If any climate legislation could garner at least nominal bipartisan support, it might be Rep. John Delaney’s Tax Pollution, Not Profits Act. Delaney is in his second term representing Maryland’s 6th CD, which runs from the DC suburbs to the western end of the state. His proposal, introduced on Earth Day at the American Enterprise Institute in Washington, would tax carbon dioxide and CO2 equivalents from methane and other sources at a rate of $30 per metric ton, increasing annually at 4% above inflation. The measure includes border tax adjustments to protect energy-intensive domestic industry from unfair competition from nations that haven’t enacted carbon taxes.
Delaney’s measure offers a sweetener to conservatives: a promise to apply roughly half of carbon tax revenues to reduce the top corporate income tax rate from 35% to 28%. The bill would also provide monthly payments to low- and middle-income households and fund job training, early retirement and health care benefits for coal workers. At least as critically, at the AEI unveiling, Delaney committed near-apostasy by suggesting that his carbon tax could substitute for the Obama administration’s Clean Power Plan, final regulations for which EPA issued last month.
The Carbon Tax Center assessed the Delaney proposal’s effectiveness using our 7-sector model. We project that in its third full year the measure’s $30 price would reduce U.S. CO2 emissions to 8% below emissions in the year before enactment. Unfortunately, its schedule of 4% annual real rises is too tepid to continue reducing emissions more than fractionally over the longer term. The low upward price trajectory is a shortcoming shared by the American Opportunity Carbon Fee Act, introduced by Senators Sheldon Whitehouse (D-RI) and Brian Schatz (D-HI) in June.
In contrast, carbon tax proposals introduced in this Congress by Rep. John Larson (D-CT) and Rep. James McDermott (D-WA) would rise briskly to exceed $100 per metric ton within a decade, which we estimate would reduce U.S. emissions below this year’s levels by more than one-fourth in that time (and by nearly a third below 2005 emissions).