Big Oil Companies Want a Price on Carbon. Here’s Why.

Natural-gas profits have Shell and BP, among others, calling for increased use of carbon-emissions fees ahead of a make-or-break climate summit in Paris.

The corporate logo of Shell, a Dutch petroleum company, is seen under a midafternoon sky in Kuala Lumpur on March 31, 2008. Malaysia's conservative Islamic party PAS on March 31 urged Muslims worldwide to launch a commercial boycott of Dutch products to protest against a film deemed insulting to Islam. 
National Journal
Ben Geman
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Ben Geman
June 1, 2015, 8:43 a.m.

Six oil and gas gi­ants based in Europe have de­livered an un­usu­al joint mes­sage to or­gan­izers of United Na­tions cli­mate talks: We want a price on car­bon-di­ox­ide emis­sions.

BP, Shell, Eni, Total, Statoil, and BG Group (a big gas com­pany that Shell is ac­quir­ing) an­nounced in a let­ter to Chris­ti­ana Figueres, the top U.N. cli­mate of­fi­cial, that they are join­ing forces for an ini­ti­at­ive call­ing for car­bon pri­cing, which is ac­com­plished through emis­sions-trad­ing sys­tems or taxes.

Their ef­fort re­flects a stra­tegic cal­cu­la­tion for the com­pan­ies that by en­ga­ging on the top­ic, they can help shape cli­mate policies to be­ne­fit nat­ur­al gas, which pro­duces about half the car­bon emis­sions of coal when burned to cre­ate elec­tri­city. Wider use of car­bon pri­cing world­wide, de­pend­ing on how strin­gent the policies, could be­ne­fit com­pan­ies that pro­duce gas and ship it around the globe in li­que­fied form.

“[T]he need to cut emis­sions is so es­sen­tial that we have to pur­sue all op­tions to lower car­bon while provid­ing the en­ergy the world needs to meet de­mand from a grow­ing pop­u­la­tion seek­ing bet­ter liv­ing stand­ards. Nat­ur­al gas can help de­liv­er this,” reads a second open let­ter from the com­pan­ies re­leased to the press.

Kev­in Book of the con­sult­ing firm Clear­View En­ergy Part­ners says the com­pan­ies are mo­tiv­ated by sup­port for green policies in Europe, where the European Uni­on has a long-es­tab­lished emis­sions-trad­ing sys­tem, and the grow­ing share of nat­ur­al gas in the oil and gas in­dustry’s re­serves.

“If you are both European and gassy, then it is easy to un­der­stand the sup­port for a price on car­bon,” said Book, Clear­View’s man­aging dir­ect­or.

The let­ters come as in­dustry of­fi­cials are meet­ing in Par­is this week for the World Gas Con­fer­ence.

And they co­in­cide with the latest round of U.N. cli­mate talks in Bonn, Ger­many ahead of the Par­is cli­mate sum­mit that starts in late Novem­ber, which will be aimed a hash­ing out a fi­nal glob­al cli­mate ac­cord.

The com­pan­ies—which are headquartered in Europe but have op­er­a­tions world­wide—say they want to “open dir­ect dia­logue with the UN and will­ing gov­ern­ments.”

The com­pan­ies are call­ing on gov­ern­ments to in­tro­duce na­tion­al and re­gion­al car­bon-pri­cing policies where they don’t already ex­ist, and to cre­ate an in­ter­na­tion­al frame­work to even­tu­ally link na­tion­al pro­grams to­geth­er.

Jason Bor­doff, the found­ing dir­ect­or of the Cen­ter on Glob­al En­ergy Policy at Columbia Uni­versity, said that in ad­di­tion to in­terest in gas, there’s a re­cog­ni­tion by ma­jor com­pan­ies that they need to en­gage on cli­mate policy.

“I think giv­en how quickly na­tions are be­gin­ning to move to ad­dress cli­mate change, giv­en how pub­lic opin­ion on the is­sue is rap­idly shift­ing, and how much pres­sure is com­ing from the pub­lic for great­er ac­tion from the en­ergy com­pan­ies that pro­duce fossil fuels that are re­spons­ible for the vast ma­jor­ity of car­bon emis­sions, I think many—clearly not all—but many large en­ergy com­pan­ies are real­iz­ing that they need to pro­act­ively en­gage in the con­ver­sa­tion about what the solu­tion to cli­mate change is go­ing to be,” said Bor­doff, who was a seni­or en­ergy and cli­mate aide at the Na­tion­al Se­cur­ity Coun­cil un­der Pres­id­ent Obama.

Big U.S.-based oil and gas com­pan­ies like Ex­xon, Chev­ron, and Cono­co­Phil­lips are not part of the ini­ti­at­ive.

The European com­pan­ies say that car­bon pri­cing be­ne­fits the in­dustry in the long term by help­ing to provide cer­tainty and policy sta­bil­ity.

“Pri­cing car­bon ob­vi­ously adds a cost to our pro­duc­tion and our products—but car­bon pri­cing policy frame­works will con­trib­ute to provide our busi­nesses and their many stake­hold­ers with a clear roadmap for fu­ture in­vest­ment, a level play­ing field for all en­ergy sources across geo­graph­ies and a clear role in se­cur­ing a more sus­tain­able fu­ture,” the let­ter to Figueres states.

The let­ter notes that car­bon pri­cing can help drive use of gas as a re­place­ment for coal. But while the com­pan­ies are pro­mot­ing the role of nat­ur­al gas in cli­mate policy, they say that car­bon pri­cing will be­ne­fit sev­er­al tech­no­lo­gies, in­clud­ing en­ergy ef­fi­ciency in build­ings, re­new­ables, car­bon-cap­ture and stor­age, and low-pol­lu­tion cars.

The World Bank tracks (and pro­motes) car­bon pri­cing, and a late May Bank re­port notes growth in the prac­tice.

“In the past year and a half, Por­tugal and Mex­ico im­ple­men­ted new car­bon taxes, South Korea star­ted one of the world’s largest emis­sions trad­ing sys­tems, and Cali­for­nia and Que­bec linked their cap-and-trade sys­tems, which Ontario plans to join,” states the Bank’s up­dated guide to na­tions with car­bon pri­cing.

While pro­mot­ing gas, the com­pan­ies say they are not seek­ing “spe­cial treat­ment” for any fuel in their push for wide­spread car­bon pri­cing world­wide.

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