PLeach Total Energy USA 121128 v2

Time for a Carbon Tax?
Patrick Leach
Copyright © 2012 by Decision Strategies
Under no circumstances should this material be reproduced, stored in a retrieval system, or
transmitted in any form with any third party, including competitors without the written consent of Decision Strategies.
This document should be considered incomplete without the accompanying oral commentary and discussion.
COMPANY CONFIDENTIAL
0
“Financial Planning for Energy
Companies in Uncertain Times”
1) Integrate risk
management into your
strategy development
Identification of Level of Risk
Position to
capture upside
100
Cumulative Probability %
2) Take steps to
reduce uncertainty
where possible
Interp. > 30
> 30 mm
.90
.75
Interp. < 30
Size?
Strategy “C”
.10
Interp > 30
Identification of Sources of Risk and Opportunity
Strategy “A”
Strategy “A”
Strategy “B”
< 30 mm
.10
.25
Interp < 30
Strategy “B”
.90
.68
.08
.03
.23
Strategy “C”
Interpreted
size?
Identify actions to
mitigate downside risk
0
0
Net Present Value
*Illustrations of tools used
Interp.
> 30
> 30 mm
.70
< 30 mm
.96
.04
Interp.
< 30
> 30 mm
.30
< 30 mm
.25
.75
.68
.03
.08
.23
A carbon tax would reduce
uncertainty
1
The “Social Tipping Point”
1) Natural disasters become
more intense
2) People eventually
demand that something
be done
3) The longer we wait, the
bigger the disaster
4) The bigger the disaster, the
more draconian the response
Reference: Dr. Mark Trexler, Det Norske Veritas
2
A partial list of organizations
validating global warming science
•
•
•
•
•
•
•
•
•
•
•
American Institute of Physics
American Geophysical Union
American Meteorological Society
Australian Institute of Physics
Australian Meteorological and
Oceanographic Society
Canadian Federation of Earth
Sciences
European Federation of
Geologists
Geological Society of America
Geological Society of Australia
Geological Society of London
International Council on Science
• NASA
• National Academy of Sciences
• National Association of
Geoscience Teachers
• National Oceanic and
Atmospheric Administration
• National Research Council
• Royal Meteorological Society (UK)
• US Geological Survey
• Woods Hole Oceanographic
Institute
• World Meteorological
Organization
3
Technologies which become
economic with a carbon tax
C
4
The upcoming “Kodak Moment” for
some companies
5
A risk management perspective
In order to do nothing, we must
be sure…
…but we cannot be sure
This is why Ronald Reagan
championed the Montreal Protocol
6
Revenue neutrality
• We can offset a carbon tax
with decreases in income tax,
corporate tax, rebates, etc.
– Bob Inglis, former congressman,
R, South Carolina
– Patty Murray, senator, D,
Washington
– Charles Krauthamer, newspaper
columnist
7
Another advantage to a carbon tax
Government picking winners
Government ensuring
economic externalities
included in price
8
Summary
• Economic externalities must be included in
price
• The probability of eco-disaster is non-zero
• We don’t need to know what is going to
happen in the future
– We just need to know which strategic
alternatives to choose
• It will be easier to make these decisions with
a carbon tax
9