Lawmakers, following Obama’s climate lead, announce a plan to tax carbon

Source: Evan Lehmann, E&E reporter • Posted: Friday, February 15, 2013

Sens. Bernie Sanders (I-Vt.) and Barbara Boxer (D-Calif.) will unveil a plan today to tax carbon emissions at $20 a ton, raising potentially $1.2 trillion over 10 years for rebates and investments in clean energy and efficiency.

The morning announcement comes two days after President Obama pushed lawmakers to adopt a carbon price or face executive actions to regulate power plant emissions. Organized climate protests also followed the State of the Union address,resulting in the planned arrest yesterday of Robert Kennedy Jr. and other activists opposing the Keystone XL oil pipeline outside the White House (see related story).

The Sanders-Boxer bill would cut U.S. carbon emissions 20 percent from 2005 levels by 2025, according to Sanders’ office. Upstream facilities like coal mines and oil refineries would pay the fee, which would increase 5.6 percent annually over a decade.

The legislation represents what many economists describe as an efficient way to address warming gases with minimal, or even no, economic repercussions. Yet the bill faces unlikely odds in a partisan Congress where pricing carbon is a taboo topic with many Republicans.

Michael Levi, director of the Program on Energy Security and Climate Change at the Council on Foreign Relations, questioned Obama’s remark in his address about a past cap-and-trade program proposed by Sens. John McCain (R-Ariz.) and Joe Lieberman (I-Conn.), now retired. Levi called the president’s fleeting comment “obtuse” and hard to understand.

“I do think there are pieces that are not going to go forward,” Levi said of the president’s proposals. “The one that stands out was the president’s veiled call for some kind of carbon pricing scheme.”

The Sanders-Boxer bill breaks from the popular mold of using carbon revenue to reduce corporate tax rates. Many economists point to that structure as an important way to maximize a carbon tax’s economic benefits and political appeal.

Cutting corporate tax rates is often seen as a catalyst for gaining Republican support. Both Republican candidate Mitt Romney and Obama proposed reductions to the corporate rate during the last election. The Tax Policy Center released a report this week saying that a “carbon-for-corporate tax swap” could “make good sense from the perspective of economic efficiency.”

Rebating 50% to citizens

“America’s tax system is broken,” the report says. “The environmental argument for a carbon tax is strong, given growing evidence of a changing climate. And the resulting revenue could play a vital role in facilitating tax reform and deficit reduction.”

The Sanders-Boxer bill gives more than half of the carbon revenue to every legal American in the form of monthly rebates. It’s called the Family Clean Energy Rebate Program, and the lawmakers based it on Alaska’s oil dividend payments.

“This is the most progressive way to ensure that if fossil fuel companies jack up prices, consumers and families can offset cost increases on fuel and electricity,” a summary of the bill says.

The legislation would also direct carbon revenue into energy efficiency and clean energy programs. It would, for example, weatherize 1 million homes a year; triple the budget of the Advanced Research Projects Agency-Energy, an energy innovation program; provide financing for public-private investments in renewable energy; and help offset the cost of a carbon tax on manufacturers.

The legislation would also join an unidentified companion bill that ends fossil fuel subsidies to provide about $300 billion for deficit reduction. A Sanders aide said recently that the lawmaker acknowledges the difficulty of passing a carbon tax in the Senate, let alone the Republican-controlled House. One motivation is to have the bill ready in case tax reform negotiations begin to look approvingly on carbon revenue.

Across town, activists were drawing attention to the Keystone XL pipeline, which to some represents the frontline fight against future emissions. In an act of civil disobedience, several dozen activists were arrested yesterday after binding their wrists to a White House fence with plastic cuffs. Among those taken into custody were Kennedy, president of the Waterkeeper Alliance; actress Daryl Hannah; Michael Brune, executive director of the Sierra Club; and Bill McKibben, founder of

“The science is clear,” Kennedy said before being hauled away, according to a Natural Resources Defense Council blog. “Climate change is not just an economic issue, it is a moral issue. I do not believe that Keystone XL will happen. I believe that President Obama and Secretary Kerry will do the right thing. And we need to show our support.”

Brune and McKibben are joining Sanders and Boxer to announce the carbon tax bill this morning.