When hundreds of thousands of marchers thronged New York City in September demanding action against climate change, they probably didn’t imagine they were affecting the “shadow” price of carbon set by their bête noire, ExxonMobil. Nor were Republicans likely aware they had performed the same feat when they seized control of the U.S. Senate on Nov. 4. After all, denial of climate change is a Republican litmus test, so the notion of paying to stop climate change is beyond heretical. What company has spent more to promote the denial of climate change than any other? ExxonMobil, with at least $29.9 million since 1997, according to ExxonSecrets, a research unit within Greenpeace USA. The corporation denies the allegation, citing the partisan nature of ExxonSecrets. But the oil and gas giant—and others in the energy industry—has been operating on the assumption that it’s only a matter of time before governments around the world impose a price on carbon emissions. That assumption was borne out on Nov. 11 when the U.S. and China announced an historic climate agreement.
Pricing carbon would address what economist Sir Nicholas Stern in a 2006 report called “the greatest market failure in history.” Greenhouse gas emissions cause profound damage—drought slashes crop yields; hurricanes flood subways; rising seas inundate property—but that damage is not reflected in the emissions’ market price. Indeed, the market price is zero: The costs of climate impacts are shouldered by third parties or society as a whole.