Navigant Research Blog

National Carbon Tax Likely to Fail Again

Marianne Hedin — March 28, 2013

In his State of the Union address, President Barack Obama said he would take unilateral action to limit climate change.  He declared, “If Congress won’t act soon to protect future generations, I will.”  Obama’s new resolve raised hope that the United States will finally move forward to address climate change by regulating greenhouse gases (GHG).  So, what are the prospects for meaningful legislation?

So far, efforts in Congress have focused on a carbon tax, which some Democratic legislators describe as a win-win proposal that would reduce carbon emissions while generating significant additional revenue to reduce the federal budget deficit.   In February, Independent Bernie Sanders of Vermont and Democrat Barbara Boxer of California proposed a bill to tax carbon emissions and raise $1.2 trillion in revenue over 10 years, most of which would be returned to consumers.  And on March 12, four Democrats from the House and Senate – Representative Henry Waxman (D-CA), Senator Sheldon Whitehouse (D-RI), Representative Earl Blumenauer (D-OR), and Senator Brian Schatz (D-HI) – introduced a related draft bill to put a price on carbon emissions by charging the nation’s largest polluters a fee for each ton of GHG they emit.  The latter proposal attempts to minimize the compliance and administrative burden and costs by leveraging the resources of existing U.S. agencies, such as the Environmental Protection Agency (EPA) and the Treasury.  Predictably, a few days later 105 Republican members of Congress introduced a resolution opposing a carbon tax, citing increased energy prices and a negative impact on the U.S. economy.

Small Ball

Acknowledging that the passage of a carbon tax is unlikely, Obama apparently has given up on pushing for a comprehensive climate change policy and is pursuing smaller-scale projects that won’t require new sources of revenue.  For example, he is proposing to divert $2 billion over the next 10 years in oil and gas royalties to fund alternative fuel research as part of the administration’s Energy Security Trust.  Obama is also expected to set new guidelines for all federal agencies to follow as they consider the effects of major federal projects on air, water, and soil pollution.  These guidelines are currently being reviewed by the White House’s Council on Environmental Quality and may require agencies to consider the impacts of global warming – e.g., increases in GHG and the potential for flooding, drought, or other extreme weather – before approving major projects such as the development of new pipelines and highways.

While lawmakers wrangle about climate change, atmospheric carbon dioxide (CO2) continues to rise.  According to the National Oceanic and Atmospheric Association, global CO2 levels jumped in 2012, increasing to 395 parts per million – the second biggest increase since record keeping began in 1959.

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