Sen. Majority Leader Reid: ‘Climate Change Is An Extremely Important Issue For Me, And I Hope We Can Address It’

We are seeing a unique confluence of events put a carbon tax squarely back into the national debate: the debt crisis and fiscal cliff, Hurricane Sandy, and the results of the 2012 election.

Sen. Majority Leader Reid said Wednesday:

Climate change is an extremely important issue for me and I hope we can address it reasonably. It’s something, as we’ve seen with these storms that are overwhelming our country and the world, we need to do something about it.

Back in August Reid spoke to Greenwire following one of the most powerful public speeches on climate that any national policymaker has made in years:

Reid said he hopes the Senate will take up a bill to put a price on carbon emissions if Democrats maintain control of the chamber….

Reid now has a much stronger hand. Democrats picked up 2 seats in the Senate. A few months ago Republicans were thought to have a good chance of seizing control of the Senate — now they have undercut their chances of taking back the Senate even in 2014. And newly elected Senators Angus King (I-ME) and Elizabeth Warren (D-MA) both explicitly campaigned on climate change.

No, Reid can’t do this single-handedly. But President Obama, reelected with the help of a decisive youth vote that rightly puts climate change near the top of the list of their concerns, himself said on election night:

“We want our children to live in an America that isn’t burdened by debt, that isn’t weakened by inequality, that isn’t threatened by the destructive power of a warming planet.”

In  the coming days and weeks, Climate Progress will explore the prospects for a carbon tax from all angles. We’ll also explore other policies that could potentially achieve the same kind of reductions. And we’ll try to set the record straight when we think the media doesn’t get it quite right, as with this CNN Money article, “Climate change is back on the table“:

“If we’re going to do a grand deal on taxes, [a carbon tax] will be high on the president’s list of priorities,” said Dan Clifton, a partner at Strategas, a research firm that serves institutional investors. “But it would have to be part of a compromise for Republicans to accept something.”

Clifton puts the chances of a carbon tax up for serious debate at 20% currently, but higher if a grand deal on taxes takes shape.

Still, the chances of a carbon tax actually passing remains low.

“I think there will be some opposition from many sides,” said Whitney Stanco, an energy analyst at Guggenheim Securities’ Washington Research Group. “From conservatives because it’s a tax increase, from liberals because it’s likely a regressive tax increase and from environmental groups because it would be used to pay down the deficit, not invest in clean technologies.”

So a carbon tax will be a high priority of Obama’s and the chances of a carbon tax being part of the debate is 20% — or higher — but the chances of it actually passing are low. Hope that clears things up for you.

In fact, while everyone I talk to in DC thinks the chances of a carbon tax are below 50-50, ultimately if the President insists on a carbon tax, it has a serious shot — and Stanco’s three points of opposition are each incomplete.

First, it’s certainly true many conservatives would oppose any new tax, which is why Obama and Reid would have to put on the table something in return that conservatives want — such as a lower corporate tax. Indeed, as I will explain in a subsequent post, many in Washington think the only way to have any kind of grand deal on taxes is to simply let all the Bush tax cuts expire. That will happen automatically at the end of this year if the House and Senate can’t agree on a package that the president will sign in time.  In that scenario, the subsequent 2013 deal can be billed as the biggest tax cut in history — and throwing in a carbon tax and lower corporate tax rate wouldn’t change that.

Second, a carbon tax is certainly somewhat regressive. But we are probably talking about a tax that is under 1% of GDP — a key point I will elaborate on in subsequent posts — so it won’t be a burden on most individuals. And it is perfectly straightforward to rebate some of the tax to those in lower income brackets to eliminate the regressivity. This is certainly not a show-stopper.

Third, environmental groups would be delighted to have a carbon tax — they certainly won’t oppose it because the money might be used to pay down the debt (or even to lower taxes for corporations and lower income groups). Also, if there is a grand bargain on taxes it would probably include a final set of tax credits for wind energy and other renewables. I for one would much rather have a permanent carbon tax then permanent clean energy tax credits, especially since the latter have proven anything but permanent.

I’m not saying this deal would be easy to construct and pass through the House and Senate. I’m only saying that one can certainly design a carbon tax as part of an overall tax package to minimize opposition. It then becomes a matter of how much the President and Senator Reid insist that it be part of the final deal.

44 Responses to Sen. Majority Leader Reid: ‘Climate Change Is An Extremely Important Issue For Me, And I Hope We Can Address It’

  1. Merrelyn Emery says:

    Now is the time to put in the best possible ambit claim and be prepared to negotiate hard. And you have Nature on your side, ME

  2. Billy52 says:

    Democrats and progressives need to stop trying to play the game on the right wing’s home field. Obama was afraid to bring climate change into the campaign mainly because conservative bluster scared the President’s advisers away from this issue. As long as we keep playing defense, conservatives will continue to set the terms of the public dialogue.

  3. Mike Roddy says:

    Not enough people are stressing that a carbon tax would do something about the deficit, in a less painful way than increasing income tax rates. This would also be the case if this tax is executed as a tariff on carbon intensive imports from coal fired countries like China- brought to us on bunker fuel container ships.

    Everybody would benefit, which makes Republicans skittish. Their first question always seems to be “what will the corporations think?”. Unfortunately, the ones with the most campaign cash are the fossil fuel boys.

  4. David B. Benson says:

    Maybe it’ll be the banksters versus the oilsters?

  5. Tom says:

    I’ve been forlornly combing the internet for someone realizing the opportunity here – THANKS for putting it out there. What we’ve been trying so far has not worked – let’s try something else.

  6. Mark E says:

    As part of this initiative –

    New York should paint or otherwise decorate in some engaging way the area that I call the

    “This-is-what-Global-warming-did-to-our-storm-surge Zone”

    defined as the area that would have remained dry if seas were not 1 ft too high due to global warming.

    Imagine the millions of people who would – driving riding and walking around – see this huge area; not to mention the locals being faced with that knowledge every day!!

    PS This is art of course not hard earth science so maybe it does not follow that we can simply subtract one foot in elevation from the surge. But its plausible enough and sexy enough for street theater and based on comments from climate scientists now in the news; e.g. what Mann said to the LA Times.

  7. Mulga Mumblebrain says:

    Predator versus Alien.

  8. I agree 100% that this is a golden opportunity to push for a “carbon-funded income tax cut”!

    The great news is that BC already did just exactly this. There is a lot of data and three years of experience on it for those who want to see a real world example.

    The BC income tax cut was fully funded by a rising carbon pollution fee. “Revenue neutral” is the jargon.

    To make it more fair for lower incomes two things were added:

    1) everyone got an initial check for the same amount. That front-loaded people’s wallets to pay for it.

    2) if your income is below a certain level the government writes you a check every quarter to rebate some of the carbon pollution fees you paid.

    It enjoys wide support in BC and has survived a heavy challenge at the voting booth.

    Polls show that most folks in BC would NOW support a higher carbon fee if funds were used for healthcare or schools. But it seems it took a few years of living with it before this comfort level was reached to do it as anything other than revenue neutral. And this is just an opinion poll saying people would support a switch to direct funding of other programs…so not tested yet.

  9. I saw a quote in a bloomberg article that said HSBC estimates that carbon pollution fee would cut the deficit in half by 2022.

    Details: $20/tCO2 carbon-pollution fee rising 6% per year would bring in $154b by 2022. That would pay for a lot of income tax cuts!

  10. There will be a conference on carbon tax in USA next tuesday. Check out the list of heavy hitters who will be there. Details:

    TITLE: “The economics of carbon taxes”
    Co-sponsors American Enterprise Institute, Brookings Institution, International Monetary Fund, and Resources for the Future (RFTF)
    Tuesday, November 13, 2012 | 9:00 a.m. – 5:00 p.m at AEI in Washington
    Speakers from:
    * EPA
    * AEI
    * Brookings
    * RFTF
    * IMF
    * Duke Univ
    * US Treasury
    * Harvard
    * U of M
    * CBO
    * Urban Institute

    Live streaming plus full video post event. Website:

    I’d say the possibility of USA carbon tax is way above 20% and rising quickly.

  11. It only took BC about four months to implement their carbon pollution fee collection system that fully funded their income tax cut.

    It can happen very fast with a bare minimum of government involvement or new bureaucracy.

    Simple, cheap, fast.

  12. Paul Klinkman says:

    The biggest climate change senator of them all was Sheldon Whitehouse. If ever the oil companies had someone to worry about, Whitehouse was the guy. He ran for re-election this year and he won by 30 points. Meanwhile, the Republicans poured all their money into the somewhat tight Rhode Island first district house race.

    It’s not just the close races that prognosticators need to look at — it’s also whether, across the board, being proactive on the climate change issue gets people pre-emptively elected.

  13. Here is something to put carbon pollution fees in perspective for those worried about it raising things like gasoline prices too high.

    Below is a list of current gasoline taxes (cents per litre) in various countries. Next to each is the equivalent carbon fee that it equals:

    Canada fuel taxes = $.44/L = $162/tCO2
    UK fuel taxes = $1.27/L = $527/tCO2
    Germany fuel taxes = $1.21/L = $500/tCO2
    Japan fuel taxes = $.80/L = $330/tCO2

    BC’s $30/tCO2 carbon tax adds just 6 cents to existing fuel taxes. It didn’t send prices skyrocketing but it has helped nudge BC to decrease gasoline use faster than the rest of Canada.

  14. Ozonator says:

    Senator Reid is almost as cool, tough, and groovy as VP Biden.

  15. Scott says:

    Senator Reid better understand we just had four years of hope and it didn’t get the job done.

  16. Paul Magnus says:

    Yes. The BC setup worked well.

    Only issues were that NG and Coal resources where exempt and so are still being pursued big time which totally defeats the overall long term goal of reducing global emissions.

  17. Tim in CA says:

    Thank you for pressing this issue, Joe. We need you to continue publishing on benefits of a carbon tax as part of a larger deficit reduction deal throughout this critical time. Bottom line: it’s better fo tax pollution than income or jobs. The fiscal cliff offers the best opportunity to institute a carbon price in the next four years. We must get the word out and urge congress to seize this opportunity!

  18. Tim in CA says:

    I appreciate your posts, Barry. Thanks for collecting this useful information on the overwhelming rationality of carbon taxes.

  19. Paul Magnus says:

    I agree. I even think were in a situation now where there really is not enough time to implement an effective cap n trade.

    In any case I actually think we need to start thinking about extreme mesures like rationing….

  20. Ozonator says:

    Since deniers are primarily concerned with the Atlantic, shows:

    the 4 years (2009 – 2012) of President Obama generated 11 cat 3+ and a total of 60 hurricane ecosystems


    the last 4 years of President Bush (2005 – 2008) generated 16 cat 3+ and a total of 74 hurricane ecosystems.

  21. I strongly support a carbon tax / fee. Do be aware that it is regressive – it hits everyone, regardless of how much they earn.
    I support the money being refunded – and not only through income taxes as 47% famously don’t pay that type of tax, but do buy gas, use electricity.

  22. Reid and Obama….now consider how much of a mandate Boehner has….when his party received fewer House votes than the Dems, but still got the majority of seats:

    I expect Trump is tweeting revolution already

  23. BillD says:

    I can see it. If academics run the scenarios and the media talks about the benefits for the environment and deficit, we could see pressure for a carbon tax. In addition to the fossil fuel companies there will still be some strong groups against such a plan–such as truckers, states still highly dependent on coal-fired electricity etc. In would make much more sense to phase in the tax, rather than exemptions for fossil fuels, as indicated to be the case for BC Canada. Utility companies might become strong supporters of loans and credits for building up renewable energy.

  24. Raul M. says:

    I’m confused, is it everyone except the governments would pay extra for the carbon use. So that governments would actually profit from carbon pollution. Certainly there is some way to ignore that and just be happy/

  25. Mark E says:


    There are a lot of smart thinkers in the GOP and I believe more than a few secretly respect climate science. Is it possible the fiscal cliff drama has been done by design to allow a carbon tax to be (supposedly) forced thru? In other words is the cliff a bipartisan tactic designed to the let the GOP save face with their backers when the carbon tax finally arrives?

  26. idunno says:

    Hmmm, certain forms of carbon tax are potentially very socially regressive, hitting rural populations, seniors, and the poorest hardest.

    This, from the UK, may be relevent:

  27. John McCormick says:

    Barry, thank you for the notice of the AEI conference on a carbon tax. I will attend.

    If the panel is serious about the benefits of a carbon tax, they must also believe climate chaos is upon us. I want to hear them say that.

  28. Will says:

    Isn’t Reid’s Senate where cap-and-trade and most other action on climate change died during Obama’s first two years? I’m not sure hope and change was the problem, even if Reid did try to make up for his failure with a nice speech.

  29. Will says:

    So true. That includes the silliness of pretending there’s no anti-coal movement just because the industry started whining about a war on coal.

  30. Ozonator says:

    Looter Limbaugh today declared a war on Christmas complete with Santa Obama giving coal to bad chillin.

  31. Mulga Mumblebrain says:

    A tax hypothecated to paying compensation to the poor and working people, to renewable research and development and to ecological repair is essential. Any carbon trading scheme will be a picnic for the financial grifters and achieve bugger all.

  32. Mulga Mumblebrain says:

    Love those gerrymanders.

  33. Mulga Mumblebrain says:

    That’s the type the Right will prefer, as increasing inequality, wealth and poverty are the dearest objectives in their worldview. It all flows from the basic misanthropy, the fear and hatred of the other, that is the basis of the Rightwing psychopathology.

  34. fj says:

    Climate action must have the highest priority and the way Bloomberg and Obama responded to Hurricane Sandy gives some indication how it has to be done to be effective.

    It is pretty clear that nothing short of extremely aggressive action at wartime speed will turn the tide.

    We have to think in terms of 5 or 10 years in making emissions reductions to near zero and dramatic restoration of the environment.

  35. Mulga, perfectly right!

  36. Barry, like Tim I appreciate your post and your numbers.
    The way to use a carbon tax is essential, because if you use it to decrease your budget debt, what difference with a fuel tax?
    My point is that a carbon tax must be on top of other taxes, and the money collected reserved for the Climate Issue, not for the budget. With this logic, you quickly underrstand that the best way to use the money collected is equal redistribution between every citizen. This is fair (every one pays his pollution with the same fee, and every one receives the same share). The redistribution is key to have the poor people not harmed by this rising price while they are already leaving at under average carbon consumption.
    OK it looks utopia. But this is the fair and simple vision we should agree upon with the countries of the world. Not an easy work, but who thinks global warming is an easy problem?

  37. Tim,
    I agree that taxing carbon sounds smarter than taxing jobs. But taxing pollution is not the magic bullet to solve our debt problems. Our main p is to reduce our carbon use, it needs to put a price on carbon to reward the good behavior and punish the bad one, you have to rise this carbon price until the target of carbon cut; but you cannot do that without allowing the poor people to afford this fuel price increase. This is why redistribution is key, and why this monet cannot be used for other purposes. This is also key for the political acceptance of this carbon price mandatory to save the future of our children.

  38. Idunno,
    The guardian article backs the idea that redistribution is key for citizen to support a carbon tax.

  39. Paul Klemencic says:

    Here is a similar comment to one that I put up on the open thread:
    Climate Progress Post on November 11, 2012 at 1:14 pm

    Well, a small scale carbon tax won’t hurt… Right?

    Wrong. A small scale carbon tax will take out coal and replace this source with shale gas. Then we have to deal with the new natural gas power plants. A carbon tax would lead to extensive buildout of CHP (combined heat and power) projects. In effect, we replace 500 coal plants with millions of CHP plants… Good luck controlling emissions from millions of new carbon emission sources. And of course, shale gas emissions (methane) will be very hard to quantify and control, and have 10x the climate impact initially.

    In effect the carbon tax represents the system archetype “Fixes that Backfire” in the electricity and home heating markets.
    A carbon tax doesn’t address problems in the oil market much at all. A $20 per ton carbon tax is only about six cents per gallon, not enough to drive substitution or energy efficiency. Unconventional and frontier oil developments threaten the planet even if we eliminate all other fossil fuel carbon sources.

    Each energy market needs a customized solution, that takes into account the ineffective nature of each market. Economists who propose carbon taxes don’t understand energy markets… they assume the “free markets work best” paradigm, ignoring the actual history of energy markets that clearly demonstrates that inadequately free markets like we have now, have been a disaster in the oil, electricity, and natural gas markets. I am very frustrated by the lack of competence in addressing energy market stakeholder needs.

    Finally, a carbon tax backfires in yet several more ways. Placing a carbon tax on energy plays right into the hands of US politicians who demagogue tax hikes. And once the US implements a small ineffective carbon tax, the opponents of further action can claim “problem solved”. This would delay the action needed in the oil market to stop expanding unconventional oil production. We need to address the oil market head on.

  40. Joe Romm says:

    This misses the mark.

  41. Shelly says:

    If Reid and the Senate have done nothing so far, they won’t in the next four years — and how can they when Obama is blocking any action with his affinity for coal and oil? It’s dreamland that this administration will do anything about it. They don’t give a rip. The only thing at this point that will stop climate change is complete economic collapse, world-wide.

  42. Paul Klemencic says:

    Joe, I have tried repeatedly to get hold of you over the last year with multiple emails. A set of solutions exists that CAP should be considering instead of carbon taxes.

    I put up a comment today on the latest post on carbon tax versus cap and trade, by Robert Stavins:

    I agree with the conclusion that carbon taxes won’t work well. And I agree that studying each energy market to determine the most effective policy is necessary.

    I have been studying each energy market, evaluating and looking for the key drivers that will cause each market to transition to either green energy, substitute to different products or services, and substantially improve energy efficiency and total costs. Each energy market currently exhibits dysfunctional non-optimal behavior inconsistent with properly functioning markets. We need markets where customer needs are not only met by the products and services provided by suppliers, but where delighted customers derive high levels of satisfaction from the energy solutions.

    Clearly, our current energy markets fail to do this.

    Let me start with the most dysfunctional market, the vehicle market tied intrinsically to the crude oil market. The marginal cost of demand for an incremental barrel of oil by global oil consumers currently falls into the range of $1000 to $2500 per barrel, due to the pricing pressure exerted on global oil sales. This incremental cost translates into a valuation of $100k to $140k for each green vehicle that replaces a gasoline or diesel vehicle in the fleet, and this in turn should drive green vehicle and biofuel substitution. Currently the vehicle manufacturers and biofuel producers are unable to share in the cost savings that oil consumers receive due to substitution. Clearly, a crude oil tax tied to falling oil prices, with the proceeds going to vehicle manufacturers and biofuel producers, would create an enormous incentive for substitution. And the market would begins shifting rapidly to the green energy sources. The solution lies in using a predominantly private sector group, with public sector policies to capture a portion of oil cost savings (about 30%) and transfer these monies to the private sector group.

    The key drivers in the electricity market involve use of public financing (at 4%) for green power projects versus higher cost private financing (weighted average cost of capital at 10%), coupled with a subsidy for these public projects similar to subsidies given to private sector projects (roughly 30% of capital). Essentially primarily public sector owners, with private sector partners, should drive green power substitution for fossil fuel power sources. Since the cost of green power involves primarily capital cost recovery and cost of debt, with relatively low operating costs, the public financed projects have a huge competitive advantage over private financed projects.

    The key drivers in the natural gas market, involves the use of acreage development restrictions to manage natural gas prices into a consistent steady price range of $4-5 per million BTU, versus the glut price range of $2-2.50 currently. A cooperative effort between industry participants, government regulatory control, would keep us from blowing through this valuable resource (needed for stopgap power generation and key industrial use) at rock bottom prices. A win-win-win solution exists that benefits green energy industry, natural gas industry, and leaseholders, if severance taxes tied to natural gas at the higher price levels provides some compensation to leaseholders on properties where development has been delayed.

    A carbon tax doesn’t accomplish any of these desired outcomes directly. Each energy market needs a very different set of solutions.

    Joe, please check your inbox for my email, and call me. I can walk you through each energy market quickly, using my site posts:

  43. Barrie says:

    A carbon tax is not regressive, it simply builds some of the cost of our current energy used and emissions into the cost of energy and products now, instead of putting that cost (plus interest!) on to our children – in the form of future climate change.

    However, much of the impact of the tax on poorer people (who tend to spend a higher % of their incomes on energy) can be alleviated in the form of compensation. This is exactly what Australia did. 50% of the tax was used for compensation of individuals and export industries with the remainder being used to fund wind, solar, tree planting and bioenergy projects.

    Many people moaned about the impact on jobs, prices, inflation and the economy, but when the tax started in July this year there was no noticeable change in the price of anything (inflation went from an annual rate of 2.5% to 4% as a result of the one off increase).

    The US could easily follow this model. The good thing is that, as more countries put a price on carbon, the schemes become simpler and fairer through not needing to worry about carbon intensive exports and imports.

  44. Barrie says:

    Paul, your “solution” looks far more complex and difficult than a simple carbon tax (or carbon trading system). Also you appear to miss the point that, currently, there is no way of factoring in the cost (in terms of future climate change) into the price of fuels.

    Since a kg of carbon from natural gas has exactly the same cost as a kg of carbon from coal, it would appear most straightforward to simply factor this in to the price of the fuel used with the Government (i.e. everyone) being the beneficiary. Simply relying on existing prices and market forces gives no guarantee that the alternative will produce lower emissions (e.g. bio-ethanol from corn).

    You appear to be confusing current prices (which are based on the cost of finding, recovering, processing and transporting each fuel) with actual costs the emissions associated with use.