Carbon pricing

Demand-side emissions reduction efforts are required for climate goals to be achieved because supply-side constraints alone would be ineffective in reducing global emissions. ConocoPhillips believes a well-designed pricing regime on carbon emissions is the most effective tool to reduce GHG emissions across the global economy and, in particular, to address Scope 3 end-use emissions. A revenue-neutral carbon tax that is transparent, predictable and cost-effective to administer would be an effective policy option. It should result in some relief via the elimination of other laws and regulations aimed at reducing or controlling carbon and other GHG emissions. It is also the best way to regulate methane. Carbon pricing policy should support the implementation of currently economic emissions reduction projects and provide support for innovation to encourage the development of currently uneconomic projects. A price on carbon would also provide a stable and predictable market signal that would impact investment flows and end-user choices in a manner that minimizes adverse local economic and social impacts of an energy transition. 

We advocate for carbon pricing directly through engagement with government legislators and regulators in all jurisdictions in which we operate, and indirectly via collaboration with trade associations that are aligned with our strategy. 

We are a Founding Member of the Climate Leadership Council (CLC), an international policy institute founded in collaboration with business and environmental interests to promote a carbon dividends framework as the most cost-effective and equitable climate solution in the U.S. Participation in the CLC provides another opportunity for ongoing dialogue about carbon pricing and framing the issues in alignment with our principles. We also belong to and fund Americans for Carbon Dividends (AFCD), the education and advocacy branch of the CLC. We support and are advocating for a carbon price contingent upon four pillars: a gradually increasing carbon price, carbon dividends for all Americans, border carbon adjustments and regulatory simplification. We also recognize the policy trend in the U.S. toward a regulatory approach, and we advocate for effective and efficient regulations and legislation to advance economic incentives and reduce GHG emissions. We continue to seek opportunities to advocate for additional policies aligned with our carbon pricing principles, including a carbon dividends plan. 

Since 2022, we have also worked closely with members of the Business Roundtable (BRT) and the American Petroleum Institute (API) to engage with the Voluntary Carbon Markets Initiative (VCMI), a platform for encouraging net-zero aligned participation in a voluntary carbon market. Through BRT and API, we worked with the architects of the VCMI to develop an inclusive framework and create space for future dialogues as carbon markets develop. 

We have been actively engaged in climate-related discussions with policy makers and stakeholders since our first global climate change position was published in 2003. Since then, we have developed Climate Change Action Plans, set an emissions intensity target, integrated carbon-restricted scenarios into our strategic planning process and published carbon tax principles.   

Global principles for country-specific carbon tax legislation 

  • Economy-wide: A carbon tax designed to fix and impose a price should apply as broadly across the economy as administratively practicable.         
  • Nondiscriminatory: GHG emissions alone should form the basis of taxation. A carbon tax should not “pick winners and losers” among industries or emissions sources or discriminate in providing subsidies to energy sources. 
  • Uniform: A carbon tax should apply to all GHG emissions at the same rate on a “units of carbon dioxide equivalent” basis using the IPCC standard 100-year global warming potential.      
  • Transparent: To most efficiently incentivize changes to consumer behavior, a carbon tax should be imposed at the point in the value chain which is as close as administratively practicable to the point and timing of the emission. If a point is chosen further upstream, a system of credits or other mechanisms should be designed to eliminate (or prevent) taxation of emissions applicable to taxable products sequestered downstream of the point of taxation and to those used as feedstocks for the manufacture of products in which GHGs are stored.   
  • Avoid double taxation: A federal carbon tax should preempt state, provincial and local carbon taxes and renewable production tax credits.      
  • Provide regulatory relief: A federal carbon tax should replace all environmental laws and regulations that are intended to reduce or control carbon and other GHG emissions.    
  • Predictable: The application of a carbon tax and the tax rate may be adjustable when necessary, but such adjustments should be infrequent and should be limited to those designed to achieve the broader environmental goal of the tax legislation. 
  • Cost-effective administration: Existing channels of tax collection and emissions reporting systems should be used if feasible. Where actual emissions cannot be measured, best efforts based upon sound science should be used as an estimate. 
  • Globally competitive: A country-specific carbon tax rate should be set in accordance with existing taxation channels and emissions reporting systems and be adjusted to ensure global competitiveness. Depending on the point of taxation chosen, carbon tax legislation should include a border adjustment mechanism or other attributes designed to mitigate competitive disadvantages to host country industry when competing in global markets.       
  • Revenue recycling: A carbon tax should be revenue-neutral and used in such a way as to minimize economic impact. 
  • Compliance flexibility: A federal carbon tax should include multiple options for compliance, including offset credits from a broad range of jurisdictions, cash payments or flexible compliance frequency.