BP believes that carbon pricing by governments is the best policy to limit GHG emissions
Putting a price on carbon - one that treats all carbon equally, whether it comes out of a smokestack or a car exhaust - would make energy efficiency more attractive and lower carbon energy sources, such as natural gas and renewables, more cost competitive.
A carbon price incentivizes both energy producers and consumers to reduce their greenhouse gas (GHG) emissions.
It can reduce emissions at a larger scale and at lower cost than alternative policy measures by reducing the demand for carbon-intensive products.
Pricing carbon obviously adds a cost to our production and our products - but would help provide a roadmap for future investment, a level playing field for all energy sources across geographies and a clear role in securing a more sustainable future.
A global carbon price
We need governments across the world to provide us with clear, stable, long-term, ambitious policy frameworks. We were pleased to see that the Paris Agreement creates the possibility for carbon pricing to help deliver global goals and national contributions for reducing GHG emissions.
We recognize different national prices are a necessary and practical first step but would like to see convergence towards a single global carbon price over time.
In the meantime, any national carbon pricing mechanism should address the impacts of unequal international competition. Otherwise there is a risk of carbon leakage, meaning that energy-intensive industrial activity and investment could just move from one country to a less-regulated part of the world - potentially increasing their associated GHGs worldwide.
Our advocacy efforts
We endorsed the World Bank carbon pricing statement and in 2015 joined other oil and gas companies in calling on the UN and governments to put a price on carbon.
We are working with our peers and other parts of the private sector, governments and civil society to help support the expansion and implementation of carbon pricing, through our membership of the Carbon Pricing Leadership Coalition.
BP and carbon trading
There are currently 17 carbon trading systems operating across four continents with more in the pipeline.
BP has been active in these markets since their inception, starting in Europe and expanding to the US, New Zealand and China. For example, BP offers a portfolio of emission credits in California, including carbon offsets generated through forestry management. And in 2016 we signed the largest deal yet in China’s emerging carbon trading market for four million tonnes (Mte) of CO2.
In 2016 our financing of low carbon project activities resulted in annual emissions reductions of more than 20Mteof CO2 equivalent in the form of offsets. As reference, that’s equal to 40% of our direct emissions.
How carbon pricing works
We believe a global carbon price would help to provide the right incentives for everyone - energy producers and consumers alike - to play their part.
Where it starts
Across the world, more than 40 countries are developing mechanisms to put a price on carbon. These government initiatives aim to provide financial incentives to producers and consumers to reduce GHG emissions. This can be implemented either through a carbon tax or a cap-and-trade scheme.
How it works
This imposes a direct fee on GHGs emitted. This carbon price is achieved by setting a consistent cost per tonne of CO2 (or CO2 equivalent) released into the atmosphere.
This issues permits for sectors or whole economies to emit GHGs up to a total fixed limit or ‘cap’. Participants must acquire these permits to cover their own emissions, with the price set by market forces.
Who it affects
Producers, such as BP, pay for the GHGs emitted by their operations. They are encouraged to seek solutions to reduce their emissions - through energy efficiency and innovation in lower carbon technologies.
Businesses and households ultimately pay more for carbon-intensive goods and services. They are motivated to use less energy, choose more energy-efficient products and favour lower carbon energy products.