Global Warming Tax

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The Article

Steve MilloyDuke Energy, a leading U.S. electricity and gas utility, announced this week its support for a global warming tax — essentially a consumption tax on consumers of gasoline, oil, natural gas and coal. The tax is intended to reduce energy use and resulting emissions of greenhouse gases.

Duke calls it a “carbon tax,” but we might call it the “Greenpeace tax” in honor of the various radical environmental groups, like Greenpeace, pushing global warming hysteria and supporting such a tax. But we could also call it the “corporate appeasement tax” in honor of businesses like Duke Energy that are stumbling over themselves to curry favor with the Greens.

Duke’s announcement apparently is the idea of its Australian CEO, Paul Anderson, who explained it to Australian media in March as follows, “Every time somebody buys something at the store (they) pay a 10 per cent tax, based on how much carbon was in the fuel that they consumed.”

Duke prefers the “carbon tax” to other options for reducing greenhouse gas emissions, such as those known as cap-and-trade and the Kyoto Protocol.

Under a cap-and-trade option, which is supported by some of Duke’s competitors, limits on greenhouse gas emissions are set by the government and emissions allowances are given to utilities. Utilities that emit lower amounts of greenhouse gases than allowed may then sell the “unused” portion of their allowances to utilities that have emitted more than they were allowed.

Duke doesn’t have much room for reducing carbon dioxide emissions, so it would have few “hot air” allowances to “trade” and would stand to gain little from the cap-and-trade option.

Duke flat-out opposes mandatory greenhouse gas emission reduction strategies like those of the Kyoto Protocol and the McCain-Lieberman legislative proposal because they are believed to be too radical in terms of emission reductions and economic impact.

Consequently, Duke sees an advantage to shifting the debate to a tax rather than a cap-and-trade or a Kyoto-like policy. The carbon tax would also spread costs to all industries and consumers rather than just utilities.

Fortunately for now, however, the politics of global warming — established by President Bush, who pulled the U.S. out of the Kyoto Protocol in 2001 — make it unlikely that we will be saddled either by an economy-hurting carbon tax or the dubious trading of hot air.

But the Greens are working to change those politics, on a company-by-company basis.

In mid-March, six energy companies — Chevron-Texaco, Anadarko, Apache, Unocal, Marathon, and Tesoro — surrendered to activist demands to “take action” on global warming, including disclosure of greenhouse gas emissions; the setting of emission goals; and integrating global warming into core business strategies.

In exchange for these concessions, the activists withdrew their shareholder resolutions on these issues — resolutions which, even if they receive a majority of shareholder votes, are non-binding on management.

One of the early corporate capitulators on global warming, energy producer Cinergy, issued its annual report this week featuring a section entitled, “Global Warming: Connecting the Dots to Find Common Ground” — it’s disheartening evidence of how global warming hysteria has influenced corporate managers.

Global warming “must be dealt with holistically,” says Cinergy in New Age-speak more appropriate for a spa brochure. “We must act now,” warns Cinergy, even though “we may never know for sure [whether we will accomplish anything]. Cinergy quoted a retired college professor who echoed the company’s abandonment of science. “Humility is central to good science,” says the professor.

But science is about data, not humility — and the scientific debate continues to rage over whether humans are adversely affecting global climate. Just a few weeks ago, for example, the Wall Street Journal reported that a key computer model relied on by global warming believers, is seriously flawed, predicting global warming no matter what data are entered into it.

One activist investment manager recently told the Boston Globe that, “We now see a significant trend among a range of companies to address climate change. If we’re not at the tipping point, we’re coming close to it.”

The main roadblocks for the activists’ are large shareholders like Fidelity Investments who aren’t particularly interested at this time in shareholder activism. If they don’t like how a company operates, they tend look elsewhere to invest. “It’s not our job to become involved in the management of a company,” a Fidelity spokesman told the Globe.

But this is a short-sighted strategy at best.

If radical social activist investors continue to successfully pressure companies on global warming and other aspects of their radical political agendas, those investment alternatives that Fidelity and others look for will eventually disappear. Investors will have no choice but to invest in businesses hamstrung by the radical Green agenda.

Through our public political process, we’ve already rejected the economic disaster known as the Kyoto Protocol, a treaty whose provisions would impose $100 trillion in societal costs for a hypothetical reduction in average global temperature of 1 degree Centigrade.

Not accepting the verdict of the political process, the activists are moving to implement the Kyoto Protocol on a corporation-by-corporation basis, thus circumventing our democratic process.

It may not be Fidelity’s job to be involved with corporate management, but then this struggle is about more than the financial performance of individual companies — it’s about businesses being free to operate within the bounds of the law and based on sound science.

Steven Milloy
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