December 4, 2023

The oil and gas industry’s largest trading group on Thursday approved a price on CO2 emissions to warm the planet, a big shift after long resisting regulatory action on climate change.

The American Petroleum Institute’s move comes as President Joe Biden prepares to come up with a comprehensive infrastructure proposal that focuses on reducing greenhouse gas emissions and moving to clean energy.

In a virtual meeting with White House officials on Monday, industry leaders from companies such as ExxonMobil, BP, Chevron and ConocoPhillips, as well as API, also signaled support for market-based carbon pricing.

The approval represents a major shift in the industry’s strategy on climate change and an appreciation of the new administration’s regulatory actions following former President Donald Trump’s deregulation efforts to support U.S. producers.

For example, in January Biden issued an executive order to end new oil and gas leasing in states, which met opposition from producers and a number of Republican-led states.

Vice President Kamala Harris (2-L) and the President’s Special Envoy for Climate, John Kerry (L), watch as U.S. President Joe Biden signs executive orders after speaking in the state dining room on combating climate change, Job creation and the restoration of academic integrity was spoken at at the White House in Washington, DC on January 27, 2021.

Almond Ngan | AFP | Getty Images

The API’s confirmation also signals that the methane-emitting industry, a greenhouse gas 84 times as potent as carbon dioxide, would prefer quantifiable climate-related costs over ongoing regulations.

The industry’s plan has been amalgamating over the past 18 months and includes advocating federal funding for advanced technologies, further reducing operational emissions, promoting clean fuels, and increasing transparency by expanding the use of ESG guidelines for reporting.

The API was a staunch opponent of a carbon tax when Congress last debated the subject almost a decade ago.

CNBC policy

Read more about CNBC’s political coverage:

“The world has changed since Congress had this debate,” said API President and CEO Mike Sommers.

The industry is facing increasing pressure from investors to measure their contribution to climate change. And the von Biden administration has vowed to put the US on a path towards net zero emissions by 2050.

While the Democrats are still working on the details of the upcoming infrastructure proposal, it is expected to cost between $ 2 trillion and $ 400 billion in clean energy and innovation.

A carbon tax could also provide funding to fund the infrastructure plan. The Tax Foundation estimates that a $ 50 per tonne carbon emissions tax, assuming a 5% annual growth rate over 10 years, could generate additional federal revenue of $ 1.87 trillion.

The API said it would not support a tax that would fund other programs not related to climate change.

“To the extent that a new carbon tax is put in place to fund the X program … that’s not what we’re talking about and we wouldn’t support that,” Sommers said. He added that the industry is considering changes to existing regulations following a confirmation of the carbon pricing policy.

Some environmental groups see it as an industry ploy to offer a solution to the carbon problem and continue to participate in the debate.

David Doniger, program director for climate and clean energy at Defense Council for Natural Resources, said the move reminded him of the maxim that it is better to be at the table than on the menu.

“This is an effort to get to the table instead of being overlooked and rudely running, but it’s not entirely certain yet. I don’t know what they are offering to really support,” said Doniger.

The NRDC also spoke out against removing strict pollution or efficiency regulations in order to get a price on carbon.

“It’s like old Wimpy with the hamburgers: I’ll be happy to have a hamburger today and pay you back next Tuesday,” said Doniger. “We are not interested in trading one or more of the existing tools.”