The new shift by big business to consider supporting carbon-pricing policies will create more momentum to combat climate change, but it is unlikely to shake Republicans from their aversion to new taxes or produce a legislative breakthrough.
The U.S. Chamber of Commerce and the American Petroleum Institute this week said they support a “market-based” policy to reduce emissions across the economy, a description that leaders of both groups said could apply to a carbon tax or emissions trading program.
The groups, which have opposed carbon pricing for years, are reluctant to endorse a specific policy before legislation is being seriously considered by Congress.
But the groups are positioning carbon pricing as a compromise to sector-by-sector standards and regulations, which have become the preferred policies of Democrats and are expected to be the path pursued by President Biden.
Critics of the business lobby groups, however, say their shift is insufficient and akin to not fully committing to a diet. Democratic Sen. Sheldon Whitehouse of Rhode Island credited the moves by the Chamber and API as a “welcome development,” but he said it won’t spur a legislative breakthrough unless the groups pour lobbying money behind carbon pricing as they would with corporate tax cuts, for example.
“The devil is in the details,” Whitehouse told the Washington Examiner. “There’s too much window dressing from corporate America. The Chamber and API have taken a good first step. It remains to be seen whether they throw their political weight behind climate action as strongly as they opposed it.”
Mike Sommers, the CEO of API, the largest oil and gas lobby group, said he is sincere about wanting to work “constructively” on climate policies, including potentially an economywide carbon tax that “would fit our principles.”
“We didn’t update our position to be able to say no,” Sommers said. “We did it to be able to say yes.”
Center-right groups and economists have hoped that Republicans could embrace carbon pricing once former President Donald Trump was out of office because it would reorient the market to support clean energy without mandating it. Supporters say centrist Republicans who have flirted with a carbon tax, such as Sens. Lisa Murkowski of Alaska and Mitt Romney of Utah, could unite with centrist Democrats on a bill to pass through a split 50-50 Senate.
“This dramatic shift from the business community could prove to be decisive in getting Republicans to engage meaningfully on the issue,” said former GOP Rep. Carlos Curbelo of Florida, who introduced a carbon tax bill in 2018. “The compromise policy concept is going to end up being some kind of carbon pricing.”
Many companies, including oil and gas majors such as Exxon Mobil, ConocoPhillips, BP, and Shell, have supported carbon pricing for a while. Those companies, unlike their lobby groups, have endorsed a specific proposal by the Climate Leadership Council, a group led by two former Republican secretaries of state, James Baker III and George Shultz. The group is lobbying Congress to support a carbon tax plan that distributes the revenue to taxpayers.
“There is now a widespread belief climate can be dealt with, and what we need is incentives so businesses can make the proper investments to get to a lower-carbon economy,” said Joseph Majkut, a climate scientist at the Niskanen Center.
But skeptics argue that the motivations of businesses and Republican politicians are different despite their historical alliance.
Only one current Republican in Congress, Rep. Brian Fitzpatrick of Pennsylvania, has endorsed a carbon tax, and the policy is perceived even by many liberal Democrats as not politically appealing.
“A lot of smart people in Washington love the idea, while pretty much everyone in the nation hates it,” said Tom Pyle, president of the American Energy Alliance, a pro-fossil fuel group. “If they want to return to Washington, most members will vote against it.”
One oil and gas industry source, who requested anonymity given the political sensitivities on Capitol Hill, said it’s unrealistic to expect increased lobbying to shift the position of many Republicans.
“Our position is not going to make a difference when you have 212 members who have said they are never going to raise taxes,” the official said. “Lawmakers respond to the pressure they get at home a lot more so than Washington advocacy organizations.”
Shane Skelton, an energy adviser to former GOP House Speaker Paul Ryan, said he can envision a carbon tax passing the Senate either with a bipartisan coalition through the normal process of getting 60 votes or through a special procedure called reconciliation, through which Democrats could pass budget-related measures by a simple majority.
But he argued that it will be difficult to forge a compromise in the more partisan House over how to structure the tax, especially on how to handle the revenue raised by it and the various trade-offs involved. If the revenue is distributed to households, the approach favored by many businesses, it cannot be spent on Democratic priorities, such as clean energy investments or infrastructure improvements in lower-income communities that are exposed to pollution from fossil fuel plants.
“Even if you had agreement on a broad policy, I don’t see how you get environmental groups, the far-Left, moderates, and the far-Right to pass a tax to satisfy everybody,” Skelton said.
Leah Stokes, an assistant professor of environmental politics at the University of California, Santa Barbara, who is close to the Biden administration, is also skeptical that business groups supporting carbon pricing would change the legislative dynamic.
She suggested that Democrats would be better served pursuing a clean electricity standard, which requires utilities to obtain an increasing amount of power from renewable and zero-carbon energy sources, such as wind, solar, hydropower, and nuclear.
More than half of the states, some of them Republican-led, have adopted clean electricity standards, and it could make it easier for Biden to achieve his goal of reaching carbon-free power by 2035.
“Biden campaigned and won on a clean electricity standard, which is extremely popular and already used throughout the country,” Stokes said. “These are not mandates. They are standards that move us where we need to go at a faster pace.”
Majkut predicted that business groups and allied Republicans will feel more pressure as Biden and Democrats seek all avenues to pursue their climate agenda, including through regulations or by passing legislation with a majority vote. If they don’t proactively compromise, he said, they risk being left behind.
“President Biden and Democrats are not waiting for permission of the business community anymore,” Majkut said. “They will have to articulate how the things they are willing to support are better for consumers and businesses if they want to join the fray.”