It was certainly a counterintuitive move. A group of major oil and gas producers including BP and Shell said this week that they could live with a global carbon tax. Such a tax, by increasing the cost of emitting carbon, should in theory cut the amount of greenhouse gases going into the atmosphere. How noble of the oil majors to be thinking of the environment, even when a carbon tax would be damaging to their business.

But a globally co-ordinated carbon tax would be tough to implement. The tricky part, other than administering a global collection system, is determining the carbon price. One way to do it has been to set an overall carbon target and encourage a traded market in carbon emissions. The EU’s initial attempt, launched in 2005, has suffered from an overgenerous allocation of emission credits at the outset: the traded emissions price has fallen 50 per cent to €7.25 per tonne of CO2 over the past five years. Carbon emissions have dropped since 2008, but that is partly down to the economic downturn.

Direct carbon taxes, too, have had mixed results. In Canada, British Columbia instituted a tax in 2008. Per capita greenhouse emissions fell there by a tenth between 2008 and 2011, compared with just 1 per cent in the rest of Canada, according to research from the University of Ottawa. But Norway’s 1991 carbon tax did not prevent emissions rising 15 per cent over the next 17 years.

There is a more prosaic reason for the energy companies’ enthusiasm: half of their proven reserves are in natural gas. With a UN Climate Conference approaching in December, there is every reason for these companies to promote the use of natural gas over coal, which emits roughly twice the carbon for each unit of energy. Petrol’s carbon content lies roughly between the two.

Oil companies want to differentiate themselves from coal producers. The tar brush now calls the road black.

Extracted in full from the Australian Financial Review.