A carbon tax — that is, the imposition of a price on CO2 emissions — deserves to become the main instrument of the US government in the fight against climate change. Signed, the American Petroleum Institute. In the draft of a statement seen by the Washington Post, the leading lobby of the oil and natural gas industry declares that it strongly prefers the prospect of a tax to that of more restrictive legislation. It is an apparently contradictory position — that of companies calling for their own products to be taxed. Let us therefore try to reconstruct the reasons and dynamics behind it.

The Biden administration chooses climate

"Oil producers have not suddenly become environmentalists. They are simply very pragmatic," LifeGate's scientific director Simone Molteni explains to us. They have found themselves grappling with a new president who placed at the centre of his electoral campaign an ambitious plan to reach 100 per cent energy from renewable sources and achieve net-zero emissions by 2050. A president supported by a population for whom climate is at the top of the list of priorities capable of determining their voting decisions, according to what polls reveal. It is also to send a clear message to his voters that Joe Biden, on his first day in office, signed the executive order returning the United States to the Paris Agreement on climate.

"If you add all these elements together, you are an American oil executive and you are pragmatic, so you understand that it is in your interest to sit at the negotiating table and seek an agreement on the path that does not damage you too much. Because a carbon tax can be negotiated, but the real problem would be overly drastic alternatives, such as stringent regulations that oblige you to extract less oil," Molteni explains. "It is a tactical choice that speaks volumes about how much it matters to have a coherent policy that is capable of acting."

The arguments in favour of the carbon tax

Academics Richard Schmalensee and David Schoenbrod, co-authors of an editorial published in The Conversation, come down firmly in favour of the carbon tax. The tax, they argue, falls first on producers but then ripples through the entire market, pushing everyone — from multinationals to families — to do what they can to reduce their impact on the climate.

To the two authors, the legislative route appears more cumbersome, exposed to possible pressure from lobbies and removed from everyday reality (between Washington regulators and property and factory owners, they argue, the latter are far more capable than the former of cutting emissions from their properties in order to reduce their tax burden). What also tips the scales in favour of the carbon tax, in their view, are the timescales: a tax comes into force overnight and the revenues are collected and redistributed immediately. By contrast, to find out whether the new laws will truly have met their target, one would have to wait until 2050, by which time the current administration will no longer be in office.

Carbon tax: how and how much make all the difference

"The carbon tax is a very powerful instrument because it suddenly makes certain choices more attractive and cost-effective — not only for the oil sector but for all companies working with technology," Simone Molteni confirms. LifeGate's scientific director was also part of the group of experts who proposed this measure at Cop 9 in Milan in 2003. At the time, the idea was to start with a low rate to give market operators time to adjust, backed by a precise roadmap that set out annual increases. "Unfortunately, this has not happened so far and we find ourselves behind. If a carbon tax were introduced today, the starting values would need to be much higher and its disruptive capacity would be far more pronounced," he continues.

Proposals considered by Congress so far range from a minimum of $15 to a maximum of $50 per tonne of CO2, according to Inside Climate News. However, the Intergovernmental Panel on Climate Change (Ipcc) considers that far higher figures are needed to keep global warming within 1.5 degrees, averting the worst manifestations of the climate crisis. Special Report 15 recommends reaching, by 2030, a minimum of $135 to a maximum of $5,500 per tonne. This very wide range is due to the fact that the effectiveness of the tax also depends on the other regulations put in place in the meantime.

"Another aspect to consider is that the carbon tax instantly becomes a geopolitical issue, because a single country cannot introduce it alone. If it did, very significant economic imbalances would arise, with some states becoming more competitive than others. In short, the carbon tax is a far more powerful instrument than one might imagine, because it rewards those who are virtuous — especially those who have been so for some time — and shifts market equilibria," Molteni concludes.

The Biden administration considers new rules

According to Inside Climate News, however, the Biden administration's climate policy is leaning increasingly towards the option that the oil majors dread: stricter regulations and incentives for renewable energy sources. The underlying concern, in all likelihood, is that the inevitable negotiations over the level of the tax would lead to a figure that is too low — not commensurate with the government's climate commitments.

Bloomberg ✓ @business

𝕏

How oil and gas learned to stop worrying and love the carbon tax. trib.al/UavO5GC

♥ 15 4 mar 2021 · Apri su X →

"My job is to establish an action plan that uses all of our expertise, all of our federal budget, all of our policies, our regulations and our standards to truly drive the change we need in the United States," Gina McCarthy, the federal climate policy adviser, recently declared, addressing a virtual audience of executives from the energy and fossil fuels sector. The next key date is 22 April, Earth Day, when the US will host a summit of the nations most responsible for greenhouse gas emissions. On that occasion they will set out in detail their emissions reduction plan to 2030 and, even more importantly, the concrete ways in which they intend to put it into practice.