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Published on November 12th, 2012 | by Andrew

5

Drought + Superstorm Sandy + Looming Fiscal Cliff —> Revived Talk Of A Carbon Tax

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November 12th, 2012 by  

Notable in their absence during the recently concluded presidential election, Superstorm Sandy and historic drought are among a string of extreme weather events that are nonetheless driving climate change and human greenhouse gas emissions back toward the forefront of politics and government. This, coupled with the looming so-called “fiscal cliff,” also seems to be waking up Congress and the Obama administration, and getting them to reconsider instituting a carbon tax on the US’ largest carbon and greenhouse gas emitters, such as power producers and oil refiners.

With the US economy burdened by a massive run-up in public Treasury debt accumulated as a result of the economic emergency rescue and bank bailout packages, as well as the wars in Afghanistan and Iraq, could be cut in half by a $20 per ton tax on carbon emissions, a recent report by the Congressional Research Service determined.

In addition, the US Treasury has commissioned the National Academies of Science (NAS) to carry out an analysis of the effects of a carbon tax, along with other means the government could use to change the nature of its revenue-raising activities so as to encourage reductions in fossil fuel use, carbon and greenhouse gas (GHG) emissions. Due to be completed in Spring 2013, funding for the NAS study, which is to be undertaken by a panel of economic specialists, is the latest initiative funded as a result of legislation enacted during the George W. Bush administration in 2008 but not funded until 2009, Reuters noted in a report on this matter.

A US Carbon Tax: Pro, Con and Bipartisan Support

Emphasizing the positive and beneficial economic (as opposed to environmental and social) effects, enacting a carbon tax would generate greater bipartisan political support, the Bipartisan Policy Center’s Paul Bledsoe, who from 1998 to 2000 served as communications director of the White House Climate Change Task Force under President Clinton, told Reuters. Instituting a carbon tax on polluters would be “better for the economy than our current taxes on work,” he was quoted as saying.

Opinions as to the likelihood of a carbon tax being instituted vary widely, though the majority view seems to consider it unlikely. Opposition from the Republican Party has been strident and staunch, and Republicans maintain control of the House of Representatives.

That said, “a number of moderate Republicans, including a few economists that advised Republican presidential candidate Mitt Romney, have declared their support for a carbon tax, leading some to believe there is a chance for bipartisan support in Congress,” according to Reuters, which noted that “Harvard professor Gregory Mankiw, economic adviser to Romney, wrote in a 2007 column that ‘if we want to reduce global emissions of carbon, we need a global carbon tax.’”

Former Republican Congressman Sherwood Boehlert and Wayne Gilchrest in February joined House Democrats Henry Waxman and Ed Markey in support of a carbon tax.

One variation on the carbon tax theme calls for a portion of the revenue collected to be redistributed by passing it on to taxpayers. Longstanding Republican luminary and former Secretary of State in the Reagan administration George Shultz has been one of the few party thought leaders that for years has been advocating for a redistributive carbon tax.

Under the leadership of Prime Minister Julia Gillard, Australia managed to institute a carbon tax on its 500 largest emitters late last year following years of fierce opposition that hasn’t slackened much since being enacted. The bill also aims to cut taxes and increase government pension payments, as well as spur clean and renewable energy investment and provide relief to some affected industries, including steel.

As for a carbon tax’s prospects here in the US, “I’m quite a skeptic regarding carbon taxes, and I doubt that President Obama could gain enough support in the House to enact one even as part of a broader tax-reform package,” Reuters quoted American Enterprise Institute resident scholar Kenneth Green. “But I could be wrong.”

Nonetheless, AEI has been criticized by the Republican Party for holding closed-door discussions about enactment of a carbon tax. Along with the Brookings Institution, Resources for the Future and the International Monetary Fund (IMF), AEI is going to come out in the open on the topic next month, hosting a carbon tax forum at its Washington, D.C. headquarters next month.

Photo Credit: Martin Johnson

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About the Author

I've been reporting and writing on a wide range of topics at the nexus of economics, technology, ecology/environment and society for some five years now. Whether in Asia-Pacific, Europe, the Americas, Africa or the Middle East, issues related to these broad topical areas pose tremendous opportunities, as well as challenges, and define the quality of our lives, as well as our relationship to the natural environment.



  • Common Sense 2012

    Why is a consumption tax not in the cards? The US government is inept: a consumption tax is a progressive tax, because those with more money pay more taxes. Worried about the “little guy”? Don’t tax groceries, provide relief in the form of tax credits/refunds to those making less than a particular level of income, and get this stupid “fiscal cliff” worry out of the way. I know the country is much smaller in population/economic clout, but Canada implemented a VAT in the early 90s to stave off a complete fiscal collapse, and we all complain about it. But it has helped us complete a dramatic turnaround. And, yes, the burden of social welfare should be thrown to the States as it was to the provinces in Canada. If you want to tax fairly, you tax on consumption. Other than complete blatant use of a black market system (tax avoidance), it taxes you on your spending, which is not biased.

    • Bob_Wallace

      A significant portion of the US government is allied with the rich. They have control of one house of Congress and can prevent progressive taxes.

      The greater American public is starting to realize how much the system is structured to favor the rich and starting to push back. If this awakening continues then we might see something like a consumption tax, but not in the next two years.

      You can’t give states total control over social programs. Some will simply refuse to provide any and the people who really need help will migrate to states which provide help. That puts too much strain on the “good” states.

  • Pingback: Top Causes Of Global Warming Hit Record Highs | PlanetSave

  • fsc

    TAX THIS, NOT THAT!

    .

    . Whether we like it or not, nothing is as certain as death and taxes. We as a society need taxes in order to have a functioning government. There is a lot to be said about the way government spends our money, but that is another blog. For now let’s agree that unless we want to live in a country with no functioning government, we need taxes. If you do not agree, you can move to Somalia. No government, no taxes, no schools, no police, no basic services of any kind.

    .

    . In economics 101 you learn that a tax on any activity increases the price and reduces the demand of that activity. The government has three main taxes. Let’s look at them one by one:

    .

    . Income equals a tax on work and productivity, and reducing productivity is a bad idea. The only good thing about this particular tax is that it can be applied progressively, where the rich pay not only a higher tax, but a higher percentage of their income as tax. There is some justice in that. Sales tax is a tax on consumption, which makes more sense but is hard to apply progressively. And a tax on property is a tax on real estate wealth, and eventually on housing.

    .

    . Now we have a possibility for a fourth tax: a tax on pollution. To me this makes a lot of sense since high income individuals tend to pollute more, much more, than the budget constrained. Bigger homes, bigger cars, or even SUVs, more air travel etc. It all leads to a more energy intensive lifestyle.

    .

    . This tax would be great as long as the carbon tax is accompanied by a reduction on income tax. I do not want to give the government more money to waste; but I want them to tax this, not that. It is also imperative that the income tax reduction is by an equal amount per tax payer, as opposed to an equal percentage. Otherwise it will be just another tax break for the rich.

    .

    . Our current scheme of federal tax credits for photovoltaic IS a tax break for the rich. Taxes get collected from an individual who, by need or by choice, simply opens the windows at night. This tax revenue goes to pay for his boss’s PV arrays so he can run his air conditioner twenty-four-seven. It is unfair.

    . Those that are environmentally responsible would not pay much carbon tax, and would see their income tax reduced by a bigger amount. This way, if you are an “under-polluter” you can even come out ahead financially.

    • http://cleantechnica.com/ Zachary Shahan

      great summary.

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