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.