With record-setting temperatures across the country this summer reminding people that the weather has been getting pretty hot lately, it was only a matter of time before the notion of imposing carbon taxes would return to the heads of policy makers.
The concept of taxing carbon emissions seemed to last gain ground in 2009 when the House narrowly passed an energy bill with cap-and-trade provisions for setting a price for carbon emissions. However, it took the Senate nearly a year to bring forward its own energy bill, with a combination of tax credits for energy efficiency and clean energy projects, and a system of carbon offsets and credits.
However, the Senate bill failed to attract any Republican support after one of its main architects, Lindsey Graham, R-S.C., withdrew from backing it. The other pair of senators who had been working on it with him, John Kerry, D-Mass., and Joe Lieberman, I-Conn., eventually brought the legislation forward, but the bill never gained traction (see Senate Climate Change Bill Includes Tax Provisions).
Now the idea of a carbon tax again appears to be picking up steam, so to speak. Last week, Rep. Jim McDermott, D-Wa., a member of the tax-writing House Ways and Means Committee, introduced the Managed Carbon Price Act of 2012, an updated version of legislation he had introduced back in 2009. It incorporates suggestions from the energy industry, environmental advocates, policy experts and economists.
Unlike a traditional carbon tax, the legislation aims to create a flexible price system on carbon emissions that would increase over time, in turn producing a market incentive to reduce emissions. The Treasury Secretary would be charged with setting the price per one-quarter ton of CO2 or CO2 equivalent. The goal is to impose an emissions reduction schedule that would reduce carbon dioxide emissions by 80 percent of 2005 levels within 42 years of enactment. The proceeds would go toward a newly created Energy and Economic Security Trust Fund, in which 25 percent of the revenue would go toward deficit reduction and 75 percent would go back to the public to offset any price increases.
A recent report from the Brookings Institution found that if the starting price were set at $15 per ton, it would raise an estimated $80 billion, increasing to $170 billion in 2030 and $310 billion by 2050. McDermott’s office said he was introducing his carbon price bill to ensure it would be part of the discussion when tax reform is addressed in the House. Similar proposals are in draft form in the Senate.
On the Republican side, there has been little support so far for climate change legislation, but that may eventually change if the weather continues to heat up. Drought conditions in many conservative-leaning states in the farm belt, along with wildfires out west, are raising concerns about increases in food prices in the U.S. and other parts of the world this year.
A former Republican congressman, Bob Englis, has launched a campaign to “explore and promote conservative solutions to America’s energy and climate challenges,” according to Reuters. Inglis favors raising taxes on fossil fuels such as coal that contribute to carbon emissions while cutting income taxes. The conservative American Enterprise Institute also recently co-hosted a meeting with the liberal Climate Change Coalition, where speakers talked about the prospects for passing carbon tax legislation.
Those prospects are dim when there remains entrenched opposition to climate change science among many lawmakers in Congress. The influence and money of the oil and coal industries also holds sway over all too many lawmakers.
Even among Democrats in Congress and the Obama administration, calls for action on the environment seem relatively muted this campaign season. Obama has focused on promoting incentives for clean energy jobs and manufacturing, along with the repeal of tax breaks for the major oil companies, but in recent years there has been little talk of comprehensive energy legislation. While Congress is on a five-week recess, the debate seems to be mostly confined to whether or not various tax breaks such as the production tax credit for wind energy should be renewed. The tax credit enjoys widespread support, especially in farm belt states like Iowa where Republicans like Sen. Chuck Grassley have called for its extension. But incentives for both wind and solar energy also face opposition from lawmakers who say the government shouldn’t be favoring particular energy sectors over others.
Like so much else in Washington, the prospects for energy policy and tax reform will ultimately depend on the outcome of the fall elections.
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