Carbon Tax Bill Offered in Congress, Days After Exxon CEO's Endorsement
Despite skepticism, even in the environmental community, about the wisdom of the cap-and-trade system as a method for reducing greenhouse gas emissions, the carbon tax has never found much favor with Congress.
This is partly because of the T-word, which remains politically incendiary even after the devastating deficits launched by the Bush tax cuts. But the idea is perceived as a dead letter with industry, even more so than the unavoidably expensive cap-and-trade concept. Just listen to Rex Tillerson, the CEO of Exxon, speaking at a conference last weekend:
A carbon tax is also the most efficient means of reflecting the cost of carbon in all economic decisions -- from investments made by companies to fuel their requirements, to the product choices made by consumers.
Wait, what?! Exxon's CEO would prefer a carbon tax? This is undoubtedly a bit of mojo to muddy the waters as a climate change bill begins moving through Congress. But just the same, Rep. Pete Stark (D-CA) is at the vanguard of the movement this year, dropping a new carbon tax bill today.
Stark's bill would set a tax of $10 per ton of fossil fuels when they are first extracted in the US or imported into the country, leading to an estimated 2 cents-per-gallon increase in gas prices. The tax would rise by $10 per ton every year, until the IRS and the Energy Department verify that carbon emissions have dropped by 80% below their 1990 levels.
Incidentally, that's the same carbon cut that Barack Obama promised (by 2050) on the campaign trail.
"We must act now to combat climate change, and a carbon tax is the best and most sensible solution to address this global threat," Stark said as he dropped the proposal. "This bill will prevent businesses from gaming the system, provide an incentive for the development of cleaner alternative energies, and achieve the long-term goal of reducing emissions at a much lower cost than a more complicated cap-and-trade system."
There were two carbon tax bills offered in the House last year: Stark's and House Democratic Caucus Chairman John Larson's (D-CT), which attracted Stark and 11 other co-sponsors. Maybe Rex Tillerson will give them a thumbs-up this time around.
A barrel of oil (42 gallons) weighs about 340 pounds. $10/ton works out to $1.70 per barrel or about 4 cents per gallon, not 2 cents.
Two comments:
First, if it's a carbon tax it should be assessed per ton of carbon, not per ton of fuel. That would make the tax on coal a lot higher than on natural gas.
Second, it's about 10X too small. Four cents per gallon isn't going to have any effect. Tacking on another four cents every year is not much more than the rate of inflation.
January 15, 2009 3:43 PM | Reply | Permalink
Without redoing your calculations, this is my sense as well.
This is too little, too late.
But it fits right in with outdated notions of a 'free market' in which buyers and sellers operate with good info. Evidently, Exxon still clings to that fiction, thereby offering up this crappola as 'palatable'.
I realize that they have the electeds by the short hairs in part b/c most military equipment requires petro fuels. But that's simply one more reason to see this as a very short term option for Big Oil to use for PR while the real elves actually reengineer the economy in the back room.
If it weren't for the new Sec of Energy, I'd be eating my heart out over this stupidity. He's going to have to get a lot of support from those of us watching, who care.
January 15, 2009 5:53 PM | Reply | Permalink
The post got this wrong. The legislation (as the press release clearly states) is $10 per ton of carbon, not of the fossil fuel.
Such an incremental introduction of a certain price signal is a good path to follow, even if we all know $10 / ton is far too small. Interesting question, of course, is whether this is per ton of carbon or of CO2. Does seem to be the prior, which emphasizes even more how 'low' this initial tax would be.
January 16, 2009 6:40 AM | Reply | Permalink
Good start.
Biggest objection is that it starts too small, and grows too slowly. At some point it is not going to keep up with inflation.
January 15, 2009 3:43 PM | Reply | Permalink
This is undoubtedly a bit of mojo to muddy the waters as a climate change bill begins moving through Congress.
Good girl - you nailed it.
Not to mention that a tax is easily just passed along to customers. Cap and trade forces the oil boys to actually change the way they operate.
January 15, 2009 4:38 PM | Reply | Permalink
no shit it is passed onto the consumer. does your truck not use gas? If the tax is not passed to you, you will use exactly the same amount with or without the tax.
January 15, 2009 7:39 PM | Reply | Permalink
What do you think would happen with Cap & Trade? Somehow, it is only the nasty big corporations that would pay?
Look, we are all going to have to be "paying" more for dirty fuels. Hopefully, the resources will be used to help us all move toward a more efficient use of cleaner energy, away from our wastefully polluting ways. If done right, this might lead to "total" (insulation + efficient systems + cost of energy) costs below what we pay today (especially factoring in "external" costs like health and ecological implications).
January 16, 2009 6:43 AM | Reply | Permalink
I don't care if they tax chicken nuggets or Hello Kitty pencil boxes. The government needs to start taking in more revenue and the baby-boomers need to stop being assholes and get over their taxophobia for once in their lives. Honestly, at this point, it's just a matter of principle. The fact that a single generation has robbed this country blind is just criminal.
January 15, 2009 4:48 PM | Reply | Permalink
That point about a system that is harder to game is important. We should know by now that the more complex the system is, the more effort will go into cheating, and we know corporations will cheat if they possibly can.
January 15, 2009 5:12 PM | Reply | Permalink
If Exxon is for it, it must be a bad idea!
2 cents a gallon isn't going to change any behavior anyway.
January 15, 2009 5:38 PM | Reply | Permalink
My problem with a striaght carbon tax model is that it does nothing to encourage or require Detroit to improve vehicle efficiencies.
A Climate Bill needs to include all the players, producers, users and consumers of carbon based fuels and derive an equitable formula that doesn't punish one industry sector i.e. (the utility or fuel sector) more than the others.
I think cap and trade is the way to go along with tighter CAFE standards. An emissions auction to but into cap and trade works the same as a tax and makes people writing the checks feel better.
Either way if the US can get to 20% of 1990 levels by 2050, we might win, as long as the 80% we reduced doesn't get transfered to China, and the rest of Asia. Obama and Secretary Clinton nee to be pushing Climate Change internationally for a change, rahter than the US being the lagger.
January 15, 2009 6:26 PM | Reply | Permalink
"My problem with a striaght carbon tax model is that it does nothing to encourage or require Detroit to improve vehicle efficiencies."
wrong. detroit makes what will sell. For the last 20 years that has been trucks and SUVs. Get rid of CAFE, and tax the shit out of gas. That will improve the fleet considerably.
January 15, 2009 7:43 PM | Reply | Permalink
Storm is right. While I do think this tax is too small, a carbon tax is the right idea. As with all taxes, the cost will be shared between the producers and the consumers, as it should be.
I also agree (strongly), that the tax should be calculated by ton of carbon emissions, not by ton of fuel, since the fuel method gives a relative advantage to dirtier fuels like coal. I think the reasoning, however, is that emissions must be calculated at the end, since they are dependent on the method by which the fuel is consumed (e.g. a plant with scrubbers produces less/less harmful emissions than one without, as with a car with a modern muffler vs. one without).
Still, I think a carbon tax is a much better idea than cap-and-trade, despite Exxon's endorsement.
January 15, 2009 8:34 PM | Reply | Permalink
"I also agree (strongly), that the tax should be calculated by ton of carbon emissions, not by ton of fuel"
That's what a cap and trade system with an auction does, it regualates Carbon Dioxide emissions at the point of emission. To me that's really the objective anyway, not a ban or tax on "carbon". I think the science has become overshadowed by the politics when the public thinks carbon is bad. Shit, carbon is the element that provides and sustains life.
The bad guy is the gas, carbon dioxide, that if uncontrolled exacerbates global warming.
The reason I support cap and trade is that the accounting systems are in place, work, and the programs for acid rain and NOx reductions using the cap and trade model have proven to work over the past 10-15 years. Why reinvent the wheel on pollution controls and air emission regulation.
January 16, 2009 11:14 AM | Reply | Permalink