Why Oil Giants Figured Out Carbon Costs First: Gernot Wagner
In 1991, an Exxon subsidiary calculated the need for a price of $75 per ton of carbon dioxide to stabilize Canada's carbon emissions—a steep price much higher than even today’s consensus views.
John Armstrong, chairman of Imperial Oil, perches on a barrel of crude oil with 48 more arrayed behind him, on April 20, 1977. Imperial Oil estimated that every Canadian man, woman and child consumed on average each year the energy equivalent of these 49 barrels of crude oil.
Photographer: Harold Barkley/Toronto Star via Getty ImagesWhen in doubt, look to those who stand to gain the most from understanding the facts. That mantra works well in financial markets. It also holds for climate science. The oil industry famously knew about the effects of looming climate change as far back as the late 1970s. Of course, Exxon was then actively pretending not to understand those facts. But the oil giant knew, even in the early 1990s, what it would take to reverse our calamitous path—calculating carbon prices closer in line with today’s state of knowledge than some of the best climate economists working at the time.
Oil companies are pretty good at looking ahead. Shell, more 20 years ago, envisioned scenarios in 2020 of youth-led “direct-action campaigns against [fossil energy] companies,” all but predicting Greta Thunberg before her birth. But it was Exxon—in this case, Exxon’s Canadian subsidiary, Imperial Oil—that produced a bold sketch of what it would take to really slow down global warming.