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US Congressman Introduces Carbon Tax Bill

27 April 2007

US Representative Pete Stark (D-CA), a senior member of the Committee on Ways and Means with jurisdiction over US tax policy, introduced a bill (HR 2069) that would impose a tax on carbon-based fossil fuels.

The Save Our Climate Act would levy an initial tax of $10 per ton of carbon content on coal, petroleum and natural gas when these fossil fuels are initially removed from the ground or imported into the United States.

The tax will increase by $10 each year, freezing when a mandated report by the Internal Revenue Service and the Department of Energy determines that carbon dioxide emissions have decreased by 80% from 1990 levels.

Predictable, transparent and universal, a carbon tax is a simple solution to a difficult problem. It would drastically reduce our carbon dioxide emissions by providing an economic disincentive for the use of carbon-based fossil fuels and an incentive for the development and use of cleaner alternative energies.

—Representative Stark

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Comments

This might cover repealing/modifying the AMT.

Ten dollars a YEAR? What if it takes twenty, thirty, forty years to reach that 80% level? That's the worst idea I've ever heard. If he thinks his constituents are hurting due to high gas prices now, just wait. To say nothing of the inflationary effects those taxes will cause. This bill would cause a serious recession.

Any changes in our energy use will have to come from the bottom-up. From consumers. This top-down approach is, frankly, tyranny.

Coal prices are in the region of $30/ton.  It would take perhaps 5 years for this tax to double the cost of coal.

Every measure is going to leave winners and losers.  A carbon tax has to go somewhere; who wins and who loses depends on where it goes and whose immediate consumption is reduced for the sake of investment in lower carbon emissions.

In this case, everybody loses. Taking away more of my money with taxes means that I cannot afford to buy those more energy efficient products that would themselves be more expensive as a result of these taxes. If my electricity rates double in five years, if I'm paying north of $5-$6 for gasoline, all as the direct result of this bill, I simply cannot afford to buy a Prius. I cannot afford to move closer to work.

Any carbon tax initiative that I might possibly support must be revenue-neutral and implemented in an economically realistic manner. This is just insanity.

Charging for goods or for disposal of waste is not commonly called tyranny, so why such a touchy reaction?
If the carbon tax was balanced with cuts in other taxes then it should not overly affect inflation.

I like the idea but I think it needs more thought. The manufacturer of plastic would be paying more for raw materials despite the carbon not turning into CO2. Those (poor) spending large fractions of their income on heating could freeze to death. The cuts in taxes would have to be well thought out to avoid unintended consequences.

Cervus: you know very well that the cost of gas is going to go up anyway, why not have it go up in a more orderly manner so that people can plan ahead and move off of it now rather than continue to hope that they will find a trillion barrels of light sweet under central park. If the tax changes are revenue neutral (reduce income tax at the low end so that the poor can still pay their heating bills) then you don't have to worry about inflation. Renewables will become more competitive and you will wind up with more energy security and diversity. Consumers won't change their habits unless there is a reason to.

Neil:

That is the kind of top-down approach that I dislike so much. Government price controls through taxation are the wrong way to do it. Yes, prices are going up. But these are market forces at work rather than gas being X price due to legislative fiat.

Renewables will become more competitive because engineers and businessmen figure out how to make them cheaper. Anything else is a market distortion, and we already have enough of that because of government stupidity (ie: corn ethanol). It's not the government's job to force people to change their habits in that manner.

People aren't going to change their CO2 habits without some government intervention because at the moment those habits don't come with any immediate cost (externalities). I know you don't buy into climate change (how about acidification of the ocean?), but the US will go bankrupt if it doesn't get off oil soon, and when unpredictable peak hits, it will be a major shock as opposed to a gradual and predictable increase.
Don't you think a little nudge would be useful.

Its a good idea if you give people an option to using
alternatives to carbon based fuels before you tax them
for not doing so. It might be more effective to stop
legislating direct subsidies to oil and gas that cost $6 billlion in 2005 alone. Add into the equation, the $10 billion
for coal over the next five years, and you are approaching
$10 billion a year for these three non-renewables. Lets up
the basic production tax credit for renewables above the
1.9cents per kilowatt hour. If you give people a choice
that pays to play, then you avoid forcing draconian
bureaucratic measures. Lets give investors a path to profit
that is equal and transparent, while leveling the playing
field so that humans can reduce their annual 7 gigaton carbon
footprint. At our current rate of output, we will meet or exceed the Paleocene-Eocene thermal maximum of 55 million years ago
within the next few centuries. The more than 9 degree Fahrenheit
temperature increase will make any carbon tax seem like too
little too late. Technology and innovation are the solution.
If humanity leans too heavily on the shovel, that extracted
the fossil fuel from the deep hole we dug, it might break, and leave us at the bottom with no way to dig ourselves out. Stop
digging and drilling our way to the bottom of a 6ft deep grave.
Stop extracting energy and start harnessing it from the renewables already surrounding us.

Alleluia!!

This doesn't have a snowball's chance but it is a move in the right direction.

If you want to reduce fossil fuel consumption, this is the most logical way to do it. The implementation rate is probably too steep-the market place can't really react that fast without profoundly hurting people.

I would suggest a full refund of the tax for any sequestered CO2 (up to 1/2 the total revenue collected). The rest of the revenue should be evenly divided between all citizens-that would more than compensate for the price increases associated with this tax.

Yes, this would be wealth redistribution. Personally, I don't have a problem with the poor getting a better shake in this country.
Cervus-I agree with you, a tax like this should be revenue neutral.

David-

If you are going to permit exemptions for plastics and such, the way our political system works(?) all sorts of loopholes will be created and the power of the legislation will be gutted. Look what they did to CAFE standards. The loopholes go where the lobbies want them and the poor don't have an effective lobby.

If you want to help the poor, subsidize geothermal heatpump conversions, residential solar and mass transit. How about 0% loans for anyone below 150% of the poverty line to buy a hybrid or a nev? We don't want to subsidize and perpetuate energy intensive behaviors by the poor.

if the money the government will receive by this tax is used to reduce taxes on labor, it is a great idea. imported goods will be more expensive, local goods will become cheaper.

Neil:

Having reviewed the science, I've changed my thinking. The skeptics sound very shrill lately, and qualified though they are, after the latest IPCC report, intellectual honesty dictates that I concede defeat, barring some major discovery (such as previously unknown solar influences). I still think that we're enhancing a natural process, but that's just opinion.

The problem is that the louder people ring the alarm bells, the louder people shout that We're All Doomed, the more I'm repelled. And you have to admit that there's a lot of that on the climate change front recently. What the head of the Tyndall Centre for Climate Change Research said last October bears me out (ie: "Climate Porn"). Whipping people into a panic is the worst way to go about doing this. Irrational people do not make good decisions.

I have reluctantly started to think that some kind of carbon tax might be necessary, since it seems to be the most technologically-neutral method. But Rep. Stark's plan will cause far more harm than good. It's not a "nudge", but an uppercut to the jaw.

Also, I find Bill's proposal to redistribute half of it is simply a non-starter that I cannot support. If we consent to giving the government our money, they need to do something useful with it rather than just handing it right back. Alternative energy R&D, tax credits for efficiency, upkeep or redevelopment of our transportation infrastructure, etc..

The incompetence of our government--in both parties--does not give me much faith that they will go about this in an economically feasible way.

Cervus,

I don't want to redistribute 1/2 of it. I want to redistribute all of it. First in the form of the of a sequester rebate, then equally to the citizens (and resident aliens).

I agree, my idea is a nonstarter. Most people believe the poor are poor because of poor choices. I happen to disagree.

I'm glad to see you agree with a carbon tax. Now all we have to resolve is the rate and what to do with the money. ;-)

Bill

Bill:

You're talking to someone who was dirt poor as a child, but whose family never, ever went on welfare or any other kind of government assistance. But that kind of political argument is for a different forum. However, the fact is that I will not support any carbon tax scheme whose purpose seems to be wealth redistribution, which yours is.

Bill Youn:

I agree with you that this carbon tax will NEVER pass in C & S.

Too bad, because it would be a great step in the right direction. The new revenue could be redistributed to people and industries who have reduced pollution and GHG emissions.

Buyers of low consumption vehicles (better than 40 mpg) should get a tax credit, 100 times the mpg.
Ex:
A 45 mpg vehicle could get 45 x $100= $4.5K.
A 50 mpg vehicle could get 50 x $100= $5.0k
A 60 mpg vehicle could get 60 x $100= $6.0k
A 75 mpg vehicle could get 75 x $199= $7.5k
Etc, up to $12k per vehicle and 50% of the vehicle total cost.

Clean electrical energy producers should get similar tax credits.

Domestic buyers of high efficiency (SEER-20 or better) AC and Heat Pump units should get similar progressive credits, limited to $1000 per tonne and 50% of the unit installed cost and $5000 per home owner.
Commercial and industrial units would have different higher limits.

In other words, revenues from the carbon tax would be used to finance pollution and GHG reduction programs. The total program would not be economically destructive but would create a progressive shift from carbon economy to cleaner economy.

Harvey:

One big problem with tax schemes like this.

Since the intent is to reduce CO2 emissions, as the program becomes effective, tax revenues will decrease. You will not be able to fund such a scheme in the long term, but given the level of handouts that you propose, it will be very hard to discontinue the program. In fact, if it's very popular the govermnent would expand it in order to get more votes.

Witness what happened with the hybrid HOV sticker program here in California. They were originally going to issue only 10,000 of them. That was upped to 85,000. So many that HOV lanes started becoming almost as congested as normal ones, defeating the purpose. And an unintended consequence.

Nice thinking, Representative Stark! While we keep subsidizing gasoline, let's now start taxing it. Brilliant!

Cervus:

Strict credit limits and sunset clauses have to be used for these programs to stay within useful intended confines and budget.

Of course, application has to accelerate and decellerate progressively over a 20 to 30 years time span to give time for industry and people to adjust.

Both, the carbon tax and GHG/pollution reduction credits should be reviewed and adjusted on a regular basis by a appropriate board similar to the Feds. The regulation board should have strict guidelines to follow.

I like it. You can quibble about the dollar amount and rate increase schedule... but the principle is sound. If you're worried about carbon, you tax the carbon. The atmosphere doesn't react differently based on where that carbon comes from. The scheduled increase also allows people to know the increase schedule, and plan accordingly. If you *know* the price of gas is going to go up by $x.yz per gallon, you can plan ahead and buy a higher mpg vehicle, a more efficient furnace, etc.

The plastic manufacturing dilema is interesting, as is incentive for coal sequestration. For the former, I'd argue that peak oil and landfill space suggest that plastic shouldn't get a full refund on the tax, and that since power plant emissions comes with more than just CO_2 emissions, they shouldn't get a full refund on the tax either.

As for where the revenue should go, I'd like to see more subsidies for efficiency and renewable energy production, but I'd also like to see some of the revenue pay the debt. Of course, that requires the cooperation from Congress and the President to find a tax/spend balance.

Cervus,

In my distribution scheme, I did not say just give the money to the poor. In no way is this welfare. I said EQUALLY distribute the revenue. Donald Trump would get the same check as the beggar in the street.

Because Donald Trump would pay more under a blanket carbon tax than the beggar, it is, in effect, wealth redistribution.

Derek,

This would not be a tax on gasoline as much as a tax on coal. ($10/ton of carbon is equal to approximately $0.025 per gallon on gas.)

A tax like this, even if it started out at $1 a ton and went up $1/year would have profound implications for the power industry. The important feature for the power industry is seeing a predictable, high and rising tax on fossil fuel at the end of life of a new power plant (~50 years).

Stormv and David,

I just went and read the text of the bill. There is exemption for nonfuel use (i.e. plastics) and sequestered CO2. It is in the form of a tax rebate.

There is no tax on biofuels in this legislation. The tax is on fossil fuels only.

Bill

Because Donald Trump would pay more under a blanket carbon tax than the beggar, it is, in effect, wealth redistribution.

You'll never get me to support that. Sorry. You'll just have to come up with something else. You're not going to take my money just to give it back to me again. What would end up happening is that people would complaint that Trump is getting any money at all, and the beggar should get that share. You can't tell me that isn't a form of welfare. No.

Cervus:
So you've stated that you want the government to KEEP the money? If you do not want it redistributed, then WHO should benefit? If you do not agree with the tax, then do not pay it: buy a bus pass/bicycle/nice pair of walking shoes/motorscooter. Anyone who says that they can not survive without their car, is simply wrong. I have not had a vehicle for about 5 years, and in the summer time, when I ride past cars stopped at traffic lights, and see so many parking/speeding tickets delivered, I can not help but think that I am happy to be removed from it all.
This is not to say that in the winter, a automobile is not a fact of life. Even a hearty and stubborn Minnesotan such as myself has no pretenses about riding to college/work in a snow storm at -25F. But small changes in daily behavior have a way of compounding themselves with a multiplier effect. It shall be a much less painful transition than most people seem to realize. I promise.

Keep in mind that each gallon of gas produces 16 pounds of CO2. THe taxof $10/ton would raise the price of gas by 8 cents/gallon each year.

A carbon tax is very regressive. It taxes the poor proportionally more than the wealthy. (i.e. the poor spend a higher proportion of their income on gasoline and electricity.)

If you think this would be unfair, as I do, then some sort of compensatory mechanism is appropriate. If you believe that the poor are poor because they choose to be and don't deserve to be cut any slack, then to the rich go the spoils.

The most important feature of this proposed legislation is that increasing the price of fossil fuels is the only effective way to curb consumption. The law of supply and demand has not been repealed.

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