Few saw the surprise disclosure earlier this week that the American Petroleum Institute is considering endorsing a price on carbon dioxide emissions and thought the fierce fossil fuel lobby was suddenly becoming climate-friendly. Rather, seasoned industry-watchers say it’s the clearest sign yet that fossil fuel companies see Washington’s shift on climate policy as a real and significant threat.
A carbon price—whether in the form of an emissions trading scheme or a tax on planet-warming pollution—seems antithetical to the fossil fuel industry’s interests, as it would effectively make their core product more expensive for consumers. Large oil and gas companies are likely worried that any other potential action from the Biden administration would be worse for them, said Joe Aldy, a public policy professor at the Harvard Kennedy School who previously served as a special assistant to former President Barack Obama. “They think the alternative climate policy may be a lot of regulations they would view as burdensome and inefficient.”
But the policy itself has a number of silver linings for polluters. For starters, unlike regulations restricting drilling or mandating clean energy, a carbon tax wouldn’t bar companies from extracting natural gas or force the fossil fuel out of the nation’s electricity mix. It could also drive investments in direct-air carbon capture and other technologies that would prolong the use of fossil fuels as a power source.
In the short run, putting a price on greenhouse gas emissions could give natural gas an even greater edge over dirtier-burning coal.
“All of the oil majors have natural gas assets they are trying to protect, and this is a way to do that,” said Mike McKenna, a former deputy director of the White House Office of Legislative Affairs. “Once they became natural gas companies and started competing in the electricity space, it was just a matter of time till they wanted to rub coal out.”
Megan Bloomgren, senior vice president of communications at API, said in a statement that the industry is “evolving,” and that API is “focused on supporting a new U.S. contribution to the global Paris agreement.”
A carbon tax has long been a favorite tool of economists, who say it’s a simple, efficient way to discourage emissions and ensure that the negative costs of climate change are embedded in the price of carbon-intensive products, from gasoline to cement. Right now, “we all pay the cost” of greenhouse gas emissions, special presidential envoy for climate John Kerry wrote in an op-ed last November. But a carbon price would put the onus on the ones doing the emitting, spurring companies and consumers to reduce their output, Kerry said. Years before she became Biden’s treasury secretary, former Federal Reserve Chair Janet Yellen dubbed a carbon tax “the textbook solution to the problem of climate change.”
It’s also a favored tool of the business community. Scores of companies, including solar developers and operators of nuclear power plants, have backed a plan to tax carbon dioxide and distribute revenue to consumers, including giants such as Exelon Corp. and First Solar Inc. The Chamber of Commerce and Business Roundtable have made their own pivots on the issue, attracted by the promise of a consistent policy that wouldn’t shift with each election cycle.
But many environmentalists are deeply skeptical of working with the fossil fuel industry on anything. They suspect there are catches to oil companies’ support—including, for example, demands that a carbon tax be paired with environmental deregulation.
Kathy Mulvey, the accountability campaign director for the Climate and Energy Program at the Union of Concerned Scientists, said API has a long history of disinformation when it comes to climate change that undermines its credibility on the issue. In 1998, the lobbying group coordinated a media campaign to highlight “uncertainties” in climate science, then waged war against the last carbon-pricing scheme to gain traction in Congress, the Waxman-Markey cap-and-trade bill, which died in the Senate in 2010.