NOAA: Global Temperature Change
Bipartisan Plaudits for Rep. Delaney’s “Tax Pollution, Not Profits Act”
From an Article by James Handley, Carbon Tax Center, August 12, 2015
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).
In an online discussion forum hosted by OurEnergyPolicy.org, Rep. Delaney asked for comments on his proposal. [These are summarized in the original article on the Carbon Tax Center web-site.]
Conclusion
Rep. Delaney’s “Tax Pollution, Not Profits Act” garnered strongly positive comments from a fairly broad range of advocates and analysts. Several agreed with Delaney’s suggestion to replace more costly and less effective policies with a carbon tax. The use of carbon tax revenue remains contentious, but economists commended Delaney’s “middle course” proposal which would devote roughly half the revenue to compensate low- and middle-income households while using the remaining revenue to cut distortionary taxes and spur economic growth.
Some commenters suggested that by itself, the Tax Pollution, Not Profits Act would fall short of the price signal needed to induce a broad, clean energy transformation. The Carbon Tax Center’s modeling supports this concern, primarily because of the proposal’s modest 4% annual increase in carbon prices. But if Rep. Delaney’s proposal were modified to include a more aggressive upward price trajectory, it could offer a promising route to a stable global climate.
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See how a carbon tax works and why taxing carbon pollution must be the central policy to combat climate change:
Earth’s climate is changing in costly and painful ways. 2014 was the globe’s hottest year on record, and the dozen warmest have all come after 1997, as this graphic shows all too clearly.
Yet the transition from climate-damaging fossil fuels to energy efficiency, renewable sunlight and wind energy is slow and halting. The Number One obstacle is that the market prices of coal, oil and gas don’t include the true costs of carbon pollution. A briskly rising U.S. carbon tax will transform energy investment, re-shape consumption, and sharply reduce the carbon emissions that are driving global warming.
- A carbon tax is an “upstream” tax on the carbon contents of fossil fuels (coal, oil and natural gas) and biofuels.
- A carbon tax is the most efficient means to instill crucial price signals that spur carbon-reducing investment. Download our spreadsheet (Excel file) to input your own tax levels and see how fast U.S. emissions will fall.
- A carbon tax will raise fossil fuel prices — that’s the point. The impact on households can be softened through “dividends” (revenue distributions) and/or reducing other taxes that discourage hiring and investing (“tax-shifting or swapping”).
- Carbon taxing is an antidote to rigged energy pricing that helps fossil fuels destabilize earth’s climate. Unlike cap-and-trade, carbon taxes don’t create complex and easily-gamed“carbon markets” with allowances, trading and offsets.
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See the chart displayed above: Globe not warming? Look again. CO2 from fossil fuel-burning not the cause? Click here.
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