What is a carbon price?
According to think tank Resources for the Future, a carbon price is a climate policy approach that works by charging emitters for the tons of carbon dioxide for which they are responsible. A number of countries and sub-national jurisdictions, like US regions or states, use this policy to reduce emissions.
Cap-and-invest and a carbon tax are examples of carbon pricing. S&P Global describes trading in the carbon pricing marketplace as “an increasingly popular mechanism to harness market forces to address climate change by creating financial incentives for companies and countries to lower their emissions.”
Carbon pricing benefits
Carbon pricing promotes emissions accountability and helps companies develop effective climate strategies together with regulatory agencies.
bp supports a price on carbon because it's fair, efficient and effective. A well-designed carbon price provides the right incentives to decarbonize the entire economy. It encourages companies like bp to innovate more and emit less. The greater the program’s scope, the more effective it can be.
That’s why we’re engaging policymakers and are members of the CEO Climate Dialogue and Climate Leadership Council to encourage a national carbon pricing program. But much of the action is taking place at the state and regional level, and we’re engaging with state stakeholders to progress well-designed carbon pricing programs there.
Home to our Cherry Point Refinery, Washington is now the second state in the country with a comprehensive, economy-wide, market-based carbon pricing program – the Climate Commitment Act. The legislature and governor brought this progressive climate policy to the Evergreen State to lower carbon emissions.
The package of solutions will help to produce fewer emissions, making the entire economy cleaner by:
We worked with Clean & Prosperous Washington to advance the Climate Commitment Act, a broad coalition of businesses and environmental, labor, social justice and equity advocates. Learn more about the coalition’s work.
bp will keep doing our part to bring Washington state closer to net zero, starting with our own operations. And we look forward to working with Washington state agencies as they look to implement the Climate Commitment Act.
Cherry Point is already making progress under the new policy. We’re investing $269 million to improve the refinery’s efficiency, reduce its carbon dioxide (CO₂) emissions and increase its renewable diesel production capability. Expected to create more than 300 local jobs over the next three years, this investment is aligned with our aims to be net zero across our operations, and to reduce the lifecycle carbon intensity of the products we sell by 15-20%, by 2030. Good policy like the Climate Commitment Act incentivizes companies like bp to accelerate modernization and lower-carbon solutions. Read more about our Cherry Point investment in the Seattle Times.
Illinois is home to 1,300 bp employees and is part of the US Climate Alliance, committing to reduce GHG emissions consistent with the United Nations Paris Agreement.
Putting a price on carbon drives emissions reductions while helping grow the economy, creating and protecting jobs. The funds collected from emitters while they remove emissions from their operations can generate critical revenue for the state.
bp has publicly advocated for carbon pricing in Illinois and will continue to encourage this policy – among lawmakers and other stakeholders.
The Regional Greenhouse Gas Initiative (RGGI) is a successful cap-and-trade carbon pricing program for the power sector. Throughout the last decade, participating states have seen a range of benefits – including emission reductions – while electricity costs have decreased, according to the Center for Climate and Energy Solutions.
Independent studies of the program show RGGI works for people, businesses and the planet. RGGI states also outpaced power sector emissions reductions over the rest of the country by 90 percent.
bp publicly advocated for Virginia to join RGGI, which it did in 2020. We’re also part of a coalition of businesses and environmental organizations in Pennsylvania working to bring this policy to the Keystone State.
bp joined with business leaders, transportation companies, environmental groups and more to support the Transportation Climate Initiative for the East Coast.
Modeled after RGGI and designed by state leaders, with help from the Georgetown Climate Center, the program would have created a regional cap and trade program for transportation emissions – the biggest source of CO2 across the region.
Although TCI is not moving forward, we’ll continue to support efforts to decarbonize the transportation sector, including several states, such as New York, which are considering instituting other carbon pricing measures like low carbon fuel standards.