CERAWeek: Marathon's Cazalot favors carbon tax

Marathon Oil President and CEO Clarence Cazalot weighed in on the carbon tax versus cap-and-trade debate today, and he’s on the tax side.
Like Exxon Mobil CEO Rex Tillerson, Duke Energy CEO Paul Anderson and Dynegy CEO Bruce Williamson, Cazalot says a carbon tax is a simple, transparent way to identify the cost of carbon and avoid yet another volatile market that could be skewed by speculators. Economists have expressed the same view, skeptical of a market designed by government.
However, the Obama Administration sees cap-and-trade as a way to jumpstart the struggling economy.
Rep. Edward Markey, D-Mass., chairman of the House Commerce and Energy Subcommittee on Energy and the Environment, also says a cap-and-trade system is likely and insists Congress can make it fair and predictable.
And the United States Climate Action Partnership, a coalition of business and environmental groups that includes ConocoPhillips as well as U.S. divisions of Royal Dutch Shell and BP, built on the cap-and-trade momentum earlier this month by submitting a detailed plan to Congress.
But Cazalot said at a breakfast gathering at Cambridge Energy Research Associates’ CERAWeek conference that from the standpoint of an industry that will have to invest billions in new sources of energy in the coming decades, “we really don’t need one more source of volatility in the business.”
He referred to volatility in oil prices last year, when market speculators were largely blamed for driving prices over $140 a barrel before the economy went south.
A cap-and-trade system would seek to cut greenhouse gas emissions by setting a cap on carbon dioxide emissions, issuing emissions permits and allowing companies to trade them in an open market. When the number of permits drop, companies would have to lower emissions.
A tax would simply add a fee for every ton of carbon dioxide produced by those that use fossil fuels, like refineries and power plants. The tax would increase over time, and therefore encourage companies to seek alternatives.
Both options give companies incentives to cut emissions, and both would lead to higher energy prices for consumers.