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American Petroleum Institute weighs embracing carbon emissions price

The U.S. oil sector's top lobbying arm is considering endorsing a price on carbon emissions for the first time as it seeks a foothold to compromise with the new Biden administration's more aggressive approach to combating climate change.

American Petroleum Institute, or API, CEO Mike Sommers said March 1 at the virtual CERAWeek by IHS Markit that API membership is embracing the United States' return to the Paris Agreement on climate change, and he emphasized that the API supports the regulation of methane emissions, which is particularly an issue with associated gas in the Permian Basin and other regions.

However, the API also is asking its membership to consider supporting a price on carbon dioxide emissions for the first time. Such a so-called carbon tax has been a nonstarter within the API and the Republican Party for years, including under the Trump administration. The API's support would be contingent on an "economy-wide" approach and not a policy specifically aimed at the energy sector.

A draft statement by the API that has not yet been approved and was first reported by The Wall Street Journal says the API would support federal intervention on "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."

An API statement this week concluded, "Our efforts are focused on supporting a new U.S. contribution to the global Paris agreement."

A carbon price has been backed for years by the top European oil and gas companies, and in 2017, Exxon Mobil Corp. first said it publicly supported some form of carbon pricing proposal. However, there remains a big difference between backing a carbon price in theory and actually agreeing on a specific price tag with the Biden administration and Congress.

Sommers also emphasized at CERAWeek that oil and gas still will represent nearly half of the global energy by 2040 and that so-called net-zero emissions pledges are aspirational for now because the necessary technologies either do not exist yet or are not cost effective.

The White House under President Joe Biden's administration already is toughening the standards on greenhouse gas emissions.

Biden on Feb. 26 moved to reestablish the Obama-era price tag on the social cost of greenhouse gas emissions. Biden would put the price back at $51 per metric tonne of carbon emissions, which is the same as during the Obama administration, after former President Donald Trump set the range much lower at a range of just $1-$7/tonne.

The White House also made it clear that the cost is likely to move higher in a year after its new interagency work group makes new recommendations in January 2022 for the economic impact of carbon dioxide pollution.

Speaking at CERAWeek, John Kerry, Biden's special presidential envoy for climate, emphasized that the president is not trying to destroy the oil and gas sector.

"I don't object to fossil fuels," Kerry said. "I object to the byproducts, namely carbon dioxide and methane."

Occidental Petroleum Corp. CEO Vicki Hollub at CERAWeek on March 2 struck a similar tone, saying, "We should not be talking about eliminating fossil fuels. What we really need to talk about is eliminating emissions."

Jordan Blum is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.

IHS Markit is subject to a merger with S&P Global pending regulatory and other customary approvals.