No less of a savvy politician than Lyndon B. Johnson said that it’s best to have your rivals “inside the tent pissing out, than outside the tent pissing in.”
Which helps explain why fossil fuel companies are all of a sudden interested in joining the discussion — being led by Democrats who now control the White House and both chambers of Congress — about placing some sort of price on carbon.
It’s a discussion that wouldn’t be happening had Donald Trump been re-elected, but with Joe Biden talking about the “existential threat” posed by global warming — and the burning of fossil fuels — the oil and gas industry suddenly understands that being proactive and engaged with the other side offers the best opportunity to shape the future.
For example, the American Petroleum Institute (API) now backs a tax on carbon, saying last week that “API supports economy-wide carbon pricing as the primary government climate policy instrument to reduce CO2 emissions while helping keep energy affordable, instead of mandates or prescriptive regulatory action.”
It’s the “instead of mandates or prescriptive regulatory action” that’s key here. The oil and gas industry is eager to thwart President Biden and congressional greenies who want to accelerate the growth of renewable energy, and restrict fossil fuels any way they can.
The president made this perfectly clear within hours of being sworn in, when he revoked the construction permit for the long-disputed Keystone XL oil pipeline, designed to carry some 800,000 barrels of crude per day from Canada to refineries along the Texas Gulf Coast.
“Leaving the Keystone XL pipeline permit in place would not be consistent with my administration’s economic and climate imperatives,” Biden’s executive order said.
The president also ordered a moratorium on new oil and gas leases on federal land, including the Arctic National Wildlife Refuge. But Biden continues to insist, as he did in January, that “[w]e’re not going to ban fracking.”
The question of how carbon should be priced is hardly new. The two main ways are an emissions trading system (i.e., “cap-and-trade”) and carbon taxes. The funny thing about cap-and-trade is that conservatives today often whine about it being some sort of liberal scheme. Actually, it was first discussed seriously four decades ago in the Reagan White House. And why not? At its essence is the free market — buying and selling.
Cap-and-trade isn’t some academic theory. The Reagan and George H.W. Bush administrations used it to rein in power-plant emissions that caused acid rain. What’s not to love here? It pleased conservatives and environmentalists by shifting power from the federal bureaucracy to the free market in the first case, and in the second, by eliminating pollutants.
Meantime, carbon taxes are just what they sound like: a levy on polluters. The Tax Foundation, a non-partisan Washington group, has estimated that taxing emissions at $50 a ton could generate nearly $1.9 trillion in revenue over a decade. One concern about this, however, is that such a tax could be regressive, meaning that it would fall heavier on lower-income households.
It would also, obviously, hit major polluters heavily — like the oil and gas industry — but isn’t that the point? Such polluters are already running ahead of this idea, studying everything from carbon remediation to carbon capture, which involves taking carbon that otherwise might be pumped into the atmosphere, and pumping it underground instead.
Some big polluters see big dollar signs here. Exxon Mobil XOM, -1.54% CEO Darren Woods said last week that carbon capture will be a $2 trillion business by 2040. That’s about eight times the size of Exxon Mobil’s market cap — quite a potential market. Rival Chevron CVX, -0.23%, meanwhile, just unveiled a partnership with Microsoft Corp. MSFT, +2.81%, oilfield-services firm Schlumberger NV SLB, -1.21% and privately held Clean Energy Systems to build a carbon-capture plant in California.
Some environmentalists have expressed skepticism about these shifting winds. Speaking of the API’s apparent embrace of a carbon tax, Maya Golden-Krasner, deputy director of the Center for Biological Diversity’s Climate Law Institute, told the Washington Post that it was nothing more than a “public-relations ploy,” and said “the Biden administration shouldn’t be taking policy cues from the standard polluters’ playbook.”
I think she’s wrong. The oil and gas industry is signaling an interest in change. Whether it’s serious or not remains to be seen. But given the dollars that Exxon Mobil and others seem to have their sights on, the industry and environmentalists already have one big thing in common: They both like the color green.
Source: Market Watch