Sanders-Boxer Set “Gold Standard” But Write Off Fiscal Potential of Carbon Tax

One day after 48 climate protesters were arrested at the White House and three days before what is billed as “the largest climate rally in history,” Senators Bernie Sanders (I-VT) and Barbara Boxer (D-CA) set a new “gold standard” for transparent, effective climate legislation. Their Climate Protection Act (“CPA”) would impose an upstream carbon pollution fee starting at $20 per ton of CO2, rising in ten years to $33/T, and would tax methane emissions at their CO2 climate equivalency. Gone are “hide the price” gimmicks of cap-and-trade. No trading, offsets, banking, borrowing or allowance give-aways to polluters. Sanders-Boxer would return 60% of revenue directly to households monthly, allot 25% to deficit reduction and dedicate the remaining 15% to green energy, weatherization and infrastructure “hardening” under a companion bill, the Sustainable Energy Act. The CPA bill includes border tax adjustments to protect U.S. energy-intensive industry and nudge our trading partners to enact their own carbon pricing measures.

Senators Boxer and Sanders Introduce Carbon Fee Legislation

Opening a packed Capitol Hill press briefing yesterday morning, Sanders inveighed against partisan squabbling which he insisted must yield before the ineluctable laws of physics. Earlier scientific projections were wrong, Sanders said, “the crisis facing our planet is much more serious than they previously believed.” Sanders and Boxer conveyed alarming warnings of “global climate disruption” from a Senate Environment and Public Works Committee briefing on Wednesday. The panel of four scientists had concluded that without aggressive action, the earth will warm by 8 degrees Fahrenheit within a century, with consequences including 3 – 6 feet of sea level rise, more frequent and forceful damaging storms, drought, extreme crop loss and submerging of coastal cities.

At Thursday’s press briefing, climate activist-author and 350.org founder Bill McKibben thanked Sanders and Boxer for grasping the “depth of the climate problem” and moving to end the fossil fuel industry’s free dumping of pollution into the atmosphere. Sierra Club director Michael Brune, Public Citizen’s Tyson Slocum, Tara McGuiness of the Center for American Progress and Meg Power of the National Community Action Foundation all praised the effectiveness and fairness of the bills.

Reporters immediately questioned how the two bills could move forward. Boxer said she has just begun seeking co-sponsors and hasn’t conferred with Majority Leader Harry Reid about scheduling. But she expects to conduct hearings and markup in Environment & Public Works and to bring the measures to the Senate floor by summer. Replying to a question about EPA greenhouse gas regulations, she said, “We’ve beaten back” Republican repeal efforts. “The Clean Air Act is the law of the land” which the President “must carry out.” Boxer suggested that public opinion on climate is “far ahead” of Congress, “no one is asking for dirtier air or water.” But she offered no plans to reach across the aisle to enact their bills, either in the Democratic-controlled Senate or the Republican House. She called on environmental and public interest organizations to build support for climate legislation. Sanders suggested that the public hold accountable “Republicans who refuse to even recognize the reality of climate change.”

The Climate Protection Act certainly sets a high standard. By our lights, it’s the most potent climate legislation ever introduced in the Senate. The Carbon Tax Center gauges efficacy primarily by the price polluters would pay. Along with most economists, we are convinced that a briskly-rising price on CO2 pollution is hands down the most broadly-effective and potent force to reduce emissions and open the way for renewables, efficiency and innovation. While the CPA’s price trajectory isn’t nearly as aggressive as our own “gold standard,” Rep. John Larson’s 2009 bill (which we’ve been told he will reintroduce soon), we view CPA as a good start. We estimate Sanders-Boxer would reduce emissions by about 12% below 2005 levels in a decade. (In contrast, Rep. Larson’s more robust carbon price ramp-up would reduce emissions by 30% in the same time period.)

CPA’s proposed direct distribution of 60% of revenue would protect most low- and moderate-income households from the effects of energy price increases, without diluting incentives for everyone to reduce fossil fuel use. Its 25% share of revenue designated for deficit reduction (essentially compelled by Congressional Budget Office accounting rules) could appeal to deficit hawks. We’re less confident that energy subsidies would be well spent. But as Senator Sanders noted, home weatherization that cuts utility bills is like a permanent tax cut. Instead of subsidies, we recommend more revenue return to households to ensure growing public support for continued brisk increases in the price of carbon pollution needed to achieve scientifically-mandated emissions reduction in the range of (or exceeding) 80% by 2050. In British Columbia, dedicating carbon tax revenues to cutting a range of other taxes on work, business and consumption has marshaled public support for four annual carbon tax increases.

As we heard the press conference, Boxer and Sanders seem to have written off every member of the Republican caucus as a potential collaborator on climate policy. If that’s the case, they may be writing off this Congress and the opportunity that a looming sequester and debt ceiling crisis may present to shift taxes on productive activity to taxes on CO2 pollution.

It’s true that the House Republican leadership has pledged to reject any climate measure that generates revenue. But that may still leave room for revenue-neutral tax swaps. Kevin Hassett (American Enterprise Institute), Adele Morris (Brookings) and Donald Marron (Tax Policy Center) have suggested funding cuts in corporate income tax rates with a carbon tax. That kind of proposal should interest legislators like Ways & Means chairman Dave Camp who has repeatedly stated his desire to cut corporate income tax rates.

A proposal like Sanders-Boxer combined with one like those of Hassett, Morris and Marron could yield a broad and popular carbon tax swap like British Columbia’s. We simply can’t afford to give up on this Congress and wait any longer to start putting the brakes on global climate disruption.

Photo: Flickr– Public Citizen

Comments

  1. says

    Cap,Tax,and No trade…

    Cap all fossil production @ 80% over 30 years = 2.667% cap compounded per year. Tax rationed cap @ 15% upstream per fossil producer per year.

    Criminalize any carbon exchange mechanism by enforcing trading bans on all speculative exchange driven schemes. Most of the fossil produced today comes from the global commons and as such belongs to the earth. The earth does not recognize trading mechanisms in its climate process, nor at its peril should humanity.

    Tax revenue generated would flow into a renewable energy investment bank driven only by scientific process. Identifying distributed and on-site projects for rapid development and implementation. Funds could not be used for any other governmental needs.

    Most of the remaining fossil source is in the global commons and as such belongs to the earth. The earth does not recognize exchange driven mechanism in any of its climate nurturing process.

    Negawatts & Negaliters:
    All humanity must participate in decreasing the unsupportable levels of industrial, commercial, and consumer carbon pollution modernity has wrought upon the earths air,land,and water; an admittedly difficult lesson for a species seemly dedicated to DESERTIFICATION!

  2. emily says

    Thanks Carbon Tax Center for your work! I’m sure that your work getting the word out about carbon taxes influenced this bill, whether or not they ever called you to talk about it.

    • says

      Emily,

      Thanks for your encouraging words. We’ve been talking with Sen. Sanders’ office (and anyone else who will listen), so have many others. A few years ago I approached Sen. Sanders at a League of Conservation Voters dinner and asked about a tax on carbon pollution. His comment then was: “Good luck.”

      But things have changed. Sanders-Boxer is 25 (understandable) pages long, compared to Waxman-Markey’s 1400+. I’m gratified by this remarkable evolution toward transparency, simplicity and embrace of the “polluter pays” principle.

  3. Rick Knight says

    The Carbon Tax Center has it just about right. The Boxer/Sanders bill is pretty close to the right approach. But discarding any attempts to bring Republicans on board as Handley suggests is hardly a formula for success. The suggestion to make the entire policy revenue-neutral is very important, because all Republicans have taken a “no climate tax” pledge To G. Norquist, which states specifically that they will not support a fee on carbon “that increases government revenue”. Why would that qualifier have been included other than to leave an opening for a revenue-neutral compromise. I also like the idea of sweetening the deal with a reduction in corporate tax rates, not only because it could move some Republicans, but also because it would at least partly neutralize the need for coal, oil, and gas companies to pass on the tax costs to consumers. This would be smart dealmaking.

  4. Robert says

    Thanks for the useful summary.

    Can we encourage Boxer et al not to use this bill as a showpiece for the backwardness of the Republicans in the next election and instead to promote it effectively with the aim of passage?

    Perhaps Roots Action on one side and an old school conservative outfit on the other could send an action alert urging such to their networks to preempt the political misuse of this bill?

  5. Lindsay Sturman says

    Hooray!

    I agree — make it revenue neutral. It’s more important to get it passed.

    Here’s an offer the Republicans can’t refuse: carbon taxes and eliminate the Estate Tax (the “death tax”). Anything left over can lower corporate taxes, income taxes or (my favorite) payroll taxes.

    Just pass the bill!

  6. says

    Robert & Lindsay,

    In today’s NYT, Tom Friedman wrote:

    Obama… owes it to himself and to the country to make one more good shot at a Grand Bargain on spending, investment and tax reform before he opts for a strategy of trying to pummel the Republican Party, hoping that he can win the House for the Democrats in 2014 and then push through his second-term agenda unencumbered.

    It sounded to me like Sanders and Boxer were ready to start pummeling without trying to build their carbon tax into that Grand Bargain.

  7. David F Collins says

    The 2013/03/13 Washington Post opinion piece by Brad Plumer asks for advice on the structure of a possible Carbon Tax. I feel the discussion starts off by barking up the wrong tree. Like, what is an appropriate initial tax rate? This is like asking how many bowls of pottage constitute a fair price for the birthright of future generations? (Cf Genesis 25:19-34). Is it one? Two? Maybe a dozen?

    The whole purpose of the proposed tax is to first reduce, then virtually eliminate, CO₂ and other greenhouse gases with this pole star.

    Doing it most effectively involves consideration of investment lifetimes, the adaptabilities of cultural hardware & software, and the urgencies that become more apparent with time, as a result of experience and advancing understanding of the changing physical realities, present and future. This is what the Carbon Tax Center is all about. I am not adept in the Dismal Science; I will be glad to recommend what the CTC recommends.

    Could we have a cogent essay to this effect?

  8. says

    Thanks David,

    Yes, we’re working on a post to respond to the question about appropriate carbon tax rates.

    We often point to Rep. Larson’s carbon tax proposal which would start at $15/T CO2 and rise stepwise to $140/T in a decade. Our model suggests that on a global scale (using border tax adjustments to induce our trading partners to enact their own carbon taxes) that trajectory puts us on a path to 80% reduction of CO2 emissions by mid-century, which IPCC estimates would offer a 50/50 chance of avoiding the worst effects of global climate disruption.

Trackbacks

  1. [...] Carbon Tax Center: One day after 48 climate protesters were arrested at the White House and three days before what is billed as “the largest climate rally in history,” Senators Bernie Sanders (I-VT) and Barbara Boxer (D-CA) set a new “gold standard” for transparent, effective climate legislation. Their Climate Protection Act (“CPA”) would impose an upstream carbon pollution fee starting at $20 per ton of CO2, rising in ten years to $33/T, and would tax methane emissions at their CO2 climate equivalency. Gone are “hide the price” gimmicks of cap-and-trade. No trading, offsets, banking, borrowing or allowance give-aways to polluters. Sanders-Boxer would return 60% of revenue directly to households monthly, allot 25% to deficit reduction and dedicate the remaining 15% to green energy, weatherization and infrastructure “hardening” under a companion bill, the Sustainable Energy Act. The CPA bill includes border tax adjustments to protect U.S. energy-intensive industry and nudge our trading partners to enact their own carbon pricing measures. [...]

Leave a Reply

Your email address will not be published. Required fields are marked *

Last modified: February 15, 2013