Democrat introduces carbon tax bill; GOP slams it right away

With Republicans and Democrats deadlocked in Congress on cap-and-trade for CO2 control, Rep. Jim McDermott, D-Wash., on Aug. 2 introduced “The Managed Carbon Price Act of 2012,” which proposes a carbon tax.

McDermott’s bill, an updated version of legislation he introduced in 2009, incorporates suggestions from the energy industry, environmental advocates, policy experts and economists, the congressman said in an Aug. 2 statement. McDermott is a senior member of the House Ways and Means Committee, which is the U.S. House’s tax-writing panel.

“The American people care about the deficit and they’re worried about climate change – and we can fix both without hurting the economy,” McDermott said. “My bill would reduce carbon emissions, and it returns all the money to consumers and deficit reduction. Businesses want this kind of predictability, consumers need to be protected, and we need to step up and address our climate and fiscal issues. What seems to have fallen by the wayside is concern over the climate and how carbon emissions are playing a factor in the extreme weather conditions we have been seeing. My colleagues are seeing this in their districts. Just yesterday, the USDA said that half of the counties in the United States – 1,584 counties – had been deemed ‘natural disaster areas’ with 90% of those counties listed due to drought conditions. We can’t keep ignoring these major environmental issues, and this proposal addresses emissions reductions in an economically responsible way.”

The Managed Carbon Price Act (MCP) would place a price on carbon emissions that would increase over time, which would in turn create a market incentive to reduce emissions. Specifically, MCP imposes an emissions reduction schedule that would reduce CO2 emissions by 80% of 2005 levels within 42 years of enactment. The proceeds from MCP would go into a newly-created Energy and Economic Security Trust Fund where 25% of the revenue would go towards deficit reduction and 75% would go back to the public to offset any price increases.

McDermott added: “Mitt Romney’s Economic Advisor Greg Mankiw, Exxon-Mobil, the American Enterprise Institute and other conservatives have backed this concept because they know we have to wean ourselves off of carbon emitting energy sources, and do it in a way that doesn’t hurt our economy and makes sense for businesses.”

Tax is adjustable depending on developments

MCP is unlike a traditional carbon tax because it creates a flexible price system that provides emissions price certainty by accounting for volatility in the energy markets, requires specific emissions reductions, and addresses any increase in energy costs with dividend payments to the public, McDermott noted. The MCP charges the Treasury Secretary with setting the price per one-quarter ton of CO2 or CO2 equivalent.

A recent report from the Brookings Institution illustrated that if the starting price were set at $15 per ton, it would raise an estimated $80 billion, rising to $170 billion in 2030 and $310 billion by 2050. Similar proposals are in draft form in the U.S. Senate.

Sen. James Inhofe, R-Okla., Ranking Member of the Senate Committee on Environment and Public Works, immediately slammed McDermott’s bill. “It’s hard to believe that Democrats in Washington are introducing an energy tax on consumers, especially as Americans are out of work and the economy remains sluggish,” Inhofe said in an Aug. 2 statement. “A carbon tax will mean consumers will pay more at the pump and more for energy in their homes. An energy tax is the last thing that Congress should be considering.”

Inhofe added: “President Obama and the Democrats’ efforts to achieve their dreams of a fossil fuel free economy have been rejected time and time again by the American people, yet they remain determined. Despite the overwhelming bipartisan opposition in Congress over the past decade to global warming cap-and-trade, President Obama has pushed through a barrage of regulations with the goal of killing fossil fuel production in the United States. But he doesn’t want the American people to know that he’s imposing the greatest tax increase in American history through regulations because he couldn’t do it through legislation. Again, what would Americans get for all this economic pain? Even EPA Administrator Lisa Jackson has admitted that global warming regulations will have no impact at all on the climate.”

Inhofe said it will be interesting to see if congressional Democrats choose to support this carbon tax or try to dodge this “politically toxic issue.” He said that with an election coming up in November, it will be a tough choice for Democrats to make.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.