Microsoft Is the Latest Major U.S. Company to Back a Carbon Tax. Here’s Why

Microsoft joined a growing list of major corporations this week that have thrown their weight behind a proposal to create a federal carbon tax. It’s the latest indication that corporate America is beginning to take seriously potential climate change legislation on Capitol Hill.

“It comes from a deep sense of impatience,” says Lucas Joppa, Microsoft’s Chief Environment Officer, in describing why his company announced a handful of new climate initiatives. “No matter how green we are inside of our four walls, if we don’t start to act outside of our four walls, we’re just not doing enough.”

There are a slew of explanations for why corporate America appears to be embracing legislative action now. Consumers are increasingly concerned about climate change, the effects of warming are posing a risk to the operations of some companies, and major investors are demanding that companies act.

In addition, some executives have been spooked by prominent Democrats’ embrace of a Green New Deal, which suggests newfound interest in stringent regulations on many sectors. In an effort to get ahead of such sweeping legislation, they’re willing to push for more corporate-friendly solutions now.

For years, many of the country’s biggest corporations have said they support action on climate change, rallying in support of the Paris Agreement and announcing their own sustainability initiatives, including commitments to rely on renewable energy. In 2009, the last time the U.S. seriously considered sweeping climate legislation, many executives helped draft a framework for a bill to cap carbon dioxide emissions.

“The business community has been unequivocal about the need to solve the climate crisis for literally decades, with a few exceptions,” says Miranda Ballentine, the CEO of the Renewable Energy Buyers Alliance (REBA), a trade group that represents some of America’s largest companies. “Ultimately, what we want is a zero carbon energy future.”

But since 2009 the issue has remained a low priority for corporate lobbyists in Washington. Despite business leaders’ public commitment to action on climate change, they often chose to avoid the fight. “If you did a poll of Business Roundtable executives, you would be hard pressed to find someone who didn’t believe climate was a major problem in America,” says Heidi Heitkamp, a former Democratic Senator from North Dakota. But “it’s not the top of their issues. They’re going to talk about regulatory reform, they’re going to talk about taxes and they’re going to talk about the things they always talk about.”

Some of the most influential trade associations also worked to slow progress on climate change legislation. Even as their members touted their own sustainability commitments in speeches and advertisements, these trade groups, which spend hundreds of millions of dollars lobbying each year, hesitated to act.

One reason is that multi-industry trade groups have long tended to defer to their members’ areas of expertise. An energy company is much more likely to help dictate a trade group’s climate policy than, say, a tech company. Another reason, observers say, is that on issues like climate change, the group’s position most often represents the lowest common denominator for consensus.

Others suggest a more nefarious explanation: corporations have long wanted to have their cake and eat it too. They attract positive attention and appeal to consumers by promising to act on climate change while using lobbying groups to muddy the waters. In 2009, several corporations helped shape an ambitious climate change bill so that it was favorable to their interests before ultimately fighting against it.

The U.S. Chamber of Commerce, which spent close to $100 million lobbying last year, came under fire in that 2009 fight for calling for a debate about the science of climate change. In recent years, the group has focused on questioning the costs of various climate regulations. Similarly, the American Petroleum Institute fought cap-and-trade in 2009, and more recently has argued that oil and gas companies can police themselves to slow emissions.

Still, the major trade groups have not been immune to the shift in public opinion and the evolving positions of their membership. Hugely influential groups like the U.S. Chamber of Commerce and API now say they accept the science of climate change and support reducing emissions. Last week, the Chamber launched a lobbying campaign called “Cleaner, Stronger,” citing internal polling showing that voters are concerned about climate change.

“The risks of climate change are real,” said API President and CEO Mike Sommers in a January speech. “Industrial activity around the globe impacts the climate.”

But these groups have yet to answer questions about what concrete measures they back. On a January press call, Sommers declined to identify any climate regulation the organization supports. Similarly, the Chamber’s new campaign focuses on “innovation” and warns against too much climate regulation.

Many remain skeptical that the change in rhetoric will amount to anything on Capitol Hill. “I see zero change in any of that machinery,” says Senator Sheldon Whitehouse, a Rhode Island Democrat who wrote a book about corporate influence on Capitol Hill, adding that the Chamber of Commerce, API and other trade groups remain “captured.”

The light-touch approach from trade groups has contributed to a divide among members. Shell, for instance, has sought to stake out a position as a leader on climate change among the world’s oil and gas majors. The company released a review of its trade association memberships earlier this month that criticized API, the Chamber and others for “misalignment” on climate change policy. At the same time, Shell announced that it would leave another trade group, the American Fuel & Petrochemical Manufacturers, over its position on climate change.

Still, Shell remains an outlier and many trade groups remain defined by the views of corporations opposed to most climate change measures. In the oil and gas industry, for example, independent drillers, whose companies often lack the resources of the majors, are most sensitive to climate regulations and compliance costs.

“There are a whole lot of independents who potentially have much more political clout than people give them credit for,” says Heitkamp, referring to the smaller oil and gas companies.

Despite challenges, there are reasons to believe this time could be different. Unlike in 2009, when the effects of climate change were less apparent and an economic downturn occupied Washington’s attention, corporations today face a number of immediate climate-related risks, including threats to physical infrastructure and supply chains. A landmark report released last October from the United Nations’ climate science body warned of devastating societal effects if temperature rise exceeds 1.5°C.

Companies also now face renewed prospects of bold legislative or regulatory measures, particularly if a Democrat occupies the White House in 2021. “They’ve assumed for so long that they can control the regulatory agenda and they can lobby to keep it at bay,” says Dylan Tanner, executive director of InfluenceMap, a non-profit that tracks corporate lobbying. “This may not be the case anymore.”

Unexpectedly broad support among Democrats for a Green New Deal last year created a lane for a corporate-backed alternatives. Measures like a carbon tax would reduce emissions while giving these companies business certainty and wiggle room to continue operating. One specific proposal, the Baker-Shultz Plan — named for former GOP Secretaries of State James Baker and George Shultz — has been endorsed by a number of corporations, including ExxonMobil and AT&T, as well as environmental groups like the World Wildlife Fund and The Nature Conservancy. It would put a tax on carbon dioxide emissions with the aim of cutting U.S. greenhouse emissions 32% by 2025, more than President Obama pledged to cut emissions ahead of the negotiations that led to the Paris Agreement. The revenue would be given back to taxpayers as a dividend.

Notably, the proposal also includes provisions that would limit big greenhouse gas emitters’ liability for the impacts of climate change and chop other environmental regulations. A lobbying group connected to the proposal, known as Americans for Carbon Dividends, has received millions in funding, including from oil and gas giants ExxonMobil and ConocoPhillips. “There’s a large diverse group of industries coming together,” says Christopher Crane, the CEO of Exelon, a Fortune 100 energy company that has endorsed the proposal.

The push for a carbon tax follows years of efforts that have been more narrowly focused on promoting renewable energy. Just last month, for instance, major corporations including Walmart, General Motors and Google launched REBA with the goal of helping companies buy renewable energy.

“It’s really about making access to clean energy ubiquitous to everybody,” says Michael Terrell, head of energy market development at Google, “whether it’s a bakery or a big box retailer or a data center.”

Whether existing energy policy advocacy can be ratcheted up to back a more comprehensive solution like a carbon tax remains to be seen. Increasingly, though, as activists take to the streets, progressive Democrats rally for a Green New Deal and scientists warn that the window to fix the problem is closing, concerns about climate change are seeping into company strategy. A push for legislation could follow.