MyDD :: A Carbon Tax to Combat Climate Change

A Carbon Tax to Combat Climate Change

by Congressman Pete Stark, Mon Apr 30, 2007 at 10:50:22 AM EST

Longtime legislator, first time blogger...

I wanted to let you know that I last week introduced a carbon tax.

The question before us is not if human activity is responsible for global climate change. There is overwhelming scientific consensus - confirmed by the latest Intergovernmental Panel on Climate Change report - that we are responsible for the earth's warming. Unless we take immediate action, sea levels will rise, coastlines will flood, and storms will intensify.

The question we face is how we will respond. Will we completely ignore the problem, as George Bush has done throughout his presidency? Will we pay lip service to the climate change threat, but do nothing about it? Or will we adopt what Matt Stoller recently termed the "cap and trade scam?"

None of the above, I hope. Instead, we should enact a carbon tax, a simple solution to a difficult problem. Taxing carbon would immediately provide a monetary disincentive for the use of fossil fuels and an incentive for the use of renewable energy.

More after the jump.

A carbon tax is predictable and easy to understand. It costs little or nothing to implement and unlike cap and trade, it is difficult to game.

My legislation, the Save Our Climate Act (H.R. 2069), would tax coal, petroleum and natural gas at a rate of $10 per ton of carbon content. Applied when these fossil fuels are initially removed from the ground, the tax would increase by $10 each year, freezing when a mandated report by the Internal Revenue Service and the Department of Energy determines that carbon dioxide emissions have decreased by 80 percent from 1990 levels.

Why 80 percent? That's the reduction scientists estimate is necessary to prevent the catastrophic consequences anticipated from rapid climate change.

Imagine that, an energy policy based on science, not the oil industry's top-secret recommendations to Dick Cheney!

I look forward to reading and responding to your comments. I hope you agree that it is past time for the United States to take meaningful action to combat climate change.

Tags: carbon tax, climate change, global warming (all tags)

Permalink :: 36 Comments :: Post a Comment

Re: A Carbon Tax to Combat Climate Change (none / 0)

How does this differ from Al Gore's ideas on a carbon tax? He thinks we can get rid of the income tax and further tax carbon to make it a wash. Do you think that is possible?

by DocD on Mon Apr 30, 2007 at 12:03:42 PM EST

Re: A Carbon Tax to Combat Climate Change (none / 0)

No. Not income tax, but payroll taxes. Very different. See this summary.

by The Cunctator on Mon Apr 30, 2007 at 12:16:24 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

Is there a bill that has either been recently passed, proposed, or in the process of being made that would compliment this bill by increasing research into biofuels, alternative energy, etc.? Or do we need to wait for 2008 to get that through?

Thanks for blogging here, it's always fun to see elected officials reaching out to constituents and/or the general public in different ways!

by JeremiahTheMessiah on Mon Apr 30, 2007 at 12:11:19 PM EST

Re: A Carbon Tax to Combat Climate Change (none / 0)

Thank you for your comment and the kind words.

There are plenty of bills in Congress to increase support for renewable energy and alternative fuels. Though finding number seven in the Save Our Climate Act notes revenues from the tax could be used to fund research and development of clean energy, I didn't include any specific recommendations in the bill because that would start a food fight.

by Congressman Pete Stark on Mon Apr 30, 2007 at 05:29:10 PM EST
[ Parent ]

What about imports? (none / 0)

This is long overdue, and thanks! But...

Since the tax is "applied when they are removed from the ground," What about imported oil/gas/etc (which the U.S. doesn't have the authority to tax the moment it's "removed from the ground"? Is that taxed too, or is this going to tilt the playing field in favor of imports?

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by Go Vegetarian on Mon Apr 30, 2007 at 12:11:33 PM EST

Re: What about imports? (none / 0)

If you read the bill, it applies to imports.

by The Cunctator on Mon Apr 30, 2007 at 12:13:47 PM EST
[ Parent ]

Re: What about imports? (none / 0)

Cool. Thanks.

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by Go Vegetarian on Mon Apr 30, 2007 at 12:15:13 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

The central arguments against a carbon tax are

unprogressive
not international--thus it hurts US competitiveness and does nothing to encourage reduction of emissions outside the US
no direct guarantees of emission reduction -- taxes moderate price volatility but not emissions volatility
taxes take money out of the economy

The bill doesn't address any of these issues. In particular, it says nothing about how the massive inflow of tax dollars would be spent, which is the primary way by which industries game the tax system--they pass the cost of the tax onto consumers on one hand, but collect subsidies from the government on the other.

Furthermore, the bill also introduces a carbon sequestration subsidy/tax credit, which would seem to require the same kind of regulatory oversight that is supposedly so easy to game.

Just playing devil's advocate here.

I, like Al Gore, personally think neither a carbon tax nor a cap-and-trade system are intrinsically "scams" and that both are likely necessary components of a successful approach to reductions of our carbon footprint.

by The Cunctator on Mon Apr 30, 2007 at 12:13:29 PM EST

p.s. (none / 0)

Strongly recommended, by the way.

by The Cunctator on Mon Apr 30, 2007 at 12:21:34 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

To tackle these one at a time.

- The tax is mildly regressive, but there are other taxes which are even more regressive such as the social security payroll tax. So when you put this tax in, you should use the revenue to phase out a more regressive tax, or give a progressive tax cut.

- Reducing out carbon footprint will help out competitiveness. Agreed that we need an international agreement, but the question is whether we then do out bit by taxes or cap-and-trade. Adn a tax will get innovators working so that when we're in an agreement out obligations will be easier to fulfill. I'm also not convinced that this sort of tax hurts our position more than a tax on, say, income or property.

- Agreed, no guarantees. But businesses will know that the less they pollute the less money out of their pocket, so the incentive structure remains in place at all times--they can't dodge their obligations with horseshit "offsets."

- As noted before, we're not in a vacuum: the government needs to be paid for. Total taxes + deficit = total spending. If the deficit is a fixed quantity, then if one tax goes up another comes down (or doesn't go up.) Thus, it's not carbon tax vs. nothing. It's carbon tax vs. income tax or payroll tax or national park visiting fee etc.

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by Go Vegetarian on Mon Apr 30, 2007 at 12:21:57 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

Thanks -- hoping for a response from the Congressman's office. In particular, as I said, the bill does not direct how funds collected should be used.

Also, reviewing the bill, this worries me:

(1) MANUFACTURE OR PRODUCTION OF ANOTHER TAXABLE FUEL- Under regulations prescribed by the Secretary, if--
(A) a tax under subsection (a) was paid with respect to any taxable fuel, and
(B) such fuel was used by any person in the manufacture or production of any other substance which is a taxable fuel,
then a credit or refund (without interest) shall be allowed, in the same manner as if it were an overpayment of tax imposed by subsection (a), to such person in an amount equal to the tax so paid.

Perhaps I'm misinterpreting, but this seems to be a loophole as written. I understand that you don't want to double-tax carbon, but fuel that's burned in an oil refinery, say, shouldn't be credited.

by The Cunctator on Mon Apr 30, 2007 at 01:49:13 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

From my reading of this section, I don't think that's a problem. Remember, the tax is paid as the stuff comes out of the ground. So you pay tax on all of the crude oil produced. Then you burn some of it at a refinery to make more gasoline, and the gasoline isn't taxed because the oil it was made from (plus the oil burned to make it) already was.

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by Go Vegetarian on Mon Apr 30, 2007 at 02:19:40 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

That is correct.

I'm enjoying the back-and-forth - and am glad to see readers responding to each other!

by Congressman Pete Stark on Mon Apr 30, 2007 at 05:41:50 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

Thanks for your thoughtful response. I'll try to respond point by point.

* As the folks at the Carbon Tax Center suggest, a carbon tax could easily be made progressive. We could use revenues generated from the tax to reduce regressive payroll or sales taxes. Finding number seven in the Save Our Climate Act notes revenues could be used to decrease taxes on low and middle-income taxpayers.

* Fair enough. But more than 160 other countries have already signed the Kyoto Protocol. If the United States were to enact a carbon tax, it would encourage other nations - particularly Canada and European countries - to reduce their emissions.

* Leading economists argue prices and emissions are directly correlated. If the price of fossil fuels increases, usage will decrease.

* We could easily put the money back into the economy through progressive tax cuts, funds for renewable energy research or investment in other domestic priorities (health care, education, etc.)

by Congressman Pete Stark on Mon Apr 30, 2007 at 05:39:19 PM EST
[ Parent ]

Thanks (none / 0)

I certainly understand that the implementation of carbon tax could be made progressive by offsetting other taxes and/or properly directing revenues.

However, this bill does not do that.

And we know quite well that undirected revenue streams get misused. In fact, even directed revenue streams get misused. I strongly believe carbon tax legislation needs to be explicitly part of a comprehensive policy.

Of course, right now from a pragmatic standpoint introducing a bill in the simple form like you did will achieve the goal of getting people to have the substantive discussion necessary to build the political will for implementation. In other words I recognize that this bill is only a first step.

I really, really hope, however, that you're simultaneously working to implement positive cap-and-trade legislation as well.

by The Cunctator on Mon Apr 30, 2007 at 06:55:59 PM EST
[ Parent ]

Congressman Stark (none / 0)

THANK YOU sir, for co-sponsoring the "Clean Water protection Act", which would help end mountaintop removal coal-mining.

Mountaintop removal is the first stage of this carbon cycle, and it is ruining my homeland of Appalachia.

Congressman, your ability to see that coal is dirty from the moment it is pulled out of the ground is inspiring, and I very much appreciate and support your efforts to move us on to renewable energy, and to end the use of mountaintop removal mining in the United States.

Peace,
JW Randlph

by faithfull on Mon Apr 30, 2007 at 12:28:11 PM EST

Clean Air and Water (none / 0)

I think Global Warming is very important issue to tackle. However, to gain converts, you need to ease people into the environmental movement by stressing issues that seem more immediate to them, such as Clean Air and Water. Judging by the comment above, I am glad that it is not being forgotten. I think Clean Air and Water is something we can get the Republicans on this election cycle and then use that to expand to global warming issues.

by Pravin on Tue May 01, 2007 at 09:42:46 AM EST
[ Parent ]

Re: Clean Air and Water (3.00 / 1)

Thank you both for commenting on the importance of clean water.

JW is correct. I agreed to cosponsor the Clean Water Protection Act when it is reintroduced in the 110th Congress. The legislation would protect our water supply by prohibiting mining companies from dumping into nearby valleys the debris they remove from mountaintops during the coal extraction process.

Amazingly, the Bush Administration would like to go in the opposite direction and make it easier for dumping to occur. This despite the Administration's own Department of Interior estimate that over 1,200 miles of our streams have already been buried by debris.

I also agree with Pravin and will work both to combat climate change and to address people's immediate environmental concerns. In Florida and Louisiana, however, these would surely include the more intense hurricanes that are a result of global warming.

In March, the new Congress passed three bills to protect our water supply. You can read about these bills in an email I sent to my constituents.

by Congressman Pete Stark on Tue May 01, 2007 at 03:45:05 PM EST
[ Parent ]

Congressman Stark, (none / 0)

You'll be glad to know that we just added another Appalachian Representative - Congressman Heath Shuler - to the "Clean Water Protection Act" today, and will be introducing it this week with a record number of original co-sponsors.

One of your neighbors has been co-sponsor in the last 3 sessions (107th, 108th, and 109th), but I haven't had a chance to talk with her office yet and Im afraid she'll miss the chance to be original co-sponsor of the Clean Water Protection Act again this session.

She is Mrs. Anna Eshoo in the 14th. If you had a moment to remind her that this bill is being introduced this week, that would be extremely helpful! Im sure you have a better time of getting ahold of her than I do. :)

Thank you Congressman!

peace,
JW Randolph

by faithfull on Tue May 01, 2007 at 06:13:24 PM EST
[ Parent ]

Re: Clean Air and Water (none / 0)

Congressman Pete, thanks for taking active part in the diary instead of just posting a press release.

by Pravin on Wed May 02, 2007 at 09:51:29 AM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

A lot has been said about replacing payroll taxes or others with carbon taxes. I'm very strongly behind a carbon tax, but I'm strongly opposed to using it to replace payroll taxes. Eventually our use of fossil fuels will have siginificantly dropped. Wouldn't this be an unsustainable source of revenue?

"And so in the place of the palace of privilege, we seek to build a temple out of faith and hope and charity."-FDR

by jallen on Mon Apr 30, 2007 at 08:40:43 PM EST

Re: A Carbon Tax to Combat Climate Change (none / 0)

Not to worry.

If emmissions drop by half just double the tax rate and you keep the revenue constant. (That's a simple example. The point is that as emissions drop you can raise the rate in proportion to the drop.)

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by Go Vegetarian on Mon Apr 30, 2007 at 09:18:21 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

That would just create more disincentive to use fossil fuels, which would speed up our transition away from them. It would still be an unsustainable revenue source.

"And so in the place of the palace of privilege, we seek to build a temple out of faith and hope and charity."-FDR

by jallen on Mon Apr 30, 2007 at 11:00:54 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

Haven't done an extensive study, but I'd guess that average CO2 use would be far more predictable than, say, capital gains income for the year or even total sales income for the year. So it's perhaps less stable than a property tax, but that's probably about it.

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by Go Vegetarian on Tue May 01, 2007 at 11:26:40 AM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

Given the climate changes already set in motion by our actions, and the end of cheap energy, there's no telling how much our economy and society will be disrupted in the next 4 decades, the period during which (ideally) our carbon emissions will have dropped precipitously. Not only will there be plenty of time to restructure our revenue, the end of suburban growth and a re-orientation to locally structured economies will mean a major overhaul will have to happen anyway to how our government functions and in financed.

In short, an "unsustainable revenue source" does not seem an applicable critique of such a solution -- and I'd much rather worry about that problem 40 years from now rather than, say, permanent drought in the Southwest or further destruction of coastal cities like New Orleans.

Tim Wolfe

John McCain is not pro-choice!

by bruorton on Tue May 01, 2007 at 12:13:47 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

If you read my previous comment, I'm very much in support of a carbon tax. I just don't think it should replace payroll taxes. I don't trust Congress to be able to reinstate payroll taxes when the time comes. A fluid situation, in which payroll taxes increased as revenue from the carbon tax decreased, would be preferable, but I think I'd rather we use the revenue from carbon taxes to support efforts to decrease carbon emissions.

"And so in the place of the palace of privilege, we seek to build a temple out of faith and hope and charity."-FDR

by jallen on Tue May 01, 2007 at 08:26:52 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

You're right, I lost track of that in reading the thread... and I would say I'm in agreement on the use of that money. Thanks for being polite!

Tim Wolfe

John McCain is not pro-choice!

by bruorton on Wed May 02, 2007 at 10:39:04 AM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

Thank you, Congressman, for introducing this bill and for going the extra step and taking it to the blogs.

According to this article by the Electric Power Research Institute, carbon sequestration technologies will become economical at the following costs per ton of CO2:

Natural Gas Combined Cycle: $12
Coal IGCC: $10-22
Coal Pulverized: $30-45

Wind becomes more economical than all fossil fuels at $50/ton.

Nuclear becomes more economical than all fossil fuels at $7/ton.

As I read you bill, it starts the tax at $10/ton and increases by $10 every year, indefinitely. So it looks like fossil fuels would be priced out of the market very swiftly.

Unfortunately, we don't have the capacity to replace all fossil fuels within five years. If we had started on this project when President Carter was talking about it, we would be able to do it today. But instead of preparing for the future, we threw a big fossil fuel party. We bought millions of SUVs, sprawled out in energy-hog McMansions, outsourced our industrial base, and failed to institute energy efficiency standards.

So I would recommend revisiting the schedule of tax rate increases. Maybe in coordination with European policymakers who are on the same page on this issue. You want to make America's economic flame efficient and carbon-free, but you don't want to snuff it. And if you can harmonize with EU proposals, your bill will be all the more powerful for it.

At any rate, this is a great first step and I hope the fossil and manufacturing industries view it as a shot across the bow.

by T Maysle on Mon Apr 30, 2007 at 08:57:29 PM EST

Re: A Carbon Tax to Combat Climate Change (none / 0)

Here's a link to the EPRI article

Generation Technologies For a Carbon-Constrained World

EPRI Journal, Summer 2006

by T Maysle on Mon Apr 30, 2007 at 08:59:32 PM EST
[ Parent ]

Re: A Carbon Tax to Combat Climate Change (none / 0)

Hi all,
Usually I'm a lurker here, but this is a pretty exciting topic for me, and one I know a bit about. I've been reading the climate economics literature for a while now in preparation for graduate studies. I'm no world expert (yet!), so treat this with a little skepticism (as you should treat everything!), but if I'm doing the work correctly, this proposed tax is much lower than it should be but still a great step in the right direction.

$10 per ton carbon translates to about $2.73 per ton CO2 or about 2.4 cents per gallon of gasoline. Meanwhile, the Stern Review recommends $311 per ton CO2 ($2.74 per gallon) and Bill Nordhaus recommends $17 per ton CO2 ($0.15 per gallon). These are currently the state of the art estimates. They diverge so much because of significant disagreement in some fundamental parameters. I think that odds are pretty good that Nordhaus's figure is too low, and this HR 2069 is significantly lower. Still, it's the best we've got right now, and unless there's anything even stronger proposed, I'd eagerly vote for it.