The American Petroleum Institute (API) has announced that it endorses a carbon tax or other types of a carbon pricing policy (such as a cap-and-trade system) that the Biden administration is expected to unveil shortly.
The API made that announcement in its Climate Action Framework and Executive Summary, as well as API Policy Principles on Carbon Pricing to Evaluate Government Policy Proposals.
The API urges the carbon pricing policy to be:
- intended to achieve greenhouse gas (GHG) emissions reductions at the least cost to society;
- applied US economy-wide;
- designed to provide transparent invectives based on actual GHG emissions to reduce GHG emissions efficiently;
- non-duplicative to minimize the burden of duplicative regulations;
- aimed to meet the dual challenges of continued US economic growth and global competitiveness, while addressing the risks of climate change;
- globally integrated so that US entities have the incentive to reduce their carbon footprint on a worldwide basis without being competitively disadvantaged and to avoid carbon leakage (i.e. the movement of industry or trade, or offshoring or outsourcing of GHG emissions, from the United States to countries with less strict climate policies); and
- focused on GHG emissions such that the trading and use of applicable credits and offsets are allowed.
Note 1: The API is a US national trade association that represents all segments of the US oil and natural gas industry. The API's mission is to promote safety across the industry globally and to influence public policy related to the industry.
Note 2: A carbon tax is imposed on carbon or other types of GHG emissions (such as methane) and thus increases the price of goods created through a GHG-intensive production process. Revenue raised by a carbon tax could be spent on GHG mitigation efforts, but merely "pricing" carbon emissions establishes a market mechanism that incentivizes manufacturers to reduce GHG emissions.
Note 3: In a cap-and-trade system, the government sets a cap on GHG emissions that drive global warming, and issues emission allowances consistent with that cap to companies. Companies may buy and sell emission allowances that let them emit only a certain amount. Such trade establishes an emissions price, which generates a strong incentive to reduce GHG emissions in the most cost-effective ways.