Will Congress Pass Carbon Tax Legislation?

Posted by John Elder
John Elder
John Elder is aresidents of Kendal at Oberlin. John served as Pastor of the Firs
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on August 16, 2013 in Policy

It seems almost laughable to ask the question, “Will the U.S. Congress pass carbon tax legislation?”  At present, so little legislation of importance gets through both houses of Congress that the chance of the Sanders-Boxer Climate Change bills being passed seems nil.  Nevertheless, we need to pay attention to the “Climate Protection Act” and the “Sustainable Energy Act” introduced earlier this year by Senators Barbara Boxer (Dem. CA) and Bernie Sanders (Ind. VT).  In a hearing held by the Senate Environment and Public Works Committee last week, a panel of experts explained the vital importance of taking steps now to reduce carbon emissions.  And as Al Gore writes in The Future: Six Drivers of Global Change (2013), “Global warming pollution… should carry a price.  Placing a tax on CO2 is the place to start.”  If this summer proves to be even hotter than last, resulting more widespread disastrous drought, and extreme climate events continue to occur at an increasing rate, perhaps the public outcry will reach the ears of our representatives on Capitol Hill.

What would this legislation do?  It would set a long-term emissions reduction goal of 80% or more by 2050 – a “too little too late” goal in the view of many, but “realistic” in the view of others.  To help achieve this goal, a carbon fee of $20 per ton of carbon or methane equivalent would be applied at the coal mine, oil refinery, natural gas processing plant or point of importation.  The fee would rise at 5.6% a year over a ten-year period.  It would be levied on about 3,000 of the largest fossil fuel polluters, covering about 85% of U.S. greenhouse gas emissions.  The Congressional Budget Office estimates this step alone could raise $1.2 trillion in revenue over ten years and reduce greenhouse gas emission approximately 20% from 2005 levels by 2025.  And the legislation includes other actions that would further reduce emissions.

For those of us concerned about the harmful impact of “fracking,” this is a crucial bill.  It would end the Halliburton exemption from the Safe Drinking Water Act, and it includes all the provisions from the previously-introduced “FRAC Act” to ensure disclosure of chemicals used in the “fracking” process.

A portion of the revenues raised would be invested in energy efficiency, such as fulfilling President Obama’s 2008 goal of weatherizing 1 million homes per year.  Other funds would support the U.S. Advanced Research Projects program in breakthrough energy research and development.  Other revenue would leverage $500 billion for investments in alternative energy through public-private partnerships and provide $1 billion a year in worker training and transition programs for the clean energy economy.

“Big government spending!” you say?   Yes, because a massive shift away from our fossil fuel economy demands it.  But what makes this legislation different is the “Family Clean Energy Rebate Program.”  This is modeled on Alaska’s immensely popular oil dividend program which provides a monthly rebate to every U.S. citizen residing in the state.  If companies jack up prices, consumers can use the rebate to offset the cost increases, according to data from the Congressional Research Service.

Imported fuels and products would be subject to the same fee as domestic ones, unless the exporting nation already charges a carbon fee.

This legislation, together with companion bills, would end fossil fuel subsidies and extend key renewable energy tax incentive programs.  The total impact would be an approximate $300 billion debt reduction in ten years, according to Boxer and Sanders.

“Pie in the sky!”  No, actually, carbon tax programs are spreading around the globe.  Probably the most successful is Sweden’s.  The carbon tax there is over $120 per ton (much higher than the Boxer-Sanders proposal, which would rise to about $35 per ton after 10 years).  The carbon tax was passed in 1991 as part of a tax reform package which greatly simplified tax paying – so much so that many Swedes now do their taxes with a few clicks on their cell phones.

“But a carbon tax will kill the economy!”  Not so.  In various “global competitiveness” rankings Sweden’s economy is consistently in the top five, frequently ahead of the United States, and since the carbon tax was introduced, it has grown by 44%.  Another test case is British Columbia, which has had a modest carbon levy since 2008.  The province has reduced its carbon emissions faster than any other province, while its economy has been growing slightly faster than the rest of Canada since the recession. Furthermore, British Columbia now has the lowest corporate tax rate and the lowest personal tax rate in Canada.

So let’s consider carefully the Boxer-Sanders Climate Change legislation as a possible approach to reducing carbon emissions.

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John Elder is aresidents of Kendal at Oberlin. John served as Pastor of the First Church in Oberlin UCC from 1973 to 1991. John enjoys papermaking, printmaking, and watercolors.

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