Each week, we’re compiling the most relevant news stories from diverse sources online, connecting the latest environmental and energy economics research to global current events, real-time public discourse, and policy decisions. Here are some questions we’re asking and addressing with our research chops this week:
How is the oil and gas sector responding to increased pressure from policymakers and investors to take action around climate change?
The American Petroleum Institute, long regarded as a stalwart opponent of environmental regulations, is reportedly planning to endorse carbon pricing. While the organization had signaled support earlier this year for “market-based policies” that reduce emissions, an official endorsement of carbon pricing would represent a seismic shift for the oil industry’s top lobbying group, which famously opposed cap-and-trade legislation in 2009. Other major business groups have recently moderated their stances on climate policy as well, including the Business Roundtable and the Chamber of Commerce, which both endorsed carbon pricing this year. The changing positions of business groups on climate policy coincide with major shifts in Washington, DC, now that a new presidential administration and a Democratic-controlled Congress are considering a variety of environmental policies, including a carbon price. But leading oil and gas companies—including Shell, Total, and BP—also have been moving toward more far-reaching climate commitments for years, in response to demands from activists, policymakers, and climate-conscious investors.
At an RFF Policy Leadership Series event this week, CEO of BP Bernard Looney discussed a range of climate policy issues with RFF President and CEO Richard G. Newell, including the oil and gas sector’s role in mitigating climate change and BP’s increasingly ambitious climate commitments. Looney elaborated on BP’s established support for carbon pricing and explored the company’s new efforts to reshape its operations and become net zero by 2050. Such a climate commitment has prompted BP to pivot away from a singular focus on oil and gas and expand major offshore wind projects, invest in hydrogen, and help develop new carbon capture and storage technologies. “The private sector has a huge role to play,” Looney said, elaborating on how companies beyond the energy sector are shifting their operations in response to climate change. “Within that, investors, policymakers, citizens, and consumers have a big role.”
Related research and commentary:
Credit: Sobrevolando Patagonia / Shutterstock
What policy tools are available to the Biden administration, as it considers reducing emissions from oil and gas production on federal lands?
Following President Joe Biden’s 60-day suspension of new oil and gas leases on federal lands, the US Department of the Interior now is undertaking a comprehensive examination of the entire leasing program. Later this month, the department will hold a virtual forum on the future of the program, which will include discussions with key stakeholders, such as fossil fuel industry representatives, labor groups, and environmental advocates. This review process is expected to culminate in an interim report that will offer next steps for policymakers. Reflecting the variety of policy options for reforming federal leases, a range of bills have been introduced in Congress this term to increase royalty rates for leases, allow for more public input, and more strictly control methane emissions. The Biden administration’s plans for federal oil and gas leases have been a flashpoint for legislators from energy-producing states, who have deployed procedural maneuvers to delay the confirmation of Secretary of the Interior nominee Deb Haaland (D-NM), owing to her support for reforms.
This week, RFF Fellow Brian Prest testified before the House Subcommittee on Energy and Mineral Resources, elaborating on his research about policy options for reforming the federal oil and gas leasing program. Highlighting the importance of a balance between competing policy objectives, Prest’s recent working paper analyzes how implementing an increase in royalty rates, a carbon adder on oil and gas production, or a ban on new leases would impact federal revenues and global emissions. At the hearing, Prest noted that a ban on new leases would do the most to reduce emissions, though other reforms would significantly increase federal royalty revenues, which then could be deployed as economic support for states that need reinforcement in the clean energy transition. “Trade-offs are a key component to policy discussions,” Prest said. “Relative to an end to leasing, adjusting royalty rates could be a more effective tool to balance both environmental and economic concerns.” For more, read Prest’s article in the new issue of Resources magazine about options that policymakers can consider.
Related research and commentary:
- Testimony: Testimony to the Subcommittee on Energy and Mineral Resources on Modernizing Energy Development Laws for the Benefit of Taxpayers, Communities, and the Environment
- Working paper: Supply-Side Reforms to Oil and Gas Production on Federal Lands: Modeling the Implications for Climate Emissions, Revenues, and Production Shifts
- Magazine: Policy Options for Oil and Gas Leasing Reform on Federal Lands and Waters
Credit: BGSmith / Shutterstock
How will the Biden administration reckon with the legal ambiguities at the core of the Clean Water Act and revamp the previous administration’s Navigable Waters Protection Rule?
The Navigable Waters Protection Rule, which removes federal safeguards from isolated wetlands and intermittent streams, was finalized last April and is now in effect across all 50 states. This week, the US Court of Appeals for the Tenth Circuit rejected a suit from Colorado, which had sued the Trump administration on the grounds that the rule unduly strips protections from many of the state’s waterways. The ruling, in one sense, is narrow; the court has avoided murkier legal questions about the Clean Water Act and weighed in only on Colorado’s standing to sue. But the case has broad implications for the Biden administration, which had asked the judges to halt their review and now has to pursue alternatives to the Trump administration’s rulemaking more quickly than expected. At his confirmation hearing last week, Michael Regan—Biden’s pick to lead the US Environmental Protection Agency—signaled that the administration is reviewing alternatives to the Navigable Waters Protection Rule. But promulgating a new regulation and preparing for near-certain legal challenges will require the administration’s careful attention.
The Clean Water Act does not clarify the types of waterways that merit federal protection, which has contributed to the persistent stream of legal battles over the federal government’s regulations. In an article from the new issue of Resources magazine, Cole Martin (yours truly) discusses the history of the Clean Water Act and explores recent research by RFF University Fellow Sheila Olmstead about the flawed economic assumptions that underlie the Trump administration’s rule. As Olmstead’s research alongside the External Environmental Economics Advisory Committee makes clear, the benefit-cost analysis justifying the rule ignores the demonstrated hydrological connections among intermittent streams and downstream waters, and incorrectly assumes that many states will strengthen local regulation of water bodies that are affected by the new regulation. But according to Olmstead, a more expansive rule from the Biden administration is unlikely to resolve the ambiguity within the legislation itself. “If the lack of clarity comes from the fact that the law is unclear, then shouldn’t Congress consider changing the law?” Olmstead asks.
Related research and commentary:
