Sunday, December 21, 2014

Federal Carbon Tax Bill Introduced into Senate

Senator Sheldon Whitehouse delivers a weekly speech on climate change on the Senate floor, a series he’s dubbed “Time to Wake Up.” (Credit: Office of Sheldon Whitehouse) Click to Enlarge.
Earlier this month, Rhode Island’s U.S. Senator Sheldon Whitehouse, who has made climate change his signature issue, introduced into the Senate the American Opportunity Carbon Fee Act (S-2940).  The bill imposes a direct, simply-applied, economy-wide tax on carbon emissions.  While the bill is not perfect, it is quite excellent (and has a number of very interesting features).

The centerpiece of the bill is that it immediately imposes an economy-wide tax on carbon at the rate of $42 a ton.  This figure ratchets up at a rate of 2% annually plus inflation (as measured by the Consumer Price Index).   At that annual rate of increase, carbon would be priced at $85.68 a ton in 2050, a bit more than the $82/ton rate widely recommended by scientists for properly pricing carbon so as to avert a climate disaster.

That is, there are three very salient differences between the Whitehouse bill and the Regional Greenhouse Gas Initiative (RGGI), the current carbon-pricing scheme that has been adopted by nine northeastern states (including all six New England states):
  • RGGI covers only the electricity sector; the Whitehouse bill covers virtually the entire economy.
  • The most recent RGGI clearing price for carbon (Auction 26, December 3, 2014) was only $5.21 per ton; the Whitehouse bill imposes a much more appropriate price, because it starts at over 800% of that amount and then ratchets up.
  • RGGI prices carbon by means of cap-and-trade; the Whitehouse bill is a straight tax.
A key part of the Whitehouse bill is that it requires governmental agencies, notably EPA and the Department of Energy, to collect data on all methane emissions resulting from extraction (including coal mining and oil drilling!) and distribution (including all gas pipeline losses and fugitive emissions) – and to impose the same carbon tax (starting at $42/ton) on methane based on the methane’s CO2 equivalent!  This is important because, depending on the time horizon used, methane is 21 times or more as powerful a greenhouse gas as CO2.  Thus quantifying and pricing methane emissions must be an important component of any overall plan to address climate change – but methane is also one that is frequently overlooked (especially by people who push increased use of natural gas as a means of lowering greenhouse gas emissions).

Read more at Federal Carbon Tax Bill Introduced into Senate

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