Index: U.S. lags other nations’ use of emissions levies

Source: By Thomas Frank, E&E News reporter • Posted: Wednesday, October 16, 2019

The United States has some of the lowest carbon taxes in the world, ranking ahead of only China, Brazil and Indonesia in one index published yesterday by a global development organization urging higher taxes on carbon dioxide emissions.

The Organisation for Economic Co-operation and Development (OECD) says industrialized nations must increase taxes on carbon dioxide-emitting fuels to contain global warming.

“Too many polluters do not pay the carbon and energy taxes needed to avoid excessive environmental and health damage,” the OECD said in a 108-page report. “Taxing polluting fuels is an effective way to help curb emissions that harm the planet and human health.”

The Paris-based OECD is an intergovernmental group that promotes economic growth and world trade. Its 36 members include the United States and most major economies.

The report could add urgency to efforts in Congress and around the world to increase or impose new taxes on CO2 emissions. The OECD singled out coal, which is subject to minimal taxes “despite its harmful climate and air pollution impacts.” It also suggested taxing shipping and international aviation, “where emissions are on the rise.”

The OECD report comes one week after an International Monetary Fund study said a heavy global tax on CO2 emissions is needed to limit global warming to the goals contained in the 2015 Paris climate agreement. The proposed IMF tax of $75 per ton of CO2 would increase electricity prices by 45% on average and gasoline prices by 15%.

Both reports — along with some advocates — say that carbon taxes are the most effective way to promote conservation, energy efficiency and a shift to low-emissions energy.

“It’s a way to put that price front and center for people to see it and understand it and embed that into decisions about what they buy and where they go and what their modes of transport are,” said Janet Peace, senior vice president of the nonprofit Center for Climate and Energy Solutions. “Without that, carbon pollution is free.”

U.S. lawmakers and voters have resisted carbon taxes, leaving the nation with some of the world’s lowest taxes on energy.

The United States ranked 40th out of 44 countries that the OECD ranked on combined energy taxes, which include taxes on fuel, electricity and carbon emissions. The U.S. rate was less than half the average of the 44 counties and about one-tenth the rate of the countries with the highest taxes — the Netherlands, Switzerland, Denmark and Luxembourg.

“Governments are not deploying energy and carbon taxes to their full potential,” the report says.

The United States has relatively low fuel taxes and, like many countries, does not tax energy consumption in the industrial, commercial and residential sectors.

Carbon taxes in the United States have been opposed by both conservatives and some liberal groups such as the Climate Justice Alliance and the Indigenous Environmental Network, said Charles Komanoff, director of the nonprofit Carbon Tax Center, which favors the taxes.

Adopting carbon taxes will require unseating Republican lawmakers and “overcoming the antipathy to carbon taxing that has metastasized in much of the U.S. left,” Komanoff said.

Voters in Washington state defeated ballot measures in 2018 and 2016 that would have imposed the first state carbon taxes. Although Washington overwhelmingly voted for Democratic candidates for president and the U.S. Senate in 2018 and 2016, carbon tax opponents vastly outspent supporters.

Seven bills are pending in Congress to establish or increase carbon taxes along with an eighth bill that would create a cap-and-trade system, according to an analysis by the Center for Climate and Energy Solutions. But lawmakers have resisted such measures.

“There’s a fear of the unknown. There’s also a fear that you could be imposing a competitive disadvantage” on the United States, the center’s Peace said. “A lot of policymakers and companies are worried that if you put a carbon price in the U.S., producers of energy-intensive products might decide they want to move elsewhere. There’s so little evidence that that’s happened.”

Komanoff of the Carbon Tax Center said the new OECD report would likely have little impact in the United States but could motivate countries such as Germany and New Zealand, which have “a green reputation but zero/low energy taxes.”

A Treasury Department report in January 2017 found that a tax of $49 per ton of CO2 emissions would generate roughly $200 billion a year in tax revenue.

Such reports have raised concerns that the increased taxes would penalize low-income consumers through higher heating and electricity bills and more expensive gasoline. The OECD report acknowledges the point, saying “care must be taken that energy price reform does not become unbearable.”

But the report takes no position on whether revenue from energy taxes should be returned to consumers through offsetting tax cuts or spent by governments.