At its annual general meeting in Aberdeen, Scotland, this week, just over 99% of BP PLC (NYSE: BP) shareholders approved a binding resolution proposed by investor group Climate Action 100+ that requires the company to develop a strategy that is consistent with the goals of the Paris Agreement on climate change. The 58 investor groups that proposed the resolution represent nearly 10% of BP’s voting shares.
Shareholders rejected a stricter resolution proposed by an activist group called Follow This that would have required BP to “accept responsibility” for the emissions from the use of its products. Royal Dutch Shell is the only supermajor oil company that has accepted that responsibility (known as Scope 3). A similar resolution is being voted on at Chevron’s annual meeting scheduled for next week. Earlier this month, Norway’s state-controlled oil company, Equinor, approved the Climate 100+ shareholder resolution but also failed to approve the Follow This resolution.
By accepting responsibility, the Follow This resolution means “pay for” mitigating the damage done to the environment since the beginning of the oil age. It’s not hard to figure out why oil companies would resist such a resolution.
Rather than pay up, some industry players and a host of other bigwigs have signed on to the Baker-Shultz Carbon Dividends Plan, named after two former Secretaries of State, James Baker and George Schultz, and promoted by Americans for Carbon Dividends (AFCD). Climate Leadership Council (CLC) developed the dividend plan and proposes setting a (gradually rising) tax of $40 a ton on carbon emissions and repaying U.S. consumers to offset the increase in energy costs.
The dividend plan calls for 100% of collections from a U.S. carbon tax to be returned to U.S. families. The CLC estimates a rebate amount of $2,000 for a family of four from a $40 per-ton fee.
There are a couple of catches with such a plan. First, the CLC dividend plan effectively eliminates U.S. Environmental Protection Agency (EPA) clean air regulations: “The final [of four] pillar [of the Baker-Schultz Carbon Dividends Plan] is the streamlining of regulations that are no longer necessary upon the enactment of a rising carbon fee whose longevity is secured by the popularity of dividends. Many, though not all, Obama-era carbon dioxide regulations could be safely phased out, including a repeal of the Clean Power Plan.” The Clean Power Plan is a particular thorn in the side of the current administration.
Second, along with eliminating EPA’s clean air regulations, the dividend plan also would wipe out any liability for oil companies in lawsuits contending that those companies should pay up for their contributions to global warming. “A robust national carbon price would also make possible a historic emissions provision stipulating that no party should be liable for damages from past emissions that were legal at the time,” says the plan.
What does this have to do with BP’s adoption of the shareholder proposal that it align its goals with those of the Paris agreement? BP is a founding member of the CLC, as are Shell, Exxon, Conoco and Total. We may infer, then, that these companies support the CLC’s dividends plan.
And why wouldn’t they? The monetary cost to them is, at worst, negligible. Moreover, the dividends plan, which returns 100% of carbon-tax collections to U.S. families, raises no funds to mitigate either historic or future climate damage. Basically, this is a business-as-usual scenario dressed up to make it palatable to consumers, regardless of political party affiliation.
For a carbon tax to succeed at keeping the global temperature from rising by 2° Celsius (the goal of the Paris agreement), producers and consumers are not going to make any kind of dent unless they reduce both production and consumption. The classic way to do that is to impose a tax that is large enough to make the message clear.
In an expert report supporting a lawsuit by a group of young people against the United States for failing to take any action against climate change for decades and thus violating their right to a clean environment, Nobel Prize-winning economist Joseph Stiglitz writes: “At present, the U.S. lacks a comprehensive carbon-pricing regime that accounts for the negative externalities of burning fossil fuels such that private markets can be relied on to make efficient decisions. Thus, producers and sellers of fossil fuels consider only their private costs and benefits, and the costs that their activities are imposing on society through, among other factors, increased GHG emissions …. Beyond the lack of a comprehensive carbon-pricing regime, a faulty system that is full of hidden subsidies for fossil fuels … hinders the transition towards a less carbon-intensive economy. These subsidies also accelerate and exacerbate the costs to Youth Plaintiffs from climate change.”
Stiglitz and Nicholas Stern in 2017 chaired a UN commission on carbon pricing that reached this conclusion: “[T]his Commission concludes that the explicit carbon-price level consistent with achieving the Paris temperature target is at least US$40–80/tCO2 by 2020 and US$50–100/tCO2 by 2030, provided a supportive policy environment is in place.”
It is not too late to meet the goal of the Paris agreement, but a meaningless gesture like the dividends plan is not the answer. The answer appears to be a stiff dose of tax medicine, a cure that, in the eyes of many, is worse than the disease.
In case you’re wondering, these are the 15 countries that control the world’s oil.