With a mighty creak of long-rusted hinges, a door is finally opening in Washington. The present Congress will apparently be asked to consider a carbon tax.
The measure -- actually, a hybrid carbon and petroleum tax -- will be introduced by the powerful chairman of the House Committee on Energy and Commerce, Rep. John Dingell (D-Mich.).
Today Dingell posted on his website a summary of the bill, which he began drafting in June. The current version would phase in, each year for five years, a charge of $10 per ton of carbon content of coal, oil, and natural gas -- plus an additional 10 cents/gallon for gasoline and jet fuel (kerosene). By the end of the five-year period the charges would reach $50/ton of carbon plus 50 cents/gallon of gasoline and jet fuel. These equate to 63 cents a gallon of gas and 90 cents for one hundred kilowatt-hours, assuming the nationwide average fuel mix.
Dingell is asking the public for comments. Here's ours: we think the bill is terrific. It's in line with what we said when we founded the Carbon Tax Center, and as Dingell himself wrote last month in the Washington Post, "[S]ome form of carbon emissions fee or tax ... would be the most effective way to curb carbon emissions and make alternatives economically viable." Moreover, as we elaborate below, his supplemental tax on gasoline and jet fuel has the look of genius.
How much carbon and petroleum would Dingell's hybrid carbon tax eliminate? A lot, if you change one key parameter; instead of halting the tax after year 5, continue ramping it up. If the tax works and the impacts on families and businesses can be offset through tax-shifting and rebates, why stop?
We examined a 20-year ramp-up -- starting Dingell's "10/10" tax in 2008 and continuing through 2027 to a level of $200 per ton of carbon plus $2/gallon on gasoline and jet fuel. Here's where the U.S. would be in the representative year 2025:
- Carbon dioxide emissions would be down by 1.55 billion metric tons from projected levels -- a 20% drop, equivalent to current emissions from England, France, and Italy combined.
- Petroleum consumption would be 4.5 million barrels a day less than business-as-usual, an 18% decrease from projected usage and more than 10% greater than Iran's current production.
Moreover, these reductions could be supplemented by savings from other targeted policies and programs to reduce use of petroleum, natural gas, and coal-fired electricity. (Indeed, a companion section of Dingell's bill will call for phasing out the federal tax deduction on mortgage interest on very large homes, thus ending a subsidy through which middle and working-class families subsidize gargantuan sprawl homes for the wealthy.) No other single policy measure -- not broader CAFE standards, not a national Renewable Energy Standard, not a massive biofuels push, and certainly not a new generation of subsidized nuclear power plants -- can produce nearly the carbon and petroleum savings promised by the Dingell hybrid carbon tax, provided it extends beyond the initial five-year period.
The brilliant touch in the Dingell bill is the supplemental tax on gasoline and aviation fuel. Dingell obviously grasps that a carbon tax alone can't end America's dangerous oil dependence. A straight carbon tax falls most heavily on coal, both because coal's carbon content is so high and because electricity, the form in which coal's energy is delivered, is more price-elastic than gasoline.
Using CTC's four-sector spreadsheet model (.xls file), which looks individually at electricity (40% pf U.S. CO2 emissions), gasoline (21%), jet fuel (4%) and "other" (35%), we estimate that without the annual 10¢/gallon levy on gasoline and jet fuel, the oil savings in 2025 would be nearly 40% smaller -- 2.8 million barrels a day vs. 4.5 mbd. The hybrid tax thus saves 60% more petroleum, and 20% more CO2 than a straight $10/ton-a-year carbon tax.
Is the Dingell tax set at the best level? We would like to see it higher -- considerably higher. The U.S. economy and America's millions of vulnerable households could almost certainly handle a steeper ramp-up, provided the tax was made revenue-neutral. The climate crisis demands more than just the provisional $10 rate; CTC has been urging a $37/ton-a-year tax.
But getting started at all is a tremendous step, and Dingell's clear-sightedness and courage, in a Congress little characterized by either, deserve our admiration.
What should be done with the revenue from the hybrid carbon tax? Needless to say, the quantities are enormous -- $180 billion annually after Dingell's initial five years and much more if the ramp-up is extended. While CTC strongly favors the revenue-neutral route, Rep. Dingell has his own ideas for using the revenue -- as will just about everyone else.
For now, we urge you to read Dingell's statement and post a comment on his site, and at other sites that cover climate, energy, oil, national security, and politics. Having a legislator of Dingell's stature even float a carbon-tax trial balloon is a very important and positive development -- possibly a breakthrough. There's a lot riding on it. Be heard.
Roger Wicker (R-Miss.)
Carl Levin (D-Mich.) [UPDATED]
To unlock wind power, put a price on carbon
Comments
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A Siegel Posted 9:09 pm
26 Sep 2007
Congressman Dingell,
Thank you for enriching the discussion with this proposal and opening it for comment. Here are a few of my initial reactions.
I do not believe that we should call this a "tax". Polluters should pay a FEE (or a royalty) for the privilege of polluting. Just as one pays the local dump a "fee" for dumping trash.
I am concerned that this summary does not discuss, in any meaningful way, the positive benefits that would come from reduced CO2 (and related) pollution. Such as improved health from reduced coal-fired particulates in the air, etc ... This "summary" is not placing a very difficult issue in a good context.
Also on benefits, there should be discussion as to the economic benefits (jobs, reduced imports, etc ...) and security (reduced need to protect oil) and ... benefits of reducing reliance on fossil fuels and going to energy efficiency/renewable energy as cornerstones to the economy.
The summary understates the science, the target is not strong enough, and the threat/benefit (as above) is not clearly/strongly enough stated.
The proposal only talks to carbon ... not methane and other GHG. Just wondering.
I disagree with the targeted use of funding. (a) should be much (MUCH) more heavily focused on making the nation more ENERGY SMART -- help poorer people flatten their total energy bills by rapidly helping them be more energy efficient (thus reducing the carbon fee's impact). Foster overall energy efficiency (thus enabling shutting down coal-fired electricity plants). Help government at ALL levels be more energy efficient (which would reduce the citizen's burden for paying for government). Too many of the items within the list are items that should be funded (through other means). And, for example, national health care will end up lowering the nation's total health care bills (as would aggressive energy efficiency.
I disagree with so much of the gasoline tax money going to roads and airports, reinforcing the polluting systems -- for example, why not use the money for improving rail, electrifying it, and increasing its reach/extent to reduce demand for road/air travel. Why not use "gasoline tax" to help people pay for PHEVs (plug-in electric vehicles)?
There is nothing here about how to capture the Chinese / Indians / anyone else who does not undertake something similiar. (Why not cooperate with the Europeans and Japan to impose import duties on imports from any country that does institute a carbon fee and use those resources to create a Prosperous, Climate Friendly Economy based on energy efficiency and renewable (or nuclear) energy?)
Sir, there has been much discussion that this is being floated solely to help kill the potential for passage of critically needed legislation to help change the nation's reckless path toward energy and Global Warming disaster. I hope that is not the case. At this time, however, I find that your summary significantly understates the threat re Global Warming (and doesn't mention Peak Oil, cost of oil imports, etc); does not discuss the significant benefits from a changed path re energy and pollution; and proposes a use of money that will engender criticism of this as massive "tax and spend Democrat Party" concepts to hurt the economy.
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My initial discussion of the proposal, point by point, is Dingell: A dingbat proposal re Global Warming?
Blogging regularly at Energy Smart to Energize America .
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jcwinnie Posted 1:28 am
27 Sep 2007
Dingell is counting on the general selfishness of the American people, plus a natural disinclination to raise taxes (tax cuts for the rich are ever so much more popular in Congress these days).
I agree, too, with item #6 of the critique by A. Siegel for the very same reason. I may disagree with the alternative funding target, since it would seem a bit simplistic, yet I would applaud the rationale and urge Congressional staff to consider like thinking.
We see so much concern about positive feedback occurring in the environment at present, e.g., the Albedo Flip, permafrost melting, etc. It sure would be a refreshing change for American think tanks to consider how they might multiply the effect of policy to mitigate climate change.
For instance, the hanging on for dear life two in Detroit make a big deal about building cars more cleanly. Yet they still are building cars that pollute, continuing to contribute to the fastest growing segment for carbon emissions. Would it better for life on the planet, if they continued to improve (cradle to cradle) how they build the cars and built cars that polluted less?
The gasoline tax is just extra insurance to see the policy initiative fail. Yes, we need a carbon tax to stop coal (and give Big Oil pause for thought). We need CAFE to slow the increase in carbon emissions from the transportation sector. Let the revenue go for green employment.
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mkayser Posted 1:34 am
27 Sep 2007
If a bill has no defenders, it goes down in defeat. It's possible to defend the advance this bill represents to the national conversation (as Charles does) while emphasizing the need for more reductions in the future. I think it was a very well-done post, and I agree that we should applaud the bill.
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mkayser Posted 1:45 am
27 Sep 2007
But I would again say that the optimal policy for fighting climate change is a carbon price, which means either carbon tax or cap and trade.
Only a carbon price will encourage conservation. CAFE will most likely actually increase miles driven, which is perverse. It will still decrease emissions, but it is not the best way to do it.
Still, CAFE may be better than nothing, but I would prefer to aim higher. I take your point, however, that the political calculations are important.
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Biodiversivist Posted 1:49 am
27 Sep 2007
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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David Roberts Posted 2:14 am
27 Sep 2007
grist.org
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Jason D Scorse Posted 2:37 am
27 Sep 2007
I teach environmental economics and blog at http://www.voicesofreason.info.
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Biodiversivist Posted 2:51 am
27 Sep 2007
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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sunflower Posted 2:57 am
27 Sep 2007
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NancyatSallan Posted 4:49 am
27 Sep 2007
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A Siegel Posted 8:19 am
27 Sep 2007
For 'criticism' (analysis), see: http://energysmart.wordpress.com/2007/09/27/dingell-a-din ...
Blogging regularly at Energy Smart to Energize America .
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A Siegel Posted 8:21 am
27 Sep 2007
As for me, I will provide constructive comments, arguing for trying to help develop this toward something that I can rush out and defend. As per my comments here, I think has many quite serious gaps and pitfalls, such that it is nearly DOA -- and potentially purposefully so.
Blogging regularly at Energy Smart to Energize America .
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