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Executives view carbon pricing as 'inevitability' in decarbonizing world

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Executives view carbon pricing as 'inevitability' in decarbonizing world

A potentially divided 117th Congress may not put a price on carbon, but such a market mechanism is inevitable in the foreseeable future, according to energy sector observers.

Democrats will maintain control of the U.S. House of Representatives during the next Congress, but a Jan. 5, 2021, runoff race for Georgia's two U.S. Senate seats will determine which party controls the upper chamber. While President-elect Joe Biden did not campaign on a carbon price as part of his $2 trillion climate and clean energy proposal, industry observers said during a Dec. 2 webinar hosted by the CEO Climate Dialogue, a group of companies working to promote climate action in Congress, that they expect the federal government to eventually enact such a pricing mechanism given global decarbonization efforts.

"I do think it's going to take some time, particularly if we have a divided Congress after Jan. 5, but I do think it's an inevitability," said Hugh Welsh, president and general counsel of DSM North America, a company specializing in sustainability. "And why? Because we're only going to see an accelerated transition to that low-carbon economy that we all aspire to if we put our market-based price on carbon that creates a disincentive to continue to invest in that area and not into more clean technologies."

Welsh also called on companies that support climate mitigation and carbon pricing to throw their political capital behind the cause.

"I do think it's going to be a challenge in the near-term, but I do firmly believe that in the not-too-distant-future we'll have a price on carbon nationally here in the United States," Welsh said. "We wouldn't put a price on carbon on ourselves if we didn't believe that it was something that was going to be impactful for the whole business community."

Biden's energy and climate plans seek to decarbonize the U.S. power sector by 2035 and reach net-zero emissions across the entire economy by 2050. To get there, the nation will need to electrify more sectors and significantly build out renewable energy sources and storage technologies, said Thad Hill, president and CEO of Calpine Corp., which generates electricity from natural gas and geothermal resources.

"By far the best way to drive this is through putting a price on carbon," Hill said. "I don't know that it's doable this Congress, but hopefully in one of the next couple of congresses it will be, and so we're going to keep pushing."

Carbon pricing has drawn some bipartisan support, but the U.S. will need more complementary policies in addition to such a mechanism to reach midcentury goals, according to Bob Perciasepe, president of the nonpartisan Center for Climate and Energy Solutions.

The financial sector is also helping to drive the energy transition, with some institutions divesting from fossil fuels and pressuring companies to reduce their emissions. The investment community has more recently begun factoring climate considerations into its long-term decision-making, Perciasepe noted.

"I think this is real. I don't think it's a boutique thing anymore," Perciasepe said. "The sophistication of thinking ahead to the future and who's going to be prepared for that economy of 2050 as opposed to the economy of 1950, I think, is going to be on the minds of a lot of people."

However, the nation cannot move off of fossil fuels entirely to meet these midcentury emission-reduction goals and must maintain if not grow its natural gas fleet to support an increase in renewable energy sources, Hill said. While gas-fired generators may not run for as long or as frequently, the U.S. will need the fuel to ensure a reliable supply of electricity, he said.

As a result, carbon capture and storage technology will play an important role in limiting emissions from gas facilities, he said. Such technology has not yet reached wide-scale commercial viability, but that could change in the next decade or so.

"To get to the mid-century goals, carbon capture and sequestration is going to have to be a part of the solution because these assets are absolutely required [for] reliability," Hill said. "By 2030 I do believe some will be commercially deployed, but by 2050 I absolutely think it has to be part of the solution."