Washington — Having a price on carbon is "absolutely" essential to Spanish oil major Repsol's strategic plan to hit targets on the path to net-zero emissions 2050, a company official said March 2.
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The comment, by Luis Cabra, Repsol executive managing director of energy transition, sustainability and technology, came as a virtual panel of industry and government officials discussed the potential for carbon pricing tools to incentivize the energy transition, at the annual CERAWeek by IHS Markit energy conference.
Repsol recently laid out plans to accelerate a shift toward renewables away from oil and gas. Cabra, who is also deputy CEO, said targets include reaching 15 GW of renewable generation by 2030, tripling production of biofuels by 2030, and progressively substituting the use of renewable hydrogen in its refineries.
"And then the question comes whether this is contingent or dependent on having a carbon price," Cabra told the panel. "The simple answer is yes, absolutely. These new technologies are more expensive today than the old ones."
With challenges impeding a near-term adoption of a global price on carbon, Cabra said there may be a "need to live under regional regulations" and sector-based regulations for now. He suggested well-designed approaches would be technology-neutral, consider implicit carbon prices imbedded in regulation, and avoid duplicative or overlapping regulation. In addition, he said a border adjustment may be necessary to avoid the loss of competitiveness of industry in a given region.
Carbon border adjustment
The EU, which already has a large emissions trading system, is slated to consider in June imposing a carbon border adjustment, which would tax emissions of goods imported into the region. That could put more pressure on other countries such as the US, where a carbon price has faced political hurdles, to consider climate rules or prices, according to some policy analysts.
US Commodity Futures Trading Commission Acting Chairman Rostin Behnam, who also spoke on the panel, predicted there will be more high-level conversation in the US in the next few months around a carbon price or carbon taxes, including discussion of draft bills in Congress.
He suggested a carbon price has been reviewed by the Biden administration as "certainly one possible tool to address climate change."
"But I think it's going to certainly to be a long discussion that's going to have a lot of influences," he said.
Behnam helped launch a report by a CFTC advisory panel that examined climate risk to the financial system. The diverse set of stakeholders backed an economy-wide carbon price as the most important tool to mobilize a shift in capital.
"It was quite remarkable and a very strong statement for all of them to coalesce around the importance of having a price on carbon, to bring it outside the scope of an externality ... because as long as it's something that's free, it's not going to help in addressing climate change," Behnam said.
Julien Perez, vice president, strategy and policy of Oil and Gas Climate Initiative, an industry CEO-led effort, said it may be difficult for one carbon pricing mechanism to cover all contexts. In addition to explicit market-based mechanisms such as carbon taxes or emissions trading, he said "implicit" carbon value mechanisms can be used, such as performance standards or financial incentives for emerging technologies. The group has urged that market-based mechanisms be as broad as possible in scope to enable maximum abatement through scale, and as also advocated a technology-neutral approach.