Shifting Influence: The Evolving Role of the Private Sector on American Carbon Pricing Policy

Private sector support for carbon pricing has grown since the adoption of the 2015 Paris Agreement. Companies in industries typically opposed to environmental regulations or whose products would be less desirable under a carbon tax – like ExxonMobil, Royal Dutch Shell, and General Motors – have signed on to pro-carbon-pricing industry coalitions like the Climate Leadership Council. The motivations for such seemingly counterintuitive support are numerous. Positive media attention and improved credibility regarding climate policy naturally accompany support for ambitious legislation like a carbon tax. A seat at the negotiating table offers companies the opportunity to shape or delay policy viewed as inevitable. Regulatory clarity enables better informed investment decisions. The potential to package a carbon tax with the elimination of other regulations as well as certain tort liabilities appeals to supporters of the Climate Leadership Council proposal. Investor pressure to align business practices with the Paris Agreement or other climate change scenarios has also factored into decision making, first at European companies but increasingly at their American competitors. Whether a carbon tax will pass in the United States is uncertain, but support from the business community will likely prove valuable in helping build political will in Washington.