DEMOCRATS FLOAT DRAFT OF CARBON PRICING BILL

Tamar Hallerman
GHG Monitor
3/15/13

A group of House and Senate Democrats circulated a discussion draft of carbon pricing legislation this week that would tax the country’s largest polluters based on their reported greenhouse gas emissions while largely exempting the operators of carbon capture and storage projects. Led by House Energy and Commerce Committee Ranking Member Henry Waxman (D-Calif.), who shepherded comprehensive cap-and-trade legislation in the House in 2009, the four lawmakers behind the discussion draft asked for stakeholder and public feedback about the ideal carbon price that could be implemented under the scheme—they suggest somewhere between $15 to $35 per ton of CO2 emitted—as well as the ideal rate of an annual increase, likely between 2 percent and 8 percent.

The group of lawmakers, which also includes Rep. Earl Blumenauer (D-Ore.), Sen. Sheldon Whitehouse (D-R.I) and freshman Sen. Brian Schatz (D-Hawaii), also asks for input on what should be done with the revenue from the fee. While some carbon tax schemes such as the one in Australia have aimed to funnel revenues into lightening the rate impacts for low income customers, others have floated the idea of earmarking some of the money to help protect or retrain workers in energy-intensive industries. When chatter about a carbon tax emerged as a potential fix to the “fiscal cliff” last fall, many proponents suggested channeling the revenues from the fee into reducing the deficit as a way to bring Republicans on board. Another widely-circulated approach is to invest the revenues in clean energy R&D and other activities to reduce carbon pollution and its effects. “This framework is the beginning of a collaborative process to craft legislation that will reduce carbon pollution while also upholding an important principle: that all of the revenue generated through this carbon fee will be returned to the American people,” Whitehouse said in a statement.

‘A Carbon Tax is a Bad Idea’

The discussion draft marks the latest attempt by Democrats to push for Congressional action on climate change since President Obama took to his State of the Union address to call on Congress to pass a “bipartisan, market-based solution” to climate change. Sens. Barbara Boxer (D-Calif.) and Bernie Sanders (I-Vt.) unveiled a measure last month that would tax large emitters $20 per ton of CO2 emitted and use the revenue for customer rebates, clean energy research and debt reduction. A group of Democrats in both chambers of Congress led by Waxman and Whitehouse also created a climate change task force aimed at formulating recommendations for how the Obama Administration can act on climate change without Congress.

However, Democrats face an uphill battle in the House, where Republicans have balked at the idea of any new taxes or regulations on businesses and have voted multiple times in favor of stripping EPA of its authority to regulate greenhouse gas emissions to curtail climate change. House conservatives unveiled a resolution March 13 opposing efforts to install a carbon tax. At an event on Capitol Hill this week, Republican Study Committee Chairman Rep. Steve Scalise (R-La.) and Joe Barton (R-Texas) said they currently have 85 co-sponsors signed onto the measure. “A carbon tax is a bad idea whose time has still not—and will never—come. This is just another recycled liberal policy that raises taxes and kills jobs,” Barton said. “It targets middle America, hitting low income people, blue collar workers and the elderly the hardest. I fought to protect those people from this cap and tax scheme in 2009 and I will do it again.” The White House has also backed away from the idea of a carbon tax in recent months. 

Rates Based on GHG Emissions Reported to EPA

In floating the legislation this week, the group of Democrats said the price would apply to large polluters like electricity generators, petroleum refineries and industrial emitters and estimated that about 7,000 facilities would pay the fee—covering more than 85 percent of the country’s total emissions. The group said the carbon credits that each polluter would be required to purchase would be based on the emissions reported to the Environmental Protection Agency under its Greenhouse Gas Reporting Program. The tax would be collected by the Department of Treasury, they said. “There have been carbon tax proposals made by others. What’s unique about this one is its novel design. We are seeking to craft a system in which each agency does what they are good at and that minimizes compliance burdens and administrative costs. Utilities, oil companies and other major sources are already reporting their emissions to EPA,” Waxman said in a statement. “We build off of this existing program.” The lawmakers said they are accepting feedback on the discussion draft through April 12.

The lawmakers said the structure of their carbon pricing system is different from others proposed in the past because theirs encompasses all six major greenhouse gases, not just carbon dioxide. Many of the other systems proposed or in place, they pointed out, levy their taxes at the point of production or first sale of a fossil fuel, but that theirs based at the point of where the greenhouse gases are emitted or passed to consumers, a method they said is more efficient. “Advantages of the new approach include: more complete coverage of emissions; lower compliance burden for sources; lower administrative burden for the government and appropriate deployment of agency expertise,” according to a fact sheet.

The discussion draft also allows polluters to exclude the “quantities of carbon pollution that are permanently sequestered in subsurface geologic formations” from their emissions calculations, helping incentivize CCS and CO2 utilization, according to the discussion draft. “Emissions captured by a power plant are not reported as released and hence would not be subject to the fee,” according to a fact sheet. The proposal says that CO2 injected underground is not subject to a fee as long as project operators meet monitoring and other permanent storage requirements. The proposal also takes into account the carbon content of coal, which often differs dramatically depending on coal types, states and basins. “Existing taxes on coal provide no informational basis for assessing a carbon fee that takes this into account, but if the fee does not account for the carbon content, there is no incentive to reduce emissions by choosing coals with less carbon,” the bill’s fact sheet states.