Photo: Ted S. Warren, STF / AP

WASHINGTON — For years, multinational oil companies have fought back state and federal carbon pricing schemes, holding out for a nationwide carbon tax as the most equitable means of addressing climate change.

But now that strategy could be starting to buckle. The British oil giant BP is running an advertising campaign supporting cap-and-trade legislation in the state of Washington, breaking with an industry that had maintained state-by-state regulation is too costly.

The move represents a pointed statement on climate change by BP as pressure on fossil fuels increases and the oil and gas industry seeks to steer regulation in a direction that allows it to more easily adapt its business to a low-carbon economy. Just two years ago, the British oil major, which operates the largest refinery in Washington state, joined with other energy companies to defeat a ballot question that would have imposed a carbon tax there.

“We believe the world is on an unsustainable path, and where there is legislation and policy being developed is on the state level,” said Phil Cochrane, senior government affairs director for BP Fuels North America. “We have decided to engage there instead of waiting for a holy grail to come together.”

A spokesman for Royal Dutch Shell, which also operates a refinery in Washington but took no position on the 2018 carbon tax issue, said the company would likely support the legislation as well, “absent drastic and/or unforeseeable changes.”

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The Washington Legislature is considering a cap-and-trade system, under which the amount of carbon dioxide that companies can emit is capped. Companies that stay below the cap receive credits, which they can sell to those that exceed the threshold, creating a market that determines the price of carbon. The cap is lowered over the years, providing additional economic incentives to release less carbon dioxide, a major contributor to global warming, into the atmosphere.

A carbon tax or fee provides similar incentives through the government assessing a cost or price for each ton of carbon dioxide emitted by business. Supporters of the Washington cap-and-trade legislation maintain the proposal is more expansive than the 2018 carbon tax plan, doing away with many of exemptions that BP argued left it and other large polluters unfairly burdened.

With most oil companies either holding out for a nationwide scheme or — more often — fighting against carbon pricing all together, it remains an open question whether the industry can come together with environmentalists on carbon pricing legislation.

As European companies, BP and Shell are perhaps special cases. They are under intense pressure from their home governments in the United Kingdom and the Netherlands to reduce their contribution to climate change, a position unique from their competitors in other countries.

But with growing public awareness about the risks posed by climate change, oil companies are getting more engaged on the issue, said Bob Perciasepe, president of the nonprofit Center for Climate and Energy Solutions. Late last year, the American Gas Association, which represents companies including Exxon Mobil and ConocoPhillips, announced it was calling for carbon pricing, the first oil and gas trade group to do so.

“If you went back 10 years, you did not see this kind of activity in the oil and gas sector,” Perciasepe said. “From my conversations with these major oil companies, they do support (a carbon tax), and it’s real. That said, they have strongly held views on how those prices are constructed, who’s covered (and if it’s) fair and equitable.”

Leading the way on carbon pricing for large oil companies is the Climate Leadership Council, founded in 2017 to push a plan for a revenue neutral carbon tax forged by former Secretaries of State James Baker and George Shultz, both Republicans.

Instead of a state-by-state approach with 50 different sets of rules, their plan is to create a $40 per ton national carbon tax on all emissions. Rising 5 percent a year, it would replace existing regulations on greenhouse gas emissions, with all the revenue raised by the levy going back to American taxpayers. Members including Exxon, ConocoPhillips, Shell, BP and Total have each put at least $1 million into funding lobbying efforts to get legislation before Congress, said Ted Halstead, chairman of the council.

“Their view is ‘let’s not do generic carbon pricing of any flavor.’ We need a very specific plan where all sides win,” he said. “We think our proposal will be introduced on a bipartisan basis by mid-year.”

But a new tax that would likely raise the costs of fuel, electricity and other goods on Americans remains a tough sell in Washington. One political consultant recounted how an oil company told him that whenever they raised the issue in private meetings on Capitol Hill, they found a dearth of interest among politicians of either party.

And among many environmentalists, there is resistance to the idea of replacing regulations that limit greenhouse gas emissions with a carbon pricing system.

“If they can get out of complying with regulations for public health, they will take that deal for a minimum carbon price,” said Liz Perera, climate policy director at the Sierra Club. “They also know a small carbon tax is not going to impact the use of oil and gas, so they’re hedging their bets.”

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In Washington state, BP’s decision to endorse the cap-and-trade program has won the company accolades.

The bill is state Democrats’ third attempt to put a price on carbon. The last one, the 2018 ballot measure, would have created a $15 per ton carbon tax, rising to roughly $55 a ton by 2035, while exempting certain polluting industries such as mass transit and agriculture.

After initially signaling support for the tax, BP pulled back from negotiations, claiming refineries were unfairly targeted. BP joined with other companies, such as the San Antonio refiner Valero, to run a campaign opposing the carbon tax plan. Washington voters defeated the ballot measure 56 percent to 44 percent.

“I’m not sure (BP) doomed it, but it certainly hurt it,” said Doug Ray, chairman of Carbon Washington, a nonprofit advocating for climate action. “We’re really pleased (this bill) has the support of BP. They’re such a big player in the private sector.”

And BP says it isn’t done yet. They’re currently working with Oregon Gov. Kate Brown, a Democrat, on a similar cap-and-trade bill there.

james.osborne@chron.com

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