By David Vogel
Last month, the New York Times published a front-page story that may signal an historic shift in the willingness of the American business community to address the risks of global climate change. It reported that more than two dozen corporations are incorporating a price for carbon emissions into their long-term business plans. The corporations included not only firms such as General Electric, DuPont, Walmart, Microsoft, and Google, which have long had a record of progressive environmental policies. Significantly, it also included ExxonMobil, which has been criticized by environmentalists for funding research organizations that challenge the scientific evidence for global climate change.
Many firms have discovered the business benefits of becoming greener. In addition to improving a company’s public reputation, corporate environmental initiatives have reduced energy costs and created markets for environmentally friendly products. Perhaps most importantly, they have stimulated substantial investments in clean technologies. But while these business initiatives, along with the substitution of natural gas for coal, have had a marked impact on reducing the overall carbon emissions of the United States, they are inadequate. Carbon-producing fossil fuels are still central to American economic growth.
Virtually all economists concur that the most efficient and effective way for addressing the increasing risks of global climate change is a tax on fossil fuels. A carbon tax would provide additional incentives for both reducing the burning of oil and coal and for investment in alternative energies such as solar, biofuels, and nuclear power. And it would do so without the need for government subsidies.
But setting a price on carbon pollution is beyond the scope of corporate responsibility. It can only be done by governments. This is what makes the NYT story so important – and encouraging. Once significant segments of corporate America recognize that such a tax is both likely and consistent with their long-term business plans, the next logical step will be for them to put their substantial lobbying muscle behind its enactment.
Too much of the talk about corporate responsibility has focused on what firms do voluntarily. Far too little attention has been paid the more important way in which firms affect society through the decisions they make about politics and public policy. Hopefully, corporate America will now demonstrate how serious it is about addressing the risks of climate change by politically supporting a tax on carbon. That kind of support would would greatly improve the prospects for such a tax. Ultimately, it would benefit both corporate health and the planet itself.
David Vogel is a professor in the Business and Public Policy Group at the Haas School of Business and the author of The Market for Virtue: The Potential and Limits of Corporate Social Responsibility