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Policy efforts to mitigate global climate change are projected to impose significant economic costs on firms. Yet a large and growing number of firms lobby actively in favor of climate change cooperation and domestic regulation to mitigate carbon emissions. Support for mitigation policies can be found across a range of industries, from transportation and electronics to cement production and finance. Even within the oil and gas industry, infamous for its historically trenchant opposition to climate action, major players such as BP and Shell have come out in favor of policies designed to reduce carbon emissions.
Support for domestic regulation is especially puzzling in the context of an increasingly integrated global economy. Domestic regulation will raise energy costs, undermining domestic producers’ competitiveness both at home and abroad. Consider the global aluminum industry. Aluminum smelting is energy intensive, with energy accounting for 20 percent of overall production costs.1 The US aluminum industry faces stiff competition from abroad. Yet when the US House of Representatives passed nation-wide carbon cap-and-trade legislation in 2009, Pittsburgh-based producer Alcoa Corporation was among its most vocal proponents.2
Alcoa's support for cap-and-trade was more than a simple public relations campaign. Alcoa was a founding member of the US Climate Action Partnership (US CAP), an industry group counting BP, Duke Energy, and Caterpillar among its members. The Waxman-Markey bill passed by the House of Representatives was modeled directly on draft legislation published by US CAP.3 Outside of US CAP numerous other firms, including electric utilities themselves, provided public support for climate action. Louisiana-based electric utility Entergy called the proposed cap-and-trade system “a major step forward in solving the biggest challenge of our time” and lobbied for its passage.4 These and other firms played a major role in pushing for, and shaping, US cap-and-trade legislation.
To be sure, private sector opposition remains. In fact a key feature of industry's response to climate change policy has been its divisiveness within industries. While BP promoted the 2009 cap-and-trade bill as a member of US CAP, Exxon Mobil denied the threat of climate change until a change in leadership brought grudging acknowledgment in 2014. While Alcoa has long advocated effective climate change policy, one of its main US competitors, Noranda Aluminum, publicly threatened to...