House, Senate Democrats Introduce Carbon Pricing Discussion Draft

Members of Congress on March 12 introduced draft carbon-pricing legislation that would require those responsible for large amounts of carbon dioxide and greenhouse gas emissions to pay for the pollution they produce.

Introduced by House Representatives Henry Waxman (D-CA), Earl Blumenauer (D-OR), Senators Sheldon Whitehouse (D-RI), and Brian Schatz (D-HI), the “discussion draft” would require the nation’s largest polluters to pay a fee for each ton of carbon emissions they release. Assessment of carbon fees would be based on EPA’s database of reported emissions, with the Treasury Department responsible for collection and handling.

“Putting a price on carbon could help solve two of the nation’s biggest challenges at once: preventing climate change and reducing the budget deficit,” Congressman Waxman was quoted in a press release.

“There have been carbon tax proposals made by others. What’s unique about this one is its novel design. We are seeking to craft a system in which each agency does what they are good at and that minimizes compliance burdens and administrative costs. Utilities, oil companies, and other major sources are already reporting their emissions to EPA. We build off of this existing program.”

Image Credit: Guy Gorek

Taxing Carbon Emissions: Which Model is Best?

Viewed as regressive, imposing what amounts to a tax on carbon emissions would likely impact lower income Americans directly or indirectly more than the wealthy. The devil’s in the details, however.

Various proponents have proposed alternative carbon tax plans that would lighten the burden on citizens by redistributing carbon tax revenues. Variations on the theme include redistributing carbon tax proceeds broadly across lower-income US households; using them to fund renewable energy, energy efficiency, and infrastructure projects; and allocating them to federal government deficit reduction.

In contrast to carbon “cap and giveaway” and “cap and auction” models, the so-called carbon “cap and dividend” or “Skytrust” carbon trading model entails carbon emission permits being sold and the resulting revenue redistributed to citizens in the form of equal dividends rather than collected and allocated by the government.

Keeping the part about redistributing carbon tax revenue equally across the population, the carbon fee-and-dividend model would do away with the carbon emissions permits and market aspects, replacing them with a straightforward tax on emissions.

Addressing Troubling Trends

Some supporters believe that imposing a tax on carbon emissions can not only help lower the federal deficit, improve environmental health and safety, and stimulate clean energy jobs and green economic growth, but redress troubling socioeconomic and political trends that have been developing over the past three decades. Prominent among these are growing inequality in income and wealth, political representation, and economic and educational opportunity.

In a press statement, Green for All CEO Phaedra Ellis-Lamkins applauded the House members and Senators for working with a variety of stakeholders and introducing the discussion draft.

“For too long, big polluters have gotten away with passing their costs along to the rest of us in the form of poisoned air and water, health problems, and economic stagnation. Low-income communities and people of color have shouldered an especially heavy burden from pollution-related illness and increased vulnerability to climate disasters. It’s time to change the game.

“Putting a price on carbon pollution is a single elegant solution that could solve a number of our most pressing problems. By making polluters pay, we can prevent devastating cuts to the programs that keep America running, like schools and emergency services.

“A carbon fee would slash pollution and spur investment in clean energy technology, which creates three times as many jobs per dollar spent as fossil fuels.

“We need to make sure that the revenue generated supports the kind of green innovation that will create good, healthy jobs for more Americans. We need to make sure the folks on the front lines of climate change—like people of color, low-income communities, and coal and oil workers—are among the winners as we transition to a clean energy economy.”

Seeking Public Feedback

The proposed legislation’s sponsors are on the same page. “For far too long, carbon polluters have pushed the true cost of their pollution onto the American people in the form of dirty air, acidified water, and a changing climate,” Sen. Whitehouse stated.

“This framework is the beginning of a collaborative process to craft legislation that will reduce carbon pollution while also upholding an important principle: that all of the revenue generated through this carbon fee will be returned to the American people.”

Now open for a one-month period of public comment, the draft carbon-pricing legislation’s sponsors are looking for comment and feedback specifically on the following:

• What is the appropriate price per ton for polluters to pay? The draft contains alternative prices of $15, $25, and $35 per ton for discussion purposes.
• How much should the price per ton increase on an annual basis? The draft contains a range of increases from 2% to 8% per year for discussion purposes.
• What are the best ways to return the revenue to the American people? The discussion draft proposes putting the revenue toward the following goals, and solicits comments on how to best accomplish each: a) mitigating energy costs for consumers, especially low-income consumers; b) reducing the Federal deficit; c) protecting jobs of workers at trade-vulnerable, energy intensive industries; d) reducing the tax liability for individuals and businesses; and e) investing in other activities to reduce carbon pollution and its effects.
• How should the carbon fee program interact with state programs that address carbon pollution?

“Let’s send a signal to big polluters that it’s past time to start putting a price on carbon pollution,” Rep. Blumenauer was quoted as saying.

“This proposal has a great deal of potential to help protect the environment, reduce the deficit, create jobs, and support the transition to clean energy sources and low carbon transportation options. I look forward to working with my colleagues and seeking feedback on how best to use the revenue and ensure that the program is administered in a fair and equitable manner.”

“I am proud to join Congressman Waxman and Senator Whitehouse in supporting a carbon pollution fee that will help protect our health and economy,” Sen. Schatz added. “By reducing carbon pollution, this proposal would drive real action in combating climate change and improving air quality. Hawaii is a national leader in clean energy and efforts to reduce climate change, and a carbon fee will support that good work.”