Potential opening seen for carbon price, border adjustment amid altered politics

21 August 2020 | Trading

Washington — Regardless of outcome of the next presidential election, there is a shift in climate politics that offers an opening for carbon pricing and other steps to advance clean energy technologies, a former congressman said Aug. 19.

Former Representative Carlos Curbelo, Republican-Florida, spoke during an Atlantic Council forum on salient energy policies under a potential Biden or "Trump 2.0" administration.

Moderator Charles Goldwyn, chairman of the Atlantic Council Energy Advisory Group, noted a Biden administration is likely to have a historically ambitious green agenda on climate, aiming for net-zero emissions by 2050, while Trump has promised a continued focus on energy dominance. But either candidate would face headwinds of divided government and uncertainties of the pandemic and its economic impact, he said.

Curbelo offered that whatever happens in the November election, there is a "clear, irreversible trend" in congress. Democrats have reached agreement on the need to advance towards a clean energy economy and Republican are "finally starting to catch up and gain some ground," he said.

"The Congress in January of 2019 looks a lot different than the Congress we're watching today" he said. House Minority Leader Kevin McCarthy of California is urging Republicans to listen to younger voters and to develop their agenda to address climate change, he added, noting the Republicans even met as a conference to discuss climate change.

Republicans are now championing tax credits for carbon capture. And there is an opening for carbon pricing, he suggested.

"We don't need Republicans to embrace or to be enthusiastic about the idea. We just need them to accept it as part of a broader compromise," he said.

If Democrats take control of the Senate, that could come up as part of budget reconciliation, and as the need for government revenue grows, the potential for a price on carbon increases, he said.

The concept of a border adjustment in particular could gain momentum, in his view, because it doesn't rely on trusting other countries, and aligns with the conservative idea that China and others may fail to keep their commitments, he said.

Global role

Panelists suggested the US could still play a leadership role in global climate efforts but would need to take strong measures at home to regain credibility after backing away from prior agreements.

"Why would others look to the United States and say, here is the exemplar of how we want to world to move," said Jonathan Pershing, former State Department special envoy on climate change. "It's going to have to follow a difference course ... in which the domestic agenda will lead and there will be a set of aggressive and clear domestic outcomes," framing a deep reduction plan but also talking about how the economy continues to grow, he said.

Christine Todd Whitman, former Environmental Protection Agency administrator and New Jersey governor, said Republicans "are going to have to get together to start having these conversations and not hide from it." If Trump wins a second term, "some people are going to have to stand up to him," she said. "If we don't start it here first, and show some commitment, ... the rest of the world isn't going to pay attention to us when we come back and say, here's how we think it ought to go."

Role of gas

As for natural gas, participants noted it appears to stay in the fuel mix in the climate agenda laid out by Biden, who has avoided backing a fracking ban or export ban.

More so than coal, gas is still likely to be competitive in some places for some period of time and be part of a global conversation in which the US is a gas producer, Pershing said. "But it has to be seen in a context of how you get to zero, he said, adding the transition for fossil fuel producing communities will be a matter of global importance.

Elizabeth Sherwood-Randall, former deputy secretary of energy, highlighted the importance of paying attention to the workforce in oil and gas communities. "We will need to have a very aggressive plan designed to assist communities" most affected by market forces and changes in policy," she said. Sherwood-Randall pointed to a need to rapidly develop technologies for carbon capture, sequestration and storage, and the potential for the workforce in oil and gas country to shift to new opportunities.

Source: S&P Global