Efforts to integrate low- and zero-carbon hydrogen into the U.S. energy sector have intensified, with the National Petroleum Council (NPC) releasing a report detailing its potential role. Commissioned by U.S. Energy Secretary Jennifer Granholm in 2021, the study examines how hydrogen can contribute to reducing carbon emissions in industries such as power generation, transportation, and industrial processing. The NPC, a long-standing advisory body between the oil and gas industry and the government, highlights the need for policy measures to support this transition. Companies in the sector are increasingly advocating for carbon pricing as a tool to enhance investment predictability while addressing climate concerns.
Discussions about carbon pricing in the oil and gas industry have been ongoing since at least 2011, when the NPC first acknowledged its potential benefits. Over the years, debates have revolved around balancing economic interests with environmental objectives. While some industry players were initially resistant to policies that might increase costs, the necessity of long-term strategic planning has shifted perspectives. The latest NPC report aligns with previous industry statements supporting structured carbon pricing mechanisms that ensure stability for investments in emerging energy technologies.
Why Are Oil and Gas Companies Supporting Carbon Pricing?
The NPC report suggests that an economy-wide carbon price would create a stable framework for long-term investment decisions. Unlike short-term incentives, such as tax credits, a predictable carbon pricing model would provide clear signals for businesses making capital-intensive investments in hydrogen and other low-carbon solutions. This perspective reflects a shift towards securing a structured transition rather than reacting to policy changes on an ad-hoc basis.
How Does Predictability Impact Investment in Low-Carbon Energy?
For industries with significant infrastructure investments, long-term predictability plays a crucial role in decision-making. A regulated carbon pricing system would reduce uncertainties linked to fluctuating policy incentives and market conditions. The NPC has emphasized that such a mechanism should be carefully designed to maintain energy security, affordability, and reliability while encouraging investment in alternative energy sources.
In a statement within the report, the NPC recommended that the administration work with Congress to establish a carbon pricing framework before current incentives expire.
“Significant and immediate actions beyond current policies are necessary to unlock various low-carbon-intensity hydrogen demand sectors at the scale needed to support U.S. net zero by 2050 aspirations.”
This recommendation reflects the industry’s recognition that long-term planning requires more than temporary financial incentives.
Despite concerns that carbon pricing could raise the cost of fossil fuel products, industry leaders appear to view this as a manageable challenge. Many oil and gas companies have extensive expertise in evaluating climate-related trends and are positioning themselves to adapt rather than resist regulatory shifts. By promoting a phased-in approach to carbon pricing, these companies aim to mitigate potential disruptions while maintaining business stability.
The emphasis on predictability underlines the industry’s broader objective: ensuring a smooth transition that minimizes financial risks while aligning with emissions reduction targets. For policymakers, this stance presents an opportunity to engage with energy companies on structured frameworks that balance economic viability and climate goals. As discussions on carbon pricing continue, the alignment between business strategy and regulatory certainty will remain a key factor in shaping the future of energy investments.
