Carbon Tax Continues to Gain Cred. Deniers Worried.

March 13, 2013


There are a few remaining rational actors in the Republican party, and they have a problem.

They recognize that, as tarnished as their brand is now with young people, another 5 years of unmitigated climate change will cement the party’s place in history alongside Nero, if that’s not a done deal already.

For that reason, there is a lot of casting about for some kind of face-saving sideways approach to the climate issue, and one that has been steadily gaining currency is the “revenue neutral” carbon tax, or “fee and dividend” – in which taxes collected at mineshaft, port, or wellhead pass through instantly to citizens in the form of a monthly or annual “dividend” check. Former Secretary of State under Reagan George Schultz recently appeared on capitol hill in support of the idea.


For the past few years, Mr. Shultz, an economist, has been studying energy policy at Stanford University’s Hoover Institution. He recently traded his hybrid car for an all-electric one, and he advocates a carbon tax to pay for the research and development of alternative energy sources.

.. he said that Congress should pass a fee-and-dividend carbon tax that would remit revenues to consumers. The tax would be revenue-neutral, covering the cost of research and development for alternative energy sources without generating extra income for the government.

But in Washington, where Republicans and Democrats are deeply divided over the size and scope of government, talk of new taxes and regulations is toxic. A carbon tax like the one Mr. Shultz supports has been proposed by Senators Barbara Boxer of California and Bernie Sanders of Vermont, although Mr. Shultz did not endorse their measure.

Mr. Shultz, 92, spoke at an event sponsored by the Partnership for a Secure America, a nonpartisan think tank based in Washington that wrote a letter warning Congress of the “staggering” cost of inaction. The letter included 38 signatures from a broad spectrum of former lawmakers, Cabinet secretaries, military and intelligence officials, and national security experts, including Mr. Shultz; Madeleine Albright, the former secretary of state; and Richard G. Lugar, the former Republican senator for Indiana. Mr. Shultz was also a labor secretary, a budget director, a Treasury secretary and an adviser to President George W. Bush’s 2000 campaign.

He is one of a trickle of Republicans who are challenging the party’s stance on climate change. He said that Republican presidents from Theodore Roosevelt to George Bush signed off on major environmental policies, like the creation of the Environmental Protection Agency and the Clean Water Act.

“Good work on conservation and the environment is in the Republican gene,” Mr. Shultz said. “We’ve been the guys who did it. So we’ve just got to get back to that


For a political non-starter, a carbon tax is generating an awful lot of activity on Capitol Hill. On Wednesday, the conservative Republican Study Committee is holding a press conference to slam the idea, headlined by Texas Reps. Joe Barton and Jeb Hensarling and Louisiana chair Steve Scalise, with star billing to anti-tax activist Grover Norquist.

A bevy of fossil-fuel industry representatives and conservative activists such as Myron Ebell, who runs the climate skepticism activities of the Competitive Enterprise Institute “will discuss harmful impacts of a carbon tax on American families and small businesses” and “unveil a resolution opposing efforts to implement a national carbon tax.”

What’s catching people’s attention is the “fee and dividend” carbon tax that is remitted back to consumers as a big check each year, based on Alaska’s Permanent Fund. Sen. Barbara Boxer (D-CA) is co-sponsoring a version with Sen. Bernie Sanders (I-VT); former Secretary of State and Treasury George Shultz, a Californian who served under Ronald Reagan, promoted the idea on Capitol Hill last week. NASA climate scientist James Hansen is also a huge backer, saying that putting a price on carbon may be the only way to prevent catastrophic climate change.

Economists favor a carbon tax over cap-and-trade as more efficient and transparent; it’s also a consumption tax that economists tend to prefer over income and investment taxes. Adele Morris at the Brookings Institution argues that a “modest” carbon tax could help reduce the deficit, and that Republicans ought to consider it as a market-based alternative to President Obama’s vow to regulate C02 emissions from existing power plants. The idea is gaining traction among conservative economists, who see it as a way to cut the corporate tax rate, including former Bush adviser Greg Mankiw.

Even China is now proposing carbon taxes. Part of the problem with reducing U.S. C02 emissions is that it would impose high costs on U.S. industry, making U.S. companies uncompetitive globally and inducing a further shift of manufacturing to China. But most new versions of the tax, including Boxer/Sanders, would include a border tariff on the carbon content of imports that is equivalent to the tax. That would create a big incentive for exporting countries like China to impose their own carbon tax so as to keep the revenue.

Opponents clearly think the idea is gaining traction and want to stop it before it gets too far.

The Hill:

The oil industry, conservative groups and House GOP lawmakers will ramp up opposition to proposals that would strip industry tax breaks and impose taxes on industrial carbon emissions.

Their Capitol Hill press conference will feature lawmakers and groups like Grover Norquist’s Americans for Tax Reform and Americans for Prosperity, and discuss the “harmful impacts of a carbon tax on American families and small businesses,” an advisory states.

The House lawmakers will introduce a resolution “opposing efforts to implement a national carbon tax.”

In a separate briefing Wednesday, the American Petroleum Institute will announce new efforts to ensure its tax incentives are protected in fiscal policy negotiations.

The group, which is the oil-and-gas industry’s largest trade association, will announce a new TV ad campaign.

The White House and many Democrats have for years been pushing to strip the petroleum industry’s ability to claim several tax deductions, calling them a multibillion-dollar taxpayer handout to an industry that doesn’t need it.

But industry officials and their allies have beaten back the efforts thus far. They say that higher taxes on energy producers would slow what has been booming oil-and-gas production, harm job creation and unfairly single out their industry


6 Responses to “Carbon Tax Continues to Gain Cred. Deniers Worried.”

  1. […] There are a few remaining rational actors in the Republican party, and they have a problem. They recognize that, as tarnished as their brand is now with young people, another 5 years of unmitigated…  […]

  2. I’m sorry to say that I think the dividend half of this equation will just go back into paying for more gas or to buy more products that require gas or coal to make. Fee, yes, dividend, no. Fee that goes directly into paying for renewable energy to replace coal plants, and for incentives given to people to buy electric cars, and for incentives for people to make their homes more efficient. Not just free money.

    And I’m all for imposing a carbon tax on imports, including on the carbon used to ship those products here. That would be an incentive to buy locally. Additionally, I’m for taxing American businesses who send their manufacturing overseas, as an incentive NOT to do so, and to use cleaner technologies to do their manufacturing.

    And absolutely remove all tax incentives, and loopholes, for oil and gas (including natural gas), and coal.

    • My opinion about the dividend has also “evolved”. The increasing percentage of after tax income spent on energy has shown that demand for energy is less than optimally elastic. However, removing the dividend is a significant political hurdle, especially if the revenue flows to government funded programs, which IMO would be the optimal approach in a rational political environment.

      Perhaps, dividend income would be contingent on prioritizing the taxpayer’s additional revenue to subsidize investments in energy efficiency. The lesser political hurdle would then be to overcome right-wing attacks that energy audits are a small step away from concentration camps.

  3. […] 2013/03/13: PSinclair: Carbon Tax Continues to Gain Cred. Deniers Worried. […]

  4. Carbon taxes are only a small part of any long term solution, It is my belief we need to tax not just fossil fuels , but all natural resources , as they all have been given to mankind free of charge , but their use always causes damage somewhere along the line to the planet and all the living organisms on the planet including man.

    Rather than a carbon tax being tax neutral, a new natural resource tax could replace all existing taxes thereby providing a dividend in so many ways of reduced bureaucracy, enhanced technology and providing an equal and fair tax system for all, and enabling the individual to take control through their purchasing power to decide what is best and in the long term will decide what is made and sold.

    A simpler tax system would provide for incentives for technological growth and with a mind set change by everyone in the chain from resource to goods and services we all want and desire.

    A carbon tax is a part solution , not the whole solution as it does little in tax reform , which is what is necessary for any real change in carbon emissions to occur.

    We are on the brink of a revolution with synthetic biology and robotics , so this must be matched with a revolution in micro and macro economics that fulfill the needs of the future , rather than the pockets of the already rich.

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