offers a compromise. That’s what it did in Australia earlier this month, after the legislature shot down Prime Minister Kevin Rudd’s climate proposal. Last week the chairman of Exxon’s Australian unit, John Dashwood, called for replacing cap and trade with a carbon tax. Echoing a January 2009 speech against cap and trade by Chief Executive Rex Tillerson, Dashwood said the carbon tax “is more transparent to consumers, will achieve greater environmental benefits and is more difficult to manipulate than a cap-and-trade program.”

Tax Without Change

Let’s get this straight. Exxon is demonstrating against a climate bill in the U.S. because it is supposedly a hidden tax, and on the other side of the globe it is lobbying for a tax. This may seem contradictory, but it’s not. I believe the company simply recognizes what so many others have missed in the debate over the tax versus the cap: The cap requires economy-wide emissions reductions, and the tax doesn’t.

Exxon doesn’t want to do business in a world where cuts in carbon dioxide are mandatory. It would prefer to pay a modest tax and keep on polluting.

A tax wouldn’t guarantee any carbon reductions, let alone bring about the steep cuts needed to stave off the worst climate changes. By calling for a small tax instead of a mandatory cap, that’s exactly the kind of solution Exxon is proposing.