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Carbon Tax Plan Proposed by Climate Leadership Council

Krystal Maxwell — February 15, 2017

Climate change is a big area of political strife. It was during the election and remains so during the opening weeks of the new administration. While the major political parties generally disagree on the issue and the measures necessary for addressing it, climate change is not a partisan topic. On February 8, a group of Republicans proposed a tax on CO2 emissions in exchange for the repeal of other regulations on the industry. The proposal is led by James Baker III, former Secretary of State under President George H.W. Bush, and other members of the Climate Leadership Council. Founded by Ted Halstead, the Climate Leadership Council is an international research and advocacy organization with aims to organize global leaders around new climate solutions based on carbon dividends modified for each of the largest greenhouse gas (GHG) emitting regions.

The Proposal

The Carbon Dividends Plan is based on four main areas:

  • Gradually Increasing Carbon Tax: A $40 tax on every metric ton of CO2 would be imposed and increased steadily over time.
  • Carbon Dividends for All Americans: The estimated revenue of $200 to $300 billion per year generated from this carbon tax would be paid out to Americans through dividend checks, administered by the Social Security Administration. On average, a family of four would receive $2,000 under the plan.
  • Border Carbon Adjustments: The plan proposes border adjustments that would increase the costs of exports and imports to/from countries that do not have a comparable carbon tax.
  • Significant Regulatory Rollback: The majority of the Environmental Protection Agency’s (EPA’s) regulatory authority over CO2 emissions would be phased out, including an outright appeal of the Clean Power Plan (CPP).

The Importance

Many Republicans, including President Trump, are publicly opposed to actions on climate change. The Climate Leadership Council is made up of a number of prominent Republicans who are not only publicly in favor of action supporting the climate, but also have created a proposal to do so. Besides Baker and Halstead, authors of the proposal include Henry Paulson, Secretary of the Treasury under President George W. Bush; Martin Feldstein, Chairman of the President’s Council of Economic Advisers under President Ronald Reagan; George Shultz, Secretary of State under President Reagan; and N. Gregory Mankiw, Chairman of the President’s Council of Economic Advisers under President George W. Bush.

The Impacts

The plan would repeal the CPP put in place by President Obama to reduce carbon pollution and reduce the EPA’s influence on GHG emissions, and will likely see opposition. However, President Trump already plans to repeal the CPP, and while it is unclear if he will be successful, the Carbon Dividends Plan is not needed to assist in that repeal. While the dividends paid back to consumers help with the increased cost of energy, many can argue this would be better if used for increasing renewable energy. If the proposal is rejected and the CPP repealed without an alternative plan in place, it is unlikely actions on climate change will be taken at a federal level.

In June 2016, the House approved a non-binding resolution condemning the idea of a carbon tax. The measure passed 237-163 and was intended to make it more difficult for those that voted against a carbon tax to do so again. President Trump also opposes a carbon tax, believing that President Obama’s CPP was a regulatory overreach of power. It seems unlikely that the current administration and Republication-controlled Congress would vote in favor of such a proposal, although there is hope that some type of alternative could be offered in its place. No matter what the outcome of the Carbon Dividends Plan, there will be many arguing both for and against it.

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