Although there is a broad consensus that we need to “price carbon” to enable markets to account for the external costs of burning fossil fuels, no proposed national carbon tax legislation has received significant traction since the failure of the Waxman-Markey cap-and-trade bill in 2010.
One formula, long advocated by the non-partisan Citizens’ Climate Lobby but never proposed as legislation, is to simply refund the tax revenue in equal shares to individuals. CCL proposed starting at $15 per ton (which equates to 15 cents per gallon of gas) with an annual increase of $10 a ton forever. CCL has been instrumental in building the non-partisan Climate Solutions Caucus in the House, which has 74 members on it, 32 Republican and 32 Democrat. But none of them have proposed this bill or even clearly stated they would support the concept.
Then, in February 2017, a group of very prominent Republicans (calling themselves Climate Leadership Council, or CLC) headed up by former Secretaries of State James Baker and George Shultz proposed a very similar plan. The biggest economic difference is that they start much higher (at $40 a ton), but only anticipate small increases with inflation. Under this proposal, a family of four would receive $2000 per year. It’s accurate to characterize this as using the proceeds of a carbon tax to create the beginnings of a guaranteed annual income.
In the current state of play, Congress is frozen and doing nothing while various states and municipalities are trying to price carbon locally. But they all run into the same problem; political leaders do not want to economically disadvantage their state or locality compared to neighbors who do not tax carbon. In the simplest illustration, they do not want gas to be cheaper just across the state line.
It would seem that a few initiatives are necessary to break the status quo and create action. First, both parties should enthusiastically embrace the CLC’s Baker-Shultz proposal as a great bipartisan step toward putting a price on carbon and enabling markets to push renewables. Secondly, all state and local officials, should make a public appeal to their Representatives and Senators to stop leaving this problem to the localities and pass a national carbon pricing policy, whether it be the plan of the CCL, CLC, or something else.
I think the principle opposition devolves from the fact that advocates try too much too soon. A large tax which is highly favored, is not likely to be passed by… Read more »
Bruce: Unfortunately, the time for small, incremental changes is over. We need to begin reducing emissions by 3%/year starting now in order to have a chance of staying below +2ºC… Read more »
If the US passed Baker-Shultz, it would include adding the tax at the border for any country that didn’t tax carbon themselves. Everybody wants to sell to the American market.… Read more »
During the 2009 debates on the Waxman bill, and its descendants, the DOE/EIA and EPA issued an analysis making some very important points. First, even with a strong bill of… Read more »
Paul: a $15/ton carbon fee may make us feel that we are doing something and it probably will have some good impacts. But we should not confuse doing something with… Read more »
I would only add fervor to Dan’s argument. Whatever the bill says when we pass it, if we do FULL DIVIDEND with the carbon tax money, we will have 2/3… Read more »
Once again (although it seems no one wants to hear it) the most politically palatable and economically efficient approach is a national cap and trade scheme. We have a regional… Read more »
Bill: Cap and Trade is currently implemented in the EU, California, and other places. It does work well for a variety of reasons including the fact that the carbon fee… Read more »
A Carbon tax is Intellectually and theoretically elegant but in reality it would be a “rube Goldberg” contraption that feeds Congress’ spending addiction and rewards environmental special interests. Economic projections… Read more »
Bill: While carbon fees that go to the government may hurt near-term GDP (but still help in the longer term by reducing economy-crushing climate impacts), economic analysis of the Fee… Read more »
I like to say that I was born at night but not last night. If you believe such a program could be put in place in a simple and straight… Read more »
Carbon taxes are an important part of an overall solution to the global warming crisis. They require consumers to pay for the environmental impact of burning fossil fuels, incentivize substitution… Read more »
Henry: There are at least three important reasons why a carbon tax that is rebated back to the public is better than a carbon tax that goes to the government.… Read more »
Dan, I agree the “Carbon Fee and Dividend” approach you advocate is easier to gain support for from politicians and the general public because it is revenue-neutral, and therefore is… Read more »
Henry: The primary purpose of a carbon fee is not to generate revenues for government sponsored clean energy projects. The purpose is to internalize the external costs of climate change… Read more »
Henry: I’ll add that requiring every country to implement a carbon reduction plan is great, but I just don’t see that happening, A border duty, especially if we team with… Read more »
The purpose of any form of a carbon tax is to reduce the release of greenhouse gases to the point that the damage from climate change is survivable. In order… Read more »
Herschel: A carbon tax that is levied at the well, mine, and port-of-entry impacts fossil fuel use across the entire economy, not just electricity generation. With a carbon tax that… Read more »
Dan: Where we are in agreement is that dealing with climate change is much broader than the GHG emitted from electricity generation. As I and others have made clear, nationally … Read more »
I’m not sure that anybody advocating carbon-fee-and-dividend believes that nothing else is needed. I don’t believe there is any single “magic bullet” solution. But we think taxing carbon in a… Read more »
Mike: I believe you have misread my comments. Achieving a low carbon future requires many components, including some kind of a financial scheme, such as what you propose. I support… Read more »
Responding to the last comment from Herschell I’ve seen: yes to all you say. But let’s just pass carbon-fee-and-dividend at $40 a ton, start the checks rolling, and see where… Read more »
To Mike and Dan: The three of us seem to be converging to an initial level of agreement. We all agree that climate change represents an existential threat to all… Read more »
Herschel: I agree with your necessary but not sufficient comment. Fee and Dividend will roughly cut emissions in half. We need to be at zero…. actually negative 10 to 20… Read more »
This is responding to Herschell; I basically completely agree with Dan. Carbon-fee-and-dividend is absolutely necessary but also not sufficient. It is a policy that we can unite a lot of… Read more »
The alternative to the carbon tax is a cap-and-trade system that has the advantage that one can set carbon goals each year. It has been highly successful in controlling… Read more »
Charles: Cap and Trade (C&T) worked well for sulfur emissions but has not and will not work well for fossil fuel emissions. As others have said, C&T works well in… Read more »
Cap-and-trade and carbon taxes can be imposed at different levels in the energy system from mine/well/port to retail. That is a second level detail where carbon taxes and… Read more »
Mistrust against the US government could be an argument against ANYTHING. What is proposed here — carbon tax with 100% dividend — is expressly designed to avoid government decisions, or… Read more »
What is the main source of opposition to such a plan and how can it best be overcome? Opposition to a national carbon tax comes from multiple quarters. Therefore, the… Read more »
I believe the carbon-fee-and-dividend approach proposed by CCL and CLC and advocated so effectively here by Dan Miller, answers both of the “objections” you cited at the top. The poorest… Read more »
In theory, Dan Miller’s carbon-fee-and-dividend approach addresses the objections, in practice perhaps not so much. First, the poorest among us will be faced with budget pressures once the fee is… Read more »
Who says the first reimbursement won’t come for a year? My understanding is that checks would be sent monthly or quarterly. It is true that you’d need to have a… Read more »
First, I have read that the fossil companies already include a number for carbon tax in their budgets. I think that info came from CERES who have been active in… Read more »
There is nothing I want to argue with in your post. Pass Baker-Shultz first. Let’s get that done. Let’s tax the carbon and get the guaranteed income principle established and… Read more »
Goodness … what you have is a proposal .. set forth by former, certainly well respected, members of what used to be the Republican Party. What in the world makes… Read more »
Worse. It was proposed a YEAR ago February and you are just hearing of it. That’s the fault of those who actually knew about it. That’s why I’m trying to… Read more »