Business Roundtable’s support for putting a price on carbon is evidence of a sea change in corporate attitudes on climate action
By Greg Ip, The Wall Street Journal, Sept. 16, 2020
When Congress last pushed for comprehensive climate legislation a decade ago, much of corporate America was either neutral or hostile.
In a sign of how much corporate attitudes have changed, the Business Roundtable, one of the country’s most prominent business groups, is throwing its support behind broad-based measures to slash greenhouse gas (GHG) emissions. In a statement of principles released Wednesday, the Business Roundtable said it “supports a goal of reducing net U.S. GHG emissions by at least 80% from 2005 levels by 2050.” To achieve that, it endorses putting a price on carbon. It didn’t say whether that should be through a carbon tax or a system of tradable emissions permits.
The content of the principles doesn’t break new ground—many big companies long ago embraced equally or more aggressive goals. The U.S. targeted reducing emissions 80% by 2050 when it joined the international Paris climate accord in 2016.
Rather, the significance of the statement is that it shows how business is shifting from a source of resistance to a force for action on climate. The Business Roundtable statement represents the consensus of more than 200 members spanning every sector of the economy, from retail, finance and technology to health care, manufacturing and even oil and gas.
When the group last put out principles on climate, in 2007, it didn’t endorse mandatory measures such as carbon prices because of internal disagreement and warned against policies with “unacceptable” economic costs.
In 2010 groups like the U.S. Chamber of Commerce and National Association of Manufacturers helped kill Congress’s attempt to create a national emissions trading system. (The Business Roundtable was neutral.) Congress hasn’t taken up anything similar since.
Whether that changes will depend on the outcome of November’s election. During a briefing on California’s wildfires this week, President Trump reiterated his skepticism of the scientific consensus on climate change, and his administration has worked to dismantle the Obama administration’s climate regulations, such as on emissions from power plants, vehicles, and oil and gas wells. In November Mr. Trump began the formal, yearlong process of withdrawing from the Paris accord, over the objections of many chief executives.
On the other hand, Democratic candidate Joe Biden has an aggressive climate agenda including eliminating emissions from electricity by 2035 and net emissions for the entire economy by 2050. In that case, business could play a significant role both in shaping specific proposals and influencing individual legislators.
Much of what the Business Roundtable asks for are typical corporate demands: less regulatory uncertainty, administrative burden and duplication, as well as protection from foreign competitors facing laxer rules.
More notable is what it doesn’t demand. Business and conservative supporters of carbon taxes and emissions permits often want the revenue to be used to reduce other taxes or send checks to households, not fund other government programs. The Business Roundtable, in contrast, doesn’t call for such revenue neutrality. It says some of the money should be used to reduce the impact on “individuals and communities most negatively affected” by climate policies, and to double federal research and development of GHG-reduction technology.
Businesses usually wanted a carbon price to substitute for other regulations, such as energy-efficiency requirements and renewable-energy mandates. While it strongly prefers market-based mechanisms, the Business Roundtable acknowledges a need for regulations where price incentives are less effective, such as building codes, because a carbon price might not incentivize builders to maximize energy efficiency.
The Business Roundtable isn’t in favor of higher taxes and stricter regulation, but they aren’t the red lines they used to be. It doesn’t want to stand in the way of “a result that isn’t entirely perfect from our perspective but is actually a dramatic improvement in the country’s approach to climate,” the group’s president, Joshua Bolten, said in an interview.
He added, “We don’t support the Green New Deal, and we don’t support continuing business as usual; both of those impose significant costs. The right policy would both significantly reduce emissions and keep our economy strong and competitive at the same time.”
The real test of these new principles, then, is whether they translate into actual support for the specific steps Congress or a future administration take. That support has often been lacking in the past: The Business Roundtable, for example, opposed President Obama’s Clean Power Plan to reduce carbon emissions from electricity generation.
Still, businesses aren’t immune to the currents that drive public perceptions, and the broader public is increasingly concerned about the economic impact of global warming, from rising temperature and extreme weather to higher sea levels. Even the U.S. Chamber and National Association of Manufacturers have become more supportive of action on climate, such as participation in the Paris accord.
Neither group, however, has endorsed a carbon price. In part that’s because their larger, more diverse membership includes many smaller companies, whereas the Business Roundtable’s members are principally large, multinational, publicly traded companies. They face greater pressure from customers, employees and shareholders to act on climate. They also do business in jurisdictions with far more extensive climate rules than the U.S.
China, Japan, the European Union and Britain all have, or plan to have, either a carbon tax or an emissions-trading system. Without something similar, U.S. companies risk being penalized abroad. Natural-gas exports, for example, may fail to meet European standards on methane leakage. For many businesses, inaction on climate may be a bigger threat to their long-run health than action.
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