BP Advocates for Putting a Price on Carbon

A key oil and gas company is saying that governments internationally need to put a price on carbon to increase the percentage of renewables, natural gas and energy efficiency. BP’s Chief Executive Bob Dudley said in the company’s “BP Energy Outlook 2035” that even though carbon emissions will grow at a slower rate than in the past, they will still rise overall.

BP is part of a group of oil companies that favor such action: ExxonMobil, Royal Dutch Shell and StatOil. Those companies don’t generally advocate for taxes or restrictions but they think that such measures would be more efficient than a patchwork of international laws. Moreover, they have major investments in natural gas, which is expected to continue to be the fastest growing fuel in the United States.

“In BP, we continue to believe that carbon pricing has an important part to play as it provides incentives for everyone — producers and consumers alike — to play their part,” Dudley said at a news conference in London last week, as reported by USA Today. 

The projected annual growth is 0.6% a year until 2035. That compares to 2.1% per year for the last two decades, the outlook says. But the report adds that despite the lower annual growth rate, total carbon emissions from energy use will rise by 13% by 2035, USA Today reports. It notes that the International Energy Agency in Paris says that carbon emissions need to fall by 30% over the next 18 years.

“That,” according to Dudley, “flags up the need for further policy action,” reports the paper.

BP says that it would favor either a carbon tax or a cap-and-trade program. Australia, Ireland and Sweden have some variance of a carbon tax while China has said it would implement a cap-and-trade program, USA Today says. BP says that putting a price on carbon would reduce carbon emissions and increase the demand for alternative energy.

If the issue moves at all, it will be the major oil companies that get on board to push it. To that end, Exxon says that it will support a carbon tax that is revenue neutral, or one where the revenues from the tax are plowed back into economy in the form of clean energy investments or used to reduce other corporate taxes.

“Exxon may have its own competitive reasons for getting behind the tax: It is a major producer of natural gas, a relatively low-carbon alternative to coal. And a carbon tax would boost demand for gas,” writes Howard Gleckman, in a column for Forbes.

With that, he says that Exxon should be taken at its word — that it prefers a single federal metric for measuring carbon emissions as opposed to a patchwork of state tax and regulatory laws. It’s a position that it has outlined in its 2105 report to shareholders on corporate citizenship.

A cap-and-trade system sets carbon limits and companies unable to meet such thresholds would buy credits from those who can. Emissions fall because the ceilings are gradually lowered. Under a carbon tax, government would tax industrial facilities such as oil companies and electric utilities according to their carbon footprints that can be readily measured.

joint report issued by the Brookings Institution and the American Enterprise Institute says that pricing carbon is the most efficient way of reducing carbon dioxide releases that are tied to global warming. A $16 tax per ton would raise $1.1 trillion in the first 10 years.