Carbon Tax Huddle

February 15, 2022

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by Matthew Choi (Politico's Morning Energy) The Climate Leadership Council, a GOP-backed group supporting a carbon tax, is launching a new research center to explore how the U.S. could impose a border carbon adjustment or other policy to punish imports of high-polluting goods.

Greg Bertelsen, CEO of the Council, told Pro’s Josh Siegel ahead of the announcement today that the purpose of the Center for Climate and Trade is to help design policies to address the 25 percent of global emissions embodied in goods traded internationally, such as steel, aluminum and cement.

“There is currently no policy mechanism to account for or encourage reduction of those emissions,” Bertelsen said. “If we are going to meet this global challenge, we will need to incorporate climate considerations into trade policies and agreements.”

The Council is bringing a trio of experts focused on the nexus of climate and trade to be co-chairs of the center: Charlene Barshefsky, former U.S. trade representative under President Bill Clinton; Jim Connaughton, who led the White House CEQ during the Bush administration; and Jennifer Hillman, former member of the U.S. International Trade Commission.

The launch of the new center comes as Republicans take their first steps to engage on the idea of a border adjustment, or import tax, on carbon-intensive goods. Sen. Kevin Cramer (R-N.D.) recently wrote an op-ed with former Trump national security adviser H.R. McMaster calling for the U.S. and EU to apply a carbon fee on imported goods as part of "a transatlantic climate and trade initiative" to counter Russia’s dirtier natural gas. READ MORE

White House, congressional Democrats eye federal gas tax holiday as prices remain high, election looms (Washington Post)

Bumper Profits Are Sparking A Backlash Against Big Oil (OilPrice.com)

The bipartisan climate solution ... CARBON BORDER ADJUSTMENTS SEE MOMENTUM: (Politico's Morning Energy)

Opinion: How the U.S. could show it’s finally serious about the geopolitics of energy (Washington Post)

Washington’s Oil Lobby Pivoted on Climate Change—and Made No One Happy: The American Petroleum Institute’s green makeover has been met with skepticism from friends and foes alike (Wall Street Journal)

Oil Trade Group Drafts Carbon-Tax Proposal That Could Raise Prices at the Pump: Some API members want to delay proposal until after midterm elections, fearing it could alienate Republican lawmakers (Wall Street Journal)

SO CLOSE, YET SO FAR: The American Petroleum Institute is discussing internally whether to lobby for a specific carbon tax mechanism (Politico's Morning Energy)

Why natural gas hearts carbon pricing ... GAS FOR CARBON PRICE: (Poltico's Morning Energy)

LIGHTHIZER BACKS BORDER ADJUSTMENT: Former President Donald Trump’s top trade adviser Robert Lighthizer is advocating for the idea of penalizing imports of high carbon-polluting goods from top emitting countries like China. (Politico's Morning Energy)

Excerpt from Politico's Morning Energy: There's a bipartisan move on the hill to craft a carbon border adjustment, and lawmakers trace its origins to Donald Trump ... CARBON BORDER ADJUSTMENTS SEE MOMENTUM: Momentum is building on both sides of the aisle to come up with a measure to penalize imports of high polluting goods, and lawmakers are taking a page out of former President Donald Trump’s book, POLITICO’s Josh Siegel reports.

“It looks and feels a lot like Trump’s tariffs on China, [except World Trade Organization] compliant and in a way that doesn't distance us away from our allies,” Sen. Chris Coons (D-Del.) said.

Coons and Rep. Scott Peters (D-Calif.) introduced legislation in July to establish a border carbon adjustment on polluting imports that covered steel, aluminum and cement, as well as natural gas, petroleum and coal. And Republicans are eager to tackle competition with China, whose lax environmental standards often mean lower production prices, and create an “America-first climate policy. Donald Trump should love it,” Sen. Kevin Cramer said.

The two sides don’t see eye to eye on all aspects of the push, however. While many Democrats and some free-market Republicans want a domestic price on carbon to ensure the U.S. emissions stay down and match the standards levied by a carbon border adjustment, many Republicans recoil at the idea. With the U.S. often already manufacturing with much lower carbon emissions than overseas alternatives, many Republicans don’t see the need for additional fees.

"When you talk about a carbon price you start raising red flags," Cramer said. Read more from Josh here. READ MORE

Excerpt from Wall Street Journal: The nation’s biggest oil industry trade group has drafted a proposal urging Congress to adopt a carbon tax, which would put a surcharge on gasoline and other fossil fuels to discourage greenhouse-gas emissions.

The draft proposal was approved by the American Petroleum Institute’s climate committee last month, according to a document reviewed by The Wall Street Journal. The measure must still be approved by the group’s executive committee. READ MORE

Excerpt from Politico's Morning Energy: Though nothing is final yet, the group feels that an easy-to-digest publicly known carbon price would serve the industry better than a price set by Interior and other government agencies that could fluctuate with every new administration, the person said. “The idea that consumers aren’t already paying for climate policy is a false status quo,” the representative said. “They are already paying through regulation and hidden taxation.”

The oil and gas industry's lobby group, much like Biden, is caught between conservatives and progressives when it comes to energy policy. When API came out in support for a general price on carbon in 2021, Republicans lambasted the policy shift, and Louisiana’s Rep. Garret Graves, the top Republican on the House climate committee, called news of API’s fleshing out of the idea “ just idiotic.” Progressives have also walked back earlier enthusiasm for a carbon tax, saying it would fall too hard on low-income people who will spend a greater part of their paycheck on fuel.

It's a similar story within the industry, with tension between international oil companies who need to adapt to meet changing regulations and investor expectations on climate policy and the more conservative firms that are loath to advocate a new tax. On the one side are European companies like Shell, BP and Equinor that have branded themselves as being aggressive on climate measures (France’s Total Energies publicly exited the association last year partly because of “differing positions” on carbon prices). But API membership also includes companies, mainly U.S.-based, that could threaten to take their membership fees elsewhere if it advocates too hard for a tax, leaving it in a bind. That could also put it on the outs with its traditional Republican backers in the federal government.

The API “is afraid of losing member companies and is straddling the fence with its US-based companies and the European players, with splits among the former giving them further headaches,” said one industry source who requested anonymity to discuss internal association politics. READ MORE

Excerpt from Politico's Morning Energy: Why natural gas hearts carbon pricing ... GAS FOR CARBON PRICE: A price on carbon doesn’t have the environmental luster it used to, but it enjoys support from one group: natural gas power plant owners, POLITICO’s Catherine Morehouse reports. With gas generators fearing their investments will be disadvantaged by a patchwork of clean energy policies, they are rallying around state and regional pricing schemes to keep them competitive.

“It has been the experience of the state-by-state approach that it has not been as successful in securing emissions reductions as some would like to think, and it has proven to be much more expensive than a well-crafted, economy-wide price on carbon would be,” said Todd Snitchler, president and CEO of the Electric Power Supply Association, which represents several major energy companies including BP Plc, Shell Energy and NRG Energy.

But getting a carbon pricing policy adopted is proving a challenge. Climate-focused Democrats have largely averted their attention toward clean energy tax credits and other incentives to spur renewable development. And partisan battles, tensions between states that have emissions reduction goals and those that do not, and environmental justice concerns have thwarted attempts to expand these programs at the state and regional levels.

Environmentalists are also skeptical about a program that may lower overall emissions but further bake natural gas into the grid for the long haul. Read more from Catherine here. READ MORE

Excerpt from Poltico's Morning Energy: LIGHTHIZER BACKS BORDER ADJUSTMENT: Former President Donald Trump’s top trade adviser Robert Lighthizer is advocating for the idea of penalizing imports of high carbon-polluting goods from top emitting countries like China. The concept pairs a protectionist trade agenda favored by Lighthizer with combating climate change, an issue that the Trump administration disdained.

“When you let polluters sell in your market without a border adjustment you are losing U.S. jobs in the competing industries and essentially you are subsidizing the polluters. This makes no sense,” Lighthizer told POLITICO's Josh Siegel.

Lighthizer, the architect of Trump’s trade war against China, said he’s spoken about the idea with Republican senators toying with the idea (it’s a point of potential bipartisanship, as Josh reported in February). Republicans including Sens. Cramer and Lindsey Graham have reached out to former Trump administration officials to rally support for the policy in order to boost credibility with conservatives who are skittish about being associated with any policy that would address climate change.

But Lighthizer said he is opposed to pairing any tariff or fee on imported goods with a corresponding domestic carbon price. Many economists and trade experts say it would be hard to get the WTO to approve a carbon border fee for a country that wants to penalize imported goods based on carbon content without taxing its own products. READ MORE