Tumblr Icon RSS Icon

The Newly Proposed Carbon Tax Will Fight Global Warming, Protect Low-Income Americans And Reduce The Deficit

Posted on

"The Newly Proposed Carbon Tax Will Fight Global Warming, Protect Low-Income Americans And Reduce The Deficit"

Share:

google plus icon

By Richard Caperton

In the last two years, the biggest extreme weather events cost American families and businesses $188 billion. As we pump more and more greenhouse gas pollution into the atmosphere, these disasters are only going to become more common.

We must do something now to take action. And, thanks to a bill that was introduced today, United States Senators have the opportunity to take action: They must pass the Climate Protection Act and the Sustainable Energy Act.

Taken together, the Climate Protection Act and Sustainable Energy Act are a comprehensive climate bill, led by Senators Bernie Sanders (I-VT) and Barbara Boxer (D-CA). Most important, the package puts a price on carbon, which will make polluters pay for the damage they inflict on all of us while encouraging the transition to cleaner fuels. This $20 fee for each ton of carbon dioxide pollution will reduce emissions to 20 percent below 2005 levels by 2025.

These bills also bring in more than $1 trillion in new revenue over the next decade. The success of any pollution reduction program depends on how new revenue is spent, and these bills spend the money smartly. Broadly speaking, the money goes to three places: consumer protection, clean energy infrastructure, and deficit reduction. Each of these is important.

A carbon fee is just like any other consumption tax in that it inordinately impacts low- and middle-income families. The Climate Protection Act and Sustainable Energy Act create a rebate program to make sure that these families are not harmed. This is modeled after Alaska’s oil dividend, and will ensure that pollution reduction is not a regressive tax.

Reducing dirty energy use is great, but we need to make sure that we replace it with clean energy to power our economy. This package funds the Weatherization Assistance Program, ARPA-E, the production tax credit and investment tax credit, manufacturing for clean energy technologies, worker training, and other programs that will be critical in transitioning to a clean energy future.

Finally, our nation’s budget deficit is a real problem. The Climate Protection Act and Sustainable Energy Act will reduce the debt by $300 billion over the next ten years.

This package is closely aligned with the progressive carbon tax that CAP proposed in December 2012. At that time, we said that any carbon tax must:

  • Be sufficiently robust that it leads to meaningful reductions in greenhouse gas pollution, getting us on a path that helps us avoid the most catastrophic effects of climate change. In addition to being high enough to affect pollution rates, the tax should also increase over time and be applicable to non-carbon-dioxide greenhouse gases such as methane. This would both ensure a continuing reduction in the release of carbon dioxide and also encourage companies to move toward cleaner energy sources instead of different dirty ones.
  • Encourage businesses to make new investments in energy efficiency and renewable energy to reduce greenhouse gas emissions. This will stimulate the economy and put people back to work in the burgeoning clean-tech and green-jobs sectors.
  • Reduce — not increase — economic vulnerability of low-income households by ensuring that they are fairly compensated for any increase in energy prices.
  • Have appropriate mechanisms to protect existing American businesses and prevent so-called pollution leakage to countries without similar systems in place. Leakage occurs if highly polluting industries simply move to other countries that don’t have a comparable limit on pollution. In this way, they can continue business as usual without stricter environmental regulations. Leakage can also happen if domestic industries shut down, causing us to import goods from other countries.
  • Reduce the budget deficit to prevent draconian cuts in vital domestic programs by raising revenue from the tax.

This legislation does each of these five things. That’s why CAP has encouraged Congress to pass the bills without delay. Tara McGuinness, Executive Director of the Center for American Progress Action Fund, spoke at the bills’ introduction this morning. This is her statement about why this legislation matters:

Sen. Sanders and Sen. Boxer continue to focus us on what really matters: our moral obligation to leave a country and a planet to our children that is not damaged and polluted. They are taking action to reduce carbon pollution — making sure that political squabbling doesn’t distract us from the task at hand. Today, across the country, Americans of all walks of life are coping with the devastating impacts of climate change on their homes, businesses, and livelihoods. It’s time that we invest in our communities, rather than leaving the American taxpayer to foot a billion-dollar bill while they’re clearing the debris and fearing the effects of the next catastrophic storm.

The Climate Protection Act and Sustainable Energy Act include some important details that were not in CAP’s proposal. For example, the bills end the taxpayer subsidies to oil and gas companies. We should be charging them for pollution, not lowering their taxes by billions of dollars per year. And, the bills include provisions to reduce risks from natural gas production. Since a fee on pollution will likely encourage some shifting from coal to natural gas for power generation, it’s important that this not lead to more local air and water pollution.

In Tuesday’s State of the Union address, President Obama called on Congress to pass a bill just like this one. Congress should heed that call. At the same time, the Environmental Protection Agency must move forward with limits on pollution from power plants. Not only is this a powerful backstop if Congress doesn’t act, but it also makes sure that EPA has the authority to require more reductions than this bill calls for if the benefits of more action outweigh the costs.

Richard W. Caperton is Director of Clean Energy Investment at the Center for American Progress.

« »

41 Responses to The Newly Proposed Carbon Tax Will Fight Global Warming, Protect Low-Income Americans And Reduce The Deficit

  1. Photon says:

    I’m confused. The article states “$20 fee for each ton of carbon dioxide pollution”,

    While the .pdf legislative summary says “$20 per ton of carbon or methane equivalent”

    Which is being taxed at $20? A ton of CO2 or a ton of carbon? The difference is hardly trivial. The reference to “methane equivalent” seems to imply CO2, but it’s unclear. Anyone?

    • Photon says:

      Never mind. I read the bill itself. It’s $20/ton of CO2, it seems.

    • Terry Fillow says:

      Photon here is where they talk about methane in the article.
      •Be sufficiently robust that it leads to meaningful reductions in greenhouse gas pollution, getting us on a path that helps us avoid the most catastrophic effects of climate change. In addition to being high enough to affect pollution rates, the tax should also increase over time and be applicable to non-carbon-dioxide greenhouse gases such as methane. This would both ensure a continuing reduction in the release of carbon dioxide and also encourage companies to move toward cleaner energy sources instead of different dirty ones.

  2. Photon says:

    I’ve crunched some numbers, to help people translate a carbon tax into everyday consumption of fossil fuel energy.

    A $20/ton tax on CO2 works out to:

    ~ $0.02/kWh for coal-fired electricity
    ~ $.01/kWh for gas-fired electricity
    ~ $0.195/gallon of gasoline.

    Some caveats:
    * the cost per coal-fired might be as low as 1.8 cents, if it’s coming from a newer, more efficient plant
    * Similarly, gas ranges in efficiency. An advanced combined cycle gas plant may have a lower cost per kWh, perhaps as low as 0.8 cents.
    * The carbon price being applied to gas does not include any potential fees that might be levied on methane leakage (the bill makes reference to “methane equivalents”). Depending on what the leak rate is determined to be, this could make the carbon fee on gas-fired electricity almost equal to that of coal.

  3. Mike Roddy says:

    Richard, what is the rate of increase of this tax over time?

    This is an important step, and let’s hope it comes to a vote. While unlikely to pass, the exercise is worth it in order to determine how close it is to passage, and which Senators may be won over. It’s possible that a few Republicans could break ranks (McCain? Collins?), making up for opposition from Blue Dog Democrats. Unlikely to be enough for passage, but maybe close enough to make ultimate passage inevitable.

    • Mulga Mumblebrain says:

      Yes the tax must be set at a rising rate, known to all, so that people can plan accordingly. It must not be susceptible to sabotage by some future far Right Tea Party style outbreak of mass insanity. And, I’m convinced, the proceeds must be hypothecated to renewable research and development, compensation for the working and middle classes and for ecological repair. It must not be simply swallowed up into the general revenue.

  4. Merrelyn Emery says:

    I didn’t notice anything roughly equivalent to our Climate Commission which I think has been particularly useful. It puts out public discussion papers and holds community meetings where citizens ask questions of the scientists, etc and these forums are televized nationally, ME

  5. Niall says:

    Watch my lips.

    Twenty per cent below 2005 levels by 2025 is not enough!

    Assuming it’s not too late, we need to be decarbonising the entire world economy, now!

    Oh, and forget that tooth-fairy fantasy of infinite growth. It’s another delusion.

  6. Mark E says:

    Not just expensive food, but empty shelves.

    Only way it will pass the GOP house.

    Sorry.

    Why would Obama wait for Congress?

  7. Rabid Doomsayer says:

    I do prefer the relative clarity of a simple carbon tax compared to the obscurity of offsets and carbon trade.

  8. Leif says:

    A Nation that places NO VALUE on Earth’s life support systems, places NO VALUE on LIFE! Price Carbon. Stop profits from polluting the commons. Bring distributed green energy production to the communities. Bring profits to the communities. Not profits to the polluters. Money is not the operative word here. Survival of Earth’s Life Support Systems and a livable earth for the Kidders IS!
    There is no such thing as clean coal. Ship it over to China “WE the People” still get the pollution and the climatic disruption, the ecocide fossil barons still get the profits.
    Hell, I have a $120/T charge for home garbage, $50 for compost makings! Waste water fees, even “rain run off” is not free to this person. (Guide lines here?) Corpro/People deserve a bulk rate of free? They piss all over themselves at the thought of $25/ton for toxins! In fact they get my tax subsidy support in the process! Get real… Try throwing 19 pounds of paper cups out the car window for each gallon of gas you consume and report! We are talking justice here. Even Morals! Corporations are people now yet don’t respect the fiduciary common law of not polluting your neighbors land. For profit or otherwise!
    The GOP do not fund abortion. Fine. A precedent. Why must we fund, with our TAX DOLLARS, the ecocide of the PLANET!
    What is a fair price to dump tons of toxins in the pristine waters and air of the commons? I seldom see that question asked, much less answered. Ain’t we talking real money here? Cutting school lunches instead?
    Corporations are “People” now. Does not “WE the PEOPLE” mean ALL of us?
    Stop profits from the pollution of the commons.
    Humanity deserves nothing less! I demand NOTHING LESS!
    Both power and money have been conscripted by the ecocide fossil Barons… Distributed Green Energy gives both power and money back to “We the People!”

  9. ToddInNorway says:

    Watch out for outsourcing of carbon-intensive industry to Asia where their emissions will likely increase compared to keeping it in the US. Business leaders must get a clear message that they cannot simply move the problem outside of the USA. A carbon import tariff must be in the cards.

    • Leif says:

      No legitimate government can resist the revenue that a carbon tax can provide as long as it is a level playing field. Nor the social benefits that a Green Awakening Economy can provide its own people as well as the world. The road will be littered with obstructions and “We the People” must be vigilant. Our Government is still a product of “We the People” however fragile at this time, but humanity must prevail or it is Toastville for the Kidders. Those are the stakes IMO.

    • Mark E says:

      Outsourcing-prevention is easy:

      If the producing and transporting nations don’t tax the carbon involved in production and transoceanic shipping, then we should impose such a tax right here, in the form of carbon-based import duties.

  10. Brian says:

    Imagine for a moment how these taxes will negatively impact the business community. I work for a company that has shipped 50+ jobs overseas because it costs half as much to have them make it over there and ship it here. The “half as much” includes the cost of hauling the stuff over on containers. So with this new tax, everything will just get even more expensive, thereby increasing even more the cost difference. Trust me, foreign countries don’t care about this stuff if it brings jobs to their economies.

    What’s ironic about my particular company is that the owner is a bona-fide tree-hugger to the extreme. And he still chose to send jobs overseas where there are virtually no regulations on pollution and employee safety. So he drives his Prius, pretending to help the environment here, while doing just the opposite over there. In reality, money will always talk loudest.

    Now don’t get me wrong, I don’t disagree with green plants and clean water. But we must be very careful in how we go about trying to accomplish this. And truth be told, I don’t have any good solutions. But to dramatically raise the costs of these items seems to me to be penny-wise and pound-foolish. From my standpoint, my gas bill will go up 5% and my electric bill will go up 20%.

    Considering my income has gone up 0% in each of the last 3 years, this additional cost will come from me not buying something else, just like many people. And that something else I and everyone else is not buying means lost jobs. It’s a slippery slope my friends. Just be careful what you wish for.

    • Mulga Mumblebrain says:

      I wish for the end of capitalism, that life-destroying spiritual disease whose machinations you so clearly outlined. Any system that makes it impossible, or staggeringly difficult, to rectify its life-destroying properties, and continues to degrade and defile the life-sustaining biospheres of the planet, simply must be eradicated. A system that mandates that the maximisation of profits, even at the expense of life itself, is not just the highest good, but virtually the sole object of society, is plainly malignant, and, if it is not excised, it will shortly kill its host.

  11. Gingerbaker says:

    How is this going to help?

    We can’t move away from carbon fuels until renewable infrastructure is agreed upon, funded, constructed and, most importantly, deployed.

    This carbon tax is not going to accomplish any of that. It is simply going to make energy more expensive for individuals, and does not even direct enough money for guided, intelligent, cost-effective infrastructure, which requires a massively coordinated effort to have any chance of reducing our CO2 emissions quickly enough to do any significant and meaningful reductions on the time scale we need them. Whatever money ends up going toward infrastructure will almost certainly be squandered in pork projects – *because there is no national renewable energy strategy yet*.

    And the whole psychological strategy of the carbon tax makes no sense, either. Because energy costs are going to go up by a tiny amount – less than two cents a gallon of gasoline at the pump, or a miniscule increase in our electricity bill – suddenly this is going to propel the American conscience to make a serious large-scale investment in renewables? Are you kidding me??? Gasoline has tripled in price over the past 5 to 10 years – and it has not instigated a significant move away from carbon fuels.

    All of the mental effort, all the time, all the money and planning devoted to passing carbon tax legislation has been a colossal waste of time, an enormously debilitating diversion from the true conversation we need to be having. It is less than a half measure, it is a pico measure. It is yet another doomed idea based on the corporate fetish we have been using futilely for the past thirty years – that tweaks and incentives *of the free market system* are the best way to approach a national energy crisis. And it is madness to think that this carbon tax effort will bear any different fruit than the failures of the past three decades. It is madness to think that market-based incentives are going to accomplish what we need to accomplish in time to save our future.

    The only way to impose a green energy future on a fossil fuel-based economy and a fossil fuel-corrupted politic is to impose change from the Federal level. We must have a national renewable energy utility.

    • Mark E says:

      Gingerbaker, If pounding the table for six parpagraphs makes you feel better, great, but you quit talking right when it was starting to get substantive….

      What is a “national renewable energy utility”?

    • Photon says:

      “We can’t move away from carbon fuels until renewable infrastructure is agreed upon, funded, constructed and, most importantly, deployed.”

      By making the marginal cost of generation of electricity by coal and gas more expensive – and increasingly more expensive over time, vital “price-signaling” is provided, making alternatives like wind and solar more viable. 1 – 2 cents per kWh isn’t “miniscule” at the wholesale level — it actually puts wind squarely in competition with coal and gas, and puts solar within striking distance.

      Regarding gasoline, it’s not “two cents” per gallon, more like 20 cents. Granted, that won’t change much behavior initially, but as the cost increases over time, it will promote the adoption of alternatives, as well as more efficient use of fossil fuel. But granted, the biggest initial gains will be in electricity.

      You seem like you could strongly benefit from an Econ. 101 course.

      • Gingerbaker says:

        I stand corrected on the price of gasoline – my error in misreading the decimal point.

        It doesn’t matter a whit to my argument, however. Renewables are already obviously our only future. They are obviously less expensive than any fossil fuels, because nobody includes the true cost of CO2 emissions. Joe Romm here has posted that our current trajectory will involve $1240 *trillion* dollars in mitigation costs from fossil fuels.

        I have written here numerous times, that by my back of an envelope (and no doubt inaccurate) estimate, we could build a large-scale solar facility large enough to replace every calorie of fossil fuel the entire country needs, build a smart grid, retrofit every home and business to 100% electricity for all energy needs, install inductive charging to our highways, and give away all this electricity free forever – for 1/100th the cost of mitigating fossil fuels.

        Economics is not the issue – renewables are WAY cheaper than fossil fuels! So, why haven’t we built these facilities yet?

        Because people (like you and the authors of the carbon tax) keep thinking that (for some reason beyond my capabilities to understand)we need to use free market-based inducements to bring about a weaning away from fossil fuels. This idea, that we need to make fossil fuels less attractive in the marketplace in order to induce our country to deploy renewables is, to me, insane.

        We don’t need to compete with the fossil fuel industry – we need to ignore it and build our own National Renewable Energy Utility.

        We have, according to some climate experts, only 5 to 10 years to bring our CO2 emissions down to zero, or we will face a world at least 4C warmer than in 1950. That is the end of civilization as we know it.

        You want to keep trying what has failed for thirty years now – to use market-based inducements to encourage the capitalist system to develop renewable energy.

        I want to socialize renewable energy. I think a national utility has a chance of saving humanity because it is technically achievable, and the most cost-effective way to achieve the goal.

        It also has a curiously compelling sales pitch – “Let’s not pay a dime more to the fossil fuel industry – let’s make our own energy from the sun and wind, and give the electricity away for free”.

        There is more to Economics 1 than the same old failed capitalism approach.

  12. Mark E says:

    If pounding the table for six parpagraphs makes you feel better, great, but you quit talking right when it was starting to get substantive….

    What is a “national renewable energy utility”?

    • Mark E says:

      accidental repost, please delete

    • John McCormick says:

      Wait! Ginger has a good idea.

      President Obama can issue an executive order creating a national renewable energy utility that is TVA-like; can be constructed on military land and he has the eminent domain power to construct a grid to transport the renewable power.

      Call them Energy Defense Reservations.

      Thanks, Ginger

      • Photon says:

        “President Obama can issue an executive order creating a national renewable energy utility that is TVA-like”

        Not likely. Besides, I for one don’t want to live in an America where the chief executive could sign into existence a government-owned corporation, by fiat.

        And the TVA was created by an act of Congress, by the way…

        • Merrelyn Emery says:

          Ideological differences are appearing in this exchange. Surely the situation is sufficiently dire for whatever can be done to be done, regardless of personal beliefs? ME

          • Photon says:

            I don’t think I’m being ideological, I think I’m being realistic. The president does not have the latitude to create — much less fund — massive federal corporations at the stroke of a pen. I vote democrat over republican, and I don’t think a President should have that kinds of power.

            Climate change is a real threat, one I take seriously. It needs serious solutions. Marshaling the power of America’s free enterprise can be that solution. Indeed, it must. A carbon tax is an effective way of directing that power. Not a senseless and dangerous grab of power itself.

  13. Carbon taxes are a crude approach to driving climate action. Worse still they deliver sudden (and often unproductive) price increases that are easy for skeptics to raise hysteria about.
    If you must have an emissions trading scheme it would make more sense to use an offset credit trading scheme such as that used by the highly successful US acid rain control system and the Australian RET scheme. Both of these are offset credit trading schemes. This means that that the system effectively set a levy on dirty that is used to subsidize clean. Unlike carbon taxes they don’t generate government revenue and only gradually push up the price of power.
    Offset credit trading is also highly suited to driving down the average emmisisons of new cars. See:
    http://pragmatusj.blogspot.com.au/2011/08/using-offset-credit-trading-to-drive.html AND
    http://www.mondaq.com/australia/article.asp?articleid=97222

  14. Donald Brown says:

    Any debate about proposed legislation that does not include an honest discussion of the scale of the emergency we are facing in terms of global emissions reductions we need to limit warming to 2 or 1.4 degrees C, coupled with a recognition of the undeniable fact that the US will need to reduce emissions at levels greater than the global average reduction we need, is not likely to produce the political will to do what is necessary. Donald A. Brown

    • Merrelyn Emery says:

      Surely an honest discussion of the problem with a clear explanation of the inevitable consequences of not tackling it would force all the parties to expose their real positions and make it easier to devise effective stratgies and tactics to overcome the obstacles, which I would anticipate would be considerably fewer than when so many can hide behind political posturing and widespread public ignorance of the scale of the impacts, ME