The American Petroleum Institute is considering throwing its weight behind a government-imposed price on carbon dioxide emissions as a way to slow global warming, a major policy shift by the oil industry’s top trade group.
API’s draft policy statement does not endorse a specific mechanism, such as a tax on carbon dioxide emissions or cap-and-trade system, but endorses what it calls a market-based, economy-wide policy, according to two people familiar with the discussions. It could receive a vote by the group’s executive board later this week.
Proponents argue that a carbon tax that increases the cost of energy derived from oil, natural gas and coal could be more effective than regulations at paring U.S. greenhouse gas emissions. Such as tax – the proceeds of which could be rebated to consumers – would discourage the use of fossil fuels while encouraging the market to develop low-carbon alternatives.
The Chamber of Commerce embraced market-based policies to limit emissions in January, and several of API’s largest members, including Exxon Mobil Corp., ConocoPhillips, BP plc and Royal Dutch Shell plc already support a carbon tax-and-rebate plan.
“Getting a market price on carbon is going to be really important to make sure that we’re using market forces to try to most cost-effectively reduce CO2 emissions,” Exxon Mobil chief executive officer Darren Woods said at the CERAWeek by IHS Markit conference Tuesday. “Governments should not pick winners and losers.”
The efforts have gained momentum as international energy companies are making investment decisions based on the assumption that emissions limits will be imposed by regulation, tax or other mechanisms. The companies are seeking regulatory certainty on the issue, instead of environmental policies that whipsaw with every presidential election.
And they are bracing for possible tariffs on imports from countries with lax climate policies -- a potential risk for U.S. companies selling carbon-intensive products globally.
API previously telegraphed its support in January, when it said it supported the ambitions of the Paris agreement to pare greenhouse gas emissions and cited “market-based policies” such as carbon pricing as a way to balance those reductions with “flexibility and pacing to keep energy affordable.”
API senior vice president of communications Megan Bloomgren said the group has “convened top industry officials throughout the supply chain to incubate a host of policy solutions and industry actions to shape a lower-carbon future.”
“Our efforts are focused on supporting a new U.S. contribution to the global Paris agreement,” Bloomgren said by email.
Consideration of API’s move was earlier reported by the Wall Street Journal.
Some environmentalists who oppose fossil-fuel development criticized the possible move, with Maya Golden-Krasner, deputy director of the Center for Biological Diversity’s Climate Law Institute, calling it “little more than a public relations ploy.”
“Instead of letting producers buy their way out of climate accountability, we need strong regulations to keep fossil fuels in the ground,” Golden-Krasner said.
The effort divides the oil and gas industry. Some large, integrated energy companies that have global operations and investments in low-carbon businesses, favor the approach. Many independent oil producers and refiners are opposed.
A carbon tax could benefit producers of natural gas over coal and spur investment in renewables and nuclear power.
Several utilities have lobbied Biden administration officials to support a nationwide carbon price. And Treasury Secretary Janet Yellen, who previously endorsed a carbon tax as the “textbook solution” to climate change, reiterated in January that “effective carbon pricing” is essential to “solve the climate crisis.”
“I am fully supportive of effective carbon pricing, and I know that the president is as well,” Yellen said in written answers to Senate Finance Committee questions.
Nevertheless, the politics of the issue are challenging, particularly in the Senate, which voted 50-50 along party lines last month to block a measure that would have opposed a carbon tax. Senator Joe Manchin, whose role representing coal-rich West Virginia and heading the chamber’s energy committee makes him a key Democratic vote on such issues, signaled his openness to carbon pricing by voting with his party on the measure.
Several Republicans, including Lisa Murkowski of Alaska and Mitt Romney of Utah, have said they are open to a carbon tax. But developing a consensus plan has proved difficult, with an array of proposals advanced on Capitol Hill in recent years. Some initiatives have lured Republican and business support by imposing a carbon tax in exchange for wiping away federal regulation of carbon dioxide emissions – a tradeoff many environmentalists staunchly oppose.
Still other thorny questions surround how carbon tax revenue would be used, with some proposals calling for the money to be rebated to American taxpayers, and others pushing for proceeds to go to environmental restoration projects and revitalizing coal communities.
© 2021 Bloomberg L.P.