In reversal, oil and gas lobby embraces climate-focused price on carbon

Josh Lederman
·4 min read

WASHINGTON — The top oil and gas industry lobby group on Thursday endorsed putting a federal price on carbon dioxide emissions, a reversal designed to show seriousness in addressing climate change.

The decision by the American Petroleum Institute, whose membership includes oil giants such as ExxonMobil and Chevron, ends the group's long-standing opposition that helped sink cap-and-trade legislation just over a decade ago.

The move follows a fierce internal debate within the organization over whether to embrace a carbon price, which several of the group’s members had already publicly backed.

It comes as the Biden administration works to identify the most effective and politically feasible ways to drastically reduce U.S. emissions of heat-trapping gases blamed for global warming.

“It’s a recognition of the situation that we’re in today and the importance of dealing with this important issue,” API’s CEO, Mike Sommers, said in an interview ahead of a formal announcement at a board meeting. “This is a top priority of the Biden administration and we also know that climate change is real and that we need to be part of the discussion on one of the marquee items of our time.”

The lobby group is not endorsing a specific approach to putting a price on carbon, which could come in the form of a federal tax on emissions or an emissions-trading scheme, where a cap on total emissions would be put in place and emitters must purchase or trade permits to emit, thus creating a financial incentive to lower their emissions.

Although major business and industry groups long fiercely opposed making emitters pay for their emissions, that opposition has ebbed as industry has seen major government action as inevitable and began coalescing around a market-based approach that avoids the federal government issuing mandates. In recent years the U.S. Chamber of Commerce, Business Roundtable and other groups have voiced support for a carbon price.

Part and parcel to the oil and gas lobby’s nascent support for a carbon price is its insistence that it replace mandates. The group said the carbon price should be “non-duplicative,” meaning that companies shouldn’t be hit by both a carbon price and regulations for the same emissions.

“What we’re saying is those kinds of regulatory regimes should be replaced with a transparent approach that would incentivize consumer choice and also make investments in clean technologies,” Sommers said in the interview.

The Biden administration faces an uphill battle to find and enact the steps domestically to achieve his goal of zeroing out U.S. greenhouse gas emissions economy-wide by 2050, and from the electricity sector by 2035. Although Biden is expected to push for a multi-trillion dollar infrastructure package with massive investments in clean energy and efficiency, the fate of that legislation is uncertain, and those steps alone may not be enough to bring greenhouse gas emissions in check.

Senior Biden administration officials including Treasury Secretary Janet Yellen have voiced strong support for a carbon tax. But not all Democrats agree it’s feasible. House Energy and Commerce Committee Chairman Frank Pallone, D-N.J., told NBC News recently it’s “time to try something new” after cap and trade failed a decade ago.

“The votes are just not there for a price on carbon,” Pallone said.

Jim Manley, a longtime aide to former Senate Majority Leader Harry Reid and a veteran of the failed 2009-2010 effort on cap and trade, said there have long been efforts to work with affected industries to build support for controversial, heavy-lift policies but that it “wasn’t enough to move the needle” with Republican lawmakers.

“It’s an encouraging bit of news, but having industry buy-in doesn’t necessarily guarantee success,” Manley said. “I’m just not convinced it’s going to change votes, especially in the Senate, but hope springs eternal.”

API’s endorsement of a carbon price comes as part of a new “Climate Action Framework” being unveiled Thursday that aims to lay out a path for how both the government and industry should take their own respective steps to address emissions.

From the government, the lobby group wants transparency until policies and reporting requirements as well as incentives for carbon capture and other clean energy technologies. The group says its members are agreeing to continue investing in reducing their own emissions, reducing flaring of methane and other powerful heat-trapping gases, and support direct regulation of methane by the federal government.