Public policy debate
Public policy will play a key role in reducing greenhouse gas (GHG) emissions in the future. The long-term objective of a climate change policy should be to reduce the risks posed by climate change while considering the importance of energy to global economic development. Any policy response aimed at mitigating global CO2 emissions will require participation from both developed countries and the major developing economies.
Policymakers have available a range of strategies to reduce GHG emissions, including cap-and-trade regimes, carbon taxes, increased efficiency standards and incentives or mandates for renewable energy. Where regulated emissions trading schemes exist, ExxonMobil has traded allowances, when cost-effective, and will continue to do so in the future. For example, we have been active participants in the European Union Emissions Trading Scheme, New Zealand Emissions Trading Scheme and recent California cap-and-trade programs. However, we believe a well-designed, revenue-neutral carbon tax mechanism provides a more cost-effective alternative to a cap-and-trade regime for reducing GHG emissions.
International agreements and other regional and national regulations for GHG emissions reduction are still evolving, making it difficult to predict potential business impacts. We test a range of potential cost scenarios for energy related GHG emissions in our Outlook for Energy. These forecasts use a cost of CO2 emissions to represent future climate policy options. Over time, ExxonMobil anticipates OECD1 member states’ CO2 costs to rise to about $80 per ton by 2040, with many non-OECD nations approaching $20 per ton. We use these forecasts as part of our financial analysis for major investment evaluations.
1Refer to the Organization for Economic Cooperation and Development (OECD) website for a listing of its members.