Rep. Jim McDermott Introduces Carbon Tax Law

by Matt Kasper

On Thursday, Rep. Jim McDermott (D-Wash.) introduced a bill that would force fossil fuel producers to pay for their carbon dioxide emissions. It is the latest attempt by Congress to put a price on carbon.

The Managed Carbon Price Act of 2012 (MCP) would grant the U.S. Treasury Department authority to issue permits representing one-quarter ton of CO2. Unlike the cap-and-trade legislation that failed in the Senate in 2009, the MCP does not allow permits to be traded. Rather, they can only be purchased or refunded from Treasury.

McDermott said in a statement:

What seems to have fallen by the wayside is concern over the climate and how carbon emissions are playing a factor in the extreme weather conditions we have been seeing. My colleagues are seeing this in their districts. Just yesterday, the USDA said that half of the counties in the United States – 1,584 counties – had been deemed ‘natural disaster areas’ with 90% of those counties listed due to drought conditions. We can’t keep ignoring these major environmental issues, and this proposal addresses emissions reductions in an economically responsible way.

The revenue generated from the carbon tax would be put into a public trust fund with 25 percent of funds going to pay down the deficit and the rest to subsidize any rate increases consumers might face.

The MCP would specifically tax the producers of coal, natural gas, oil and gas refineries, and cover other industrial emitters of greenhouse gases.

As for the price of carbon, McDermott has been citing a recent Brookings Institution report that analyzed the starting price set at $15 per ton. If carbon was priced at that amount, Brookings estimates that $80 billion would be raised in the first years of implementation, rising to $170 billion in 2030 and $310 billion by 2050.

McDermott is hoping that this bill will also be supported by Republicans in Congress. He added:

Mitt Romney’s Economic Advisor Greg Mankiw, Exxon-Mobil, the American Enterprise Institute and other conservatives have backed this concept because they know we have to wean ourselves off of carbon emitting energy sources, and do it in a way that doesn’t hurt our economy and makes sense for businesses.

McDermott is a senior member on the House Ways and Means Committee, the body responsible for writing tax law.

Matt Kasper is a special assistant for energy policy at the Center for American Progress.

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6 Responses to Rep. Jim McDermott Introduces Carbon Tax Law

  1. Theodore says:

    “The revenue generated from the carbon tax would be put into a public trust fund with 25 percent of funds going to pay down the deficit and the rest to subsidize any rate increases consumers might face.”

    Does this mean that 75% of the money would be used to undo the incentive to use less? Do they not understand the purpose of a carbon tax? If you “subsidize any rate increases” how is the tax going provide an incentive to the consumer to either use less or find alternative sources of energy?

    It seems to me that providing a rate increase for consumers should be the fundamental goal of any carbon tax.

    This could not possibly be as simple as it seems. What am I missing?

  2. Theodore says:

    I should have read more before commenting. My first comment was based only on the article. After following a link I found this:

    “A percent of the permit fees will be directed to a newly created Energy and Economic Security Trust Fund, which will be distributed to taxpayers in the form of a monthly dividend.”

    The article left me with the impression that rates would be prevented from rising. A dividend works. Low rates do not.

  3. Artful Dodger says:

    Lead on, McDermott. But will Mr. Reid and Obama follow? The apple cart is near it’s tipping point, Gentlemen…

  4. thanes says:

    It strikes me that the Right has pushed all this so far out of it’s mind (and as many other people as it could) that we’re starting over at square 1 with them, If I ever get a conversation going about global warming, sometimes I get some interest and expressions of concern. As soon as you broach the subject of the actual solution, though (carbon tax), you might as well have suggested they go finger their grandmother.
    But as far as I’m concerned, it’s this by 2015 or I’m running north to as much high land as I can buy. You can recycle all you want, great. Make a house out of hemp and power it on sunflower seed oil, great. Paint your ass green and call yourself Treebeard the Shepherd of the Forests. But if this or Pete Stark’s bill 3242 doesn’t pass by 2015, I’m taking my family north.

  5. This is the right solution. A good start. Just needs to be larger. So I wonder if AEI and others will support it or do an about face like they did on Health Care Reform?

  6. BillD says:

    In a revenue neutral tax, everyone more or less gets the same refund. This means that if you use more energy than average, the refund won’t cover your expenses while if you use no energy, you get to keep the whole refund.