Oil trade group is poised to endorse carbon pricing

WASHINGTON—The oil industry’s top lobbying group is preparing to endorse setting a price on carbon emissions in what would be the strongest signal yet that oil and gas producers are ready to accept government efforts to confront climate change.

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The American Petroleum Institute, one of the most powerful trade associations in Washington, is poised to embrace putting a price on carbon emissions as a policy that would “lead to the most economic paths to achieve the ambitions of the Paris Agreement,” according to a draft statement reviewed by The Wall Street Journal.

“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,” the draft statement says.

API’s executive committee was slated to discuss the proposed statement this week. In a statement to the Journal, API’s senior vice president of communications, Megan Bloomgren, said the group’s efforts “are focused on supporting a new U.S. contribution to the global Paris agreement.”

Carbon pricing aims to discourage the production of harmful greenhouse gases by setting a price on emissions. The API draft statement would endorse the concept in principle, without backing a specific pricing scheme such as a carbon tax.

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An endorsement of carbon pricing by the oil industry’s most important trade group would underscore the changing politics of climate change, as major business groups acknowledge the dangers posed by greenhouse gases and adjust to a new reality in Washington. Another major business group, the Business Roundtable, endorsed carbon pricing last year.

President Biden campaigned on treating climate change as a crisis, and since he ascended to power with Democrats controlling Congress, too, several major trade groups have announced support for new climate initiatives.

API was one of the fiercest opponents just more than a decade ago when Congress last considered major legislation on the issue, a plan to have emitters pay and trade for their contributions to climate change. Now it is just the latest of several to support similar plans to put a price on or tax emissions, following an announcement from the U.S. Chamber of Commerce in January.

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The institute’s draft statement stops short of explicitly endorsing a tax on carbon dioxide emissions or other specific pricing framework, and stops short of the language of environmental activists who argue the world must transition away from fossil fuel power sources altogether.

But it does continue a reversal that has accelerated since Mr. Biden’s victory. In recent weeks, API has backtracked on past opposition to direct federal regulation of the oil-and-gas industry’s emissions. And it is emphasizing that the industry can play a role in helping the world address climate change. That has included laying groundwork publicly to support some form of price on carbon emissions.

In its annual State of American Energy report from January, it listed “market based government policies” to reduce emissions across the economy as a policy that would support progress. The Washington Examiner reported it was the first time this report included such language.

“The risks of climate change are real,” API’s annual report said. “Market-based policies can foster meaningful emissions reductions across the economy at the lowest societal cost. An example can be carbon pricing—balancing reducing GHGs with flexibility and pacing to keep energy affordable.”

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Internally, many API members staunchly oppose endorsing a carbon tax or imposing standards for the use of renewable energy, according to one person familiar with the internal discussions who described them as “heated.” The organization had similar internal conflicts over its position on methane-emissions regulations, which the Trump administration had moved to undo at the request of independent producers.

These fights over climate change have increased the pressure on API from within. While many of the smaller and U.S. based companies in its membership want it to press for traditional values -- lower government regulation and more access to federal lands -- some of the majors, especially those based in Europe, have been pushing the organization to accept an ongoing transition to cleaner fuels, one often fed by government intervention.

Just two days after the annual report was released, Total SA announced it was leaving the organization, saying API wasn’t fully aligned with it on climate change. The French oil giant has been pushing to transform its company into producing and selling renewable power and pointed directly to API’s past opposition to carbon pricing and U.S. regulation on methane emissions in its decision.

“The (company) acknowledges the API’s considerable contribution, for over a century, to the development of our industry,” the chief executive Patrick Pouyanné said in a statement at the time. “Nevertheless, as part of our Climate Ambition…we are committed to ensuring, in a transparent manner, that the industry associations of which we are a member adopt positions and messages that are aligned with those of the (company) in the fight against climate change.”