Hidden Love: Why some fossil fuel companies support climate regulations

Whether it’s a piglet and a tiger cub or a technologically challenged grandma and a savvy millennial people like odd friendships. They are intrigued by the idea that two very different things can coexist so well. However, despite the popularity of the phenomenon there is little buzz about an odd friendship that has the potential to impact the long-term health of the planet. The odd friendship being referred to here is a budding affinity between fossil fuel companies and climate protecting regulations.

Though it may come as a surprise, there has been fossil fuel cooperate support for international climate protection goals for some time. Indeed, in 2015 ten of the world’s largest oil companies jointly wrote a letter expressing support for the UN climate goals and recognizing that their industry must help achieve these goals. This show of support was mirrored this year when major oil companies pleaded with US president Donald Trump to stay in the Paris Climate Accord.

The cynical reader may be wondering, why would fossil fuel companies support government regulation of their business unless it somehow benefited them? The answer is that it does benefit them. While there are obvious PR incentives to supporting climate change regulations the main reason oil companies support regulations lies in the fact that not all fossil fuels pollute the same and not all climate change policies have the same affects.

While oil companies have been quick to throw their support behind laws that would limit the omission of CO2 coal companies, especially in the US, have lobbied against putting these regulations in place. The basic reason for this difference is that coal, while abundant and cheap, has a much higher level of carbon than oil. In fact, according to the US Energy Information Administration oil releases only 70% the CO2 content of the heaviest form of coal when burned. A further reason oil companies are eager to punish the emission of CO2 is that many are expanding into the natural gas market and natural gas releases half the CO2 of coal when burned. Also, while coal and gasoline are primarily used for different purposes natural gas and coal are direct competitors since both are used to generate electricity.

The other key to understanding oil companies support of regulations is examining which policies they support, and which they don’t. Aside from direct intervention there are two main policies that governments can use to curtail the releasing of CO2, these are Cap and Trade and a Carbon Tax. In a Cape and Trade system the government announces an overall limit on how much CO2 can be released in a given year then distributes permits that allow companies to emit a certain amount. If a company wants to emit more than it is allowed it must either buy permits from other companies or pay a stiff fine. A Carbon Tax is much simpler, the government announces a tax on each unit of CO2 admitted into the atmosphere that companies must pay when they emit. Though both of these policies force companies to pay for polluting, the prices are less volatile under a Carbon Tax and therefore make long term planning easier. Unsurprisingly, oil companies are throwing their weight behind Carbon Tax proposals.

Despite the growing support of oil companies for the regulation of their own industry, however, there remains a lack of any international system that can force the reduction of CO2 emissions needed. Yet several countries and a few US states have already implemented a carbon tax so there is hope, the question is whether or not the policy can be expanded before it’s too late.

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