Big Oil increasingly open to carbon tax to head off more stringent environmental regulations

The renewed push for a carbon tax is coming from an unexpected player in the climate change game: Big Oil. 

It’s a strategic maneuver by oil and natural gas companies to head off tougher regulatory actions by President Biden and the Democratic-run Congress.

A carbon tax functions as a surcharge on goods and services or industries that emit carbon dioxide, the primary greenhouse gas that contributes to climate change. Previous carbon-pricing proposals have been both broad, affecting every consumer, and narrow, with only certain industries such as coal and oil being impacted.

One “conservative” carbon tax proposal, authored by former Republican Secretaries of State James Baker and George Schultz, would target oil and natural gas refineries “or the first point where fossil fuels enter the economy.” 

A carbon tax’s impact and complexities have long failed to generate traction outside of environmentalist circles. That may be changing, however. 

Since Mr. Biden won the 2020 presidential election, the nation’s leading energy and business groups have softened their position. 

The American Petroleum Institute this month began considering whether to endorse a carbon tax. The group, which represents more than 600 oil and gas companies including Exxon Mobil and Chevron, is likely to embrace some sort of carbon-pricing proposal. 

That was made clear this week when oil and gas executives met at the White House with Mr. Biden’s domestic climate adviser. After the meeting, the executives pledged to support the administration in making “it more expensive to emit the gases that contribute to climate change.” 

Sources within the oil and gas sector told The Washington Times that groups such as the American Petroleum Institute would be unlikely to endorse a blanket tax on carbon emissions. Rather the industry, as a whole, is looking for ways to define what a “market-based approach to carbon pricing should look like.” 

“A lot of us are seeing these far-left proposals in Congress that are designed to eliminate the industry,” one source said. “We feel it’s important to present some alternatives on how you do this in the most economic way.” 

Within the ranks of big business, a similar shift is occurring. In January, the U.S. Chamber of Commerce signaled it was open to a “market-based” solution to climate change. The Chamber clarified at the time that a carbon tax could fit that metric, depending on how it was designed and implemented.  

Neither the American Petroleum Institute nor the Chamber of Commerce responded to requests for this article. 

Myron Ebell, the director of the conservative Competitive Enterprise Institute’s Center for Energy and Environment, argued the embrace of carbon pricing results from a desire by companies to “advantage themselves.” The maneuvering, according to Mr. Ebell, started long before the Biden administration took office. 

“Most of the major oil companies, starting with the European ones, have supported a carbon tax for a long time,” he told The Washington Times. “Of course they haven’t lobbied for it fully. They’ve generally proposed it, though, to disadvantage coal over natural gas, since the latter is much less carbon-intensive.”

A similar calculus, Mr. Ebell contended, was now being used in hopes of “easing up the war on Big Oil.” 

“The belief by some oil and energy companies appears to be that if there is a [carbon] tax they would no longer be target number one,” he said. “A carbon tax is much less harmful to the bottom line of an oil company than all of these regulatory assaults on them at the federal level. 

“They can pass that tax much easier on to consumers,” Mr. Ebell said. 

The increasing openness to a carbon tax among some segments of the energy industry comes as Mr. Biden has promised to make combating climate a “whole of government” agenda. 

As part of that pledge, the president has reentered the Paris Climate Agreement, committing the U.S. to reach net-zero carbon emissions by 2050. To reach that goal, the administration has signaled that it will mobilize the full power of the federal government’s regulatory agencies.