Is the United States about to get a tax on carbon emissions? Advocates of carbon pricing seem optimistic, even confident, that the U.S. Congress will legislate a carbon fee or some other form of emissions restriction.
And this comes with surprisingly little public discussion of the issue.
“I think it is a ‘when’ and not ‘if’ proposition that the U.S. Congress once again has a serious conversation about climate policy generally and carbon pricing specifically,” said Greg Bertelsen, senior vice president for the Climate Leadership Council in Washington, D.C.
In October, the group Americans for Carbon Dividends announced that ExxonMobil had pledged $1 million over two years to support promotion of its carbon-tax proposal. AFCD is the separate advocacy arm of the CLC.
That proposal is known as the Baker-Shultz Carbon Dividends Plan, sponsored by a group that includes James Baker III and George Shultz, both former U.S. secretaries of state. It would place an initial tax of $40 per ton on carbon dioxide emissions, with gradual increases.
AFCD has estimated that the carbon fee would increase the cost of gasoline in the U.S. by 38 cents per gallon, with similar increases in household energy use.
Under the Baker-Shultz plan, all proceeds from the carbon tax would be rebated to Americans on an equal and monthly basis through checks, direct deposits or contributions to retirement accounts. AFCD calculated that a U.S. family of four would receive about $2,000 in dividend payments in the first year, and has proposed that the payments be tax free.
Growing Advocacy
ExxonMobil is just one of many large oil companies supporting carbon limitations. In September the company announced plans to join the Oil and Gas Climate Initiative, representing 13 of the world’s largest oil and gas producers “working collaboratively toward solutions to mitigate the risks of climate change.”
That group initiative was established following the 2014 World Economic Forum. In addition to ExxonMobil, members include BP, Chevron, CNPC, Eni, Equinor (formerly Statoil), Occidental Petroleum, Pemex, Petrobras, Repsol, Royal Dutch Shell, Saudi Aramco and Total.
Also in October, the Intergovernmental Panel on Climate Change, a climate-study body of the United Nations, issued a new report detailing the potentially disastrous effects of continued planetary warming and calling for rapid and far-reaching action on carbon emissions reduction.
This trend toward increased climate awareness provides momentum for the push to introduce carbon pricing in the United States, according to Danny Richter, vice president for legislation and science for the Citizens Climate Lobby in Washington, D.C.
“There have been some big developments in the past few months,” Richter said. “You’re seeing a lot of interest – in the idea of carbon pricing, especially – in the advocacy space.”
How It Would Work
The CCL has its own carbon pricing plan, which includes a public rebate of all fees collected. It calls for an initial fee of $15 per ton of CO2-equivalent emissions to be collected by the Treasury Department and placed in a Carbon Fees Trust Fund.
That initial fee would increase by at least $10 per ton of CO2 equivalent each year, with the U.S. Department of Energy determining whether an increase larger than $10 per ton per year is needed. Fee increases would continue until total emissions are reduced to 10 percent of the U.S. CO2-equivalent emissions in 1990.
Richter noted that numerous bills for carbon-pricing legislation have been introduced in the U.S. Congress over the past two years, with carbon fees up to $49 per ton. At least one of those bills included a cap-and-trade approach.
Under cap-and-trade, carbon emitters typically are required to buy and hold government-issued permits equal in amount to their emissions. To increase carbon emissions, they would have to buy permits from others willing to sell them.
“I do think there will be multiple bills introduced” in the United States for carbon pricing in the future, Richter said. “Cap-and-trade is still in the mix, but right now there’s more creativity around the fees.”
“I think it’s fair to say that fees and taxes work better than caps. The lesson from other countries is, ‘Yes, you can do it, but if carbon reduction is your target, fees are the way to go,’” he said.
Global Precedent
Several countries around the world have introduced some form of carbon pricing. As an example of a well-received plan, Richter cited the carbon tax first imposed by the Canadian province of British Columbia in 2008, which “actually ended up being very popular. And it’s still supported,” he said.
That plan began with a fee of $10 (Canadian) per metric ton of carbon dioxide-equivalent emissions, with annual increases. In April, its carbon tax increased to $35 per metric ton with projected increases of $5 per year, until the tax level reaches $50 per metric ton in 2021, according the provincial government’s Web site.
British Columbia took a something-for-everyone approach in its carbon plan, including individual tax credits and a reduction in the corporate income tax rate. However, critics have attacked the plan for failing to meet emission-reduction targets.
Corporate Support
Bartelsen said corporate support for carbon pricing from ExxonMobil and other large American companies isn’t surprising, since corporations dislike economic and regulatory uncertainty.
“I think a big part of it is, they want to see the U.S. be the leader and own the energy technologies of the future,” he said. “We have the opportunity to lead or to follow.”
“But this becomes a lot more difficult if we’re living in a political environment where there’s no certainty about what future carbon policies will be, as most businesses understand that some form of carbon policies will be in place in the future,” he added.
ExxonMobil drew both criticism and skepticism for its recent carbon plan support. The Bloomberg news service reported “Exxon’s $1 million pledge represents the amount it generated about every two minutes last year.”
But the company insists its interest in carbon reduction is real. In a September news release, ExxonMobil announced initiatives “to lower greenhouse gas emissions associated with its operations by 2020, including reducing methane emissions 15 percent and flaring by 25 percent. Since 2000, ExxonMobil has spent more than $9 billion to develop and deploy higher-efficiency and lower-emission energy solutions across its operations.”
And many other types of corporations are supporting carbon-pricing efforts. According to Bloomberg, power company Exelon Corp. has pledged $2 million over the next two years, with renewable energy manufacturer First Solar and the American Wind Energy Association each contributing $100,000 per year.
Political Inevitability?
Proponents of a carbon tax or fee in the United States are divided about when Congress might vote to approve carbon-pricing legislation. Some expect that to occur next year, while a more cautious faction believes such action won’t happen until after the general election in 2020.
But both sides agree that some type of carbon-restriction legislation appears increasingly inevitable. The current regulatory approach to carbon emissions reduction in the United States “is a lose-lose proposition for the economy and environment,” Bartelsen said.
“For business and industry there’s no policy certainty necessary for long-term planning and decision making, and on the other side the regulatory approach has proven wholly insufficient at making meaningful emission reductions,” he said.
He cited studies indicating that carbon pricing outperforms the regulatory function by a 3-to-1 margin in reducing emissions.
“From an environmental perspective, this is beyond a doubt a winning trade,” he said.
As one reason for optimism, carbon-pricing advocates point to the bipartisan Climate Solutions Caucus in the U.S. House of Representatives. According to the CCL, that caucus now has 45 Republican members and 45 Democratic members. The total is still far below a majority of the 435-member House, but it represents a meaningful minority.
“It’s a forum where Republicans and Democrats can get together, learn together and propose solutions. That’s a pretty big deal. A year ago, I don’t think anyone, including me, would have expected that to be at 90” members, Richter said.
He expects other voices to join the support for U.S. carbon-pricing legislation – possibly including one specific scientific constituency.
“Geologists have an important voice. If you’re a geologist, you have an understanding of the importance of climate in the deep past,” Richter said.
He sees geologists as scientists who can deliver “really vibrant pictures” about the connection between climate, the planet and life.