Saturday, February 25, 2017

Carbon Tax

                                                        Comments due by March 5, 2017

Carbon-tax haters can relax. The proposal for a national carbon tax released on February 8 by high-level Republicans, including über-GOP consigliere James Baker, isn’t going anywhere. Financially and ideologically, the American right is wedded to carbon fuels. Trumpism runs on and reeks of them. Predictably, not a single Republican in Congress, and no one in the White House, has uttered a single positive word about the new carbon-tax plan.
Nevertheless, the proposal’s intended audience may not be Beltway Republicans but rather those ordinary Americans, majorities in both parties, who say they want action on climate, and who therefore might yet figure in the political equation over climate policy. That group includes progressives. We should pay attention: Carbon taxes matter. ...
But progressives can’t just walk away from carbon taxes. Carbon taxes are the only policy tool that, by slashing demand in a rapid, predictable way, divests our economy from fossil fuels and enables governments, business, and consumers to make investments in the transition to clean energy. Carbon taxes also have the best chance of catching fire globally.
The carbon tax James Baker brought to the Trump White House on February 8 on behalf of the new Climate Leadership Council has a lot in common with I-732: The Council’s proposal is also avowedly revenue neutral. But rather than lowering an existing tax, it relies on a so-called tax-and-dividend model: As the state of Alaska does with oil revenues, revenues from the Council’s national carbon tax would be returned equally to all American households in quarterly “dividends” digitally deposited in Social Security accounts. The tax would start at $40 per ton of carbon dioxide.
Earmarking all of the revenue to these dividends creates the political will to raise the tax every year, since the dividends rise in tandem with the tax rate. Ramping up the tax by $5 a year would shrink the use of carbon fuels so drastically that, by my calculations, US carbon emissions in 2030 would be 40 percent less than they were in 2005 (a standard baseline year).

I agree that "progressives" need to get on board the carbon tax train. One hang up might be labeling this as a "conservative" approach. I'm not sure why this is being labeled a "conservative" carbon tax. If there is anything conservatives don't like these days, it is higher taxes. The "conservative" proposal for a carbon tax used to include revenue-neutral tax recycling -- lowering income taxes with an equal amount of carbon taxes raised. Now "conservatives" want to give the money back to the public as dividends. I guess both of these options differ from the "progressive" approach to the government keeping the revenue. Whatever, I don't think the ideological labels are helpful. 
One big quibble (er, a big quibble is probably not a quibble, it is more like a beef): "Carbon taxes are [not] the only policy tool that, by slashing demand in a rapid, predictable way, divests our economy from fossil fuels and enables governments, business, and consumers to make investments in the transition to clean energy." I added the bracketed term because cap-and-trade could do the exact same thing.
The Carbon Tax Center has six objections to cap-and-trade. The style is to compared an idealized textbook carbon tax with the sort of cap-and-trade that might actually be put in place by Congress (e.g., Waxman-Markey):  
  1. Whereas carbon taxes lend predictability to energy prices, cap-and-trade systems aggravate the price volatility that historically has discouraged investments in less carbon-intensive electricity generation, carbon-reducing energy efficiency and carbon-replacing renewable energy.
  2. Carbon taxes can be implemented much sooner than complex cap-and-trade systems. Because of the urgency of the climate crisis, we don’t have the luxury of waiting while the myriad details of a cap-and-trade system are resolved through lengthy negotiations.
  3. Carbon taxes are transparent and easily understandable, making them more likely to elicit the necessary public support than an opaque and difficult to understand cap-and-trade system.
  4. Carbon taxes aren’t easily subject to manipulation by special interests, while a cap-and-trade system’s complexity opens it to exploitation by special interests and perverse incentives that can undermine public confidence and undercut its effectiveness.
  5. Carbon taxes address emissions of carbon from every sector, whereas some cap-and-trade systems discussed to date have only targeted the electricity industry, which accounts for less than 40% of emissions.
  6. Carbon tax revenues would most likely be returned to the public through dividends or progressive tax-shifting, while the costs of cap-and-trade systems are likely to become a hidden tax as dollars flow to market participants, lawyers and consultants.
I think the first five of these are easily debunked:
  1. A price collar can limit the carbon permit price volatility. 
  2. This is an assertion that assumes a carbon tax would not have lengthy negotiations. 
  3. Markets are not all that difficult to understand and I need to see some empirical evidence that transparent and easily understandable leads to increased public support. 
  4. I would predict that special interests would make try to make sure that there are loopholes so that they don't pay the flat tax rate. It is a bit naive to think otherwise. 
  5. Why can't cap-and-trade cover every sector too? Answer: it can. 
Number 6 takes a little more discussion. Carbon permits in a cap-and-trade system can be auctioned off to collect just as much revenue as a carbon tax. I'm not sure why you would choose cap-and-trade over a carbon tax with full permit auctions since there would be no trading as firms would bid up to their marginal abatement cost. Cap-and-trade with freely distributed permits would provide polluters with an asset. Relatively clean firms will make money as they sell their permits. I'm not sure why the always-evil "lawyers and consultants" will make more money off a real-world cap-and-trade plan than a real world carbon tax. 
To summarize, two points:
  1. The carbon tax with dividends is a great proposal. 
  2. The cap-and-trade option should not be dismissed as easily as some would like to dismiss it.


Marc Rinosa said...

One of the most interesting parts of this plan is the consumer-based model in which the revenue gained from the taxes are redistributed to society as part of thei tax-and-dividend program. I think that what would be crucial to understand in this model is the valuation structure - how exactly does the government support the $40 tax for carbon dioxide? And operationally, how will the govenrment make sure that digital distribution of tax revenue is sustinable in the long run?

Another aspect of Bakers's plan that is crucial to note are his "catches" that run parallel to the conservative ideologies that are promoted within a Republican-controlled legislature and congress are going to be instrumental in gaining buy-in for various environmental stakeholders. Ultimately, the plan to roll-back the majority of these programs will segment the support for such an initiative and the government, in my opinion, must tread lightly and be strategic in how they implement these programs.

Lindsay Brewster said...

I think it is interesting that you mention that the progress we see from government stepping into environmental issues comes with a few set backs. I find that this is generally how things have been going with environmental issues in general. As you've stated, the new council is planning to cut some progress that President Obama had made, and repeal his Clean Power Plan. However, the carbon tax could be extremely beneficial in that it requires everyone to get involved in energy efficiency. It is these kinds of regulations that could slow down global warming and help not only our planet, but also our economy.

Austin Provancher said...

This article is interesting and gives real perspective with regard to Carbon Tax and the cap-and-trade. The carbon tax implementation would give benefits such as lowering green house gas emissions, thus taxing on fossil fuel used by companies that emit carbon. In general the carbon gas encourages alternative energy. The repeal of Presidents Clean Power Plan could become catastrophic to the world due to the plan cuttting hundreds of millions of tons of carbon pollution and hundreds of thousands of tons of harmful particle pollution, sulfur dioxide and nitrogen oxides. This can be seen as a long term benefit for our children. The plan also could save Climate and weather disasters. The 2012 cost the American economy more than $100 billion. I too disagree with the cap-and-trade because it appears easily manipulated and lining the pockets of legislators. It is important to have a concrete and standard tax on all companies that emit such gasses. It is important to have strong EPA guidelines that fine violators and set a standard of business practice around the world. This is a world problem that requires team work.

Alyssa Villacis said...

As someone who has never given carbon tax much thought, this article did a good job on elaborating on it. I like how it touched upon how people who are against this tax label it as conservative when conservatives do not like high taxes. As I wrote in my previous post I wanted to see the government takes steps towards saving our Earth and while this was a step forward, perhaps for a moment, it was also a step backwards since it will not go forward so technically we are back where we started however there is more awareness. I agree that cap-and-trade is not better than carbon tax, there are just too many problems that come with it.

Tasfin Hossain said...

A carbon tax is a tax levied on the carbon content of fuels. It is a form of carbon pricing. Carbon is present in every hydrocarbon fuel (coal, petroleum, and natural gas) and converted to carbon dioxide and other products when combusted. In contrast, non-combustion energy sources—wind, sunlight, geothermal, hydropower, and nuclear—do not convert hydrocarbons to CO2. CO2 is a heat trapping greenhouse" gas which represents a negative externality on the climate system. Since GHG emissions caused by the combustion of fossil fuels are closely related to the carbon content of the respective fuels, a tax on these emissions can be levied by taxing the carbon content of fossil fuels at any point in the product cycle of the fuel. Carbon tax offers social and economic benefits. It is a tax that increases revenue without significantly altering the economy while simultaneously promoting objectives of climate change policy. The objective of a carbon tax is to reduce the harmful and unfavorable levels of carbon dioxide emissions, thereby decelerating climate change and its negative effects on the environment and human health.

Tasfin Hossain

fashion desire said...

This post stretches the idea of compromise of in government policy but I believe there should be a bottom line, or objective standards, to these trade-offs. This would mean certain things shouldn’t be up for compromise. Immunizing fossil-fuel companies from lawsuits for damages done by their products seems like a massively uneven power dynamic. Such rule of law has only one purpose: protect the interest and actions of these large companies rather than protect the rights of the individual.

With that being said, I think that point 2 in the Carbon Tax Center’s six objections is pretty vital. It is important to keep momentum moving with climate and carbon policy and not allow for stagnation. Objection three seems like the point for educational intervention… I personally believe that it is important for individuals to understand the functionality of their economic system and policy. A larger understanding for the issue at hand might act as a catalysis to working towards solutions, globally and domestically

Elizabeth Eggimann

Anonymous said...

The carbon footprint is becoming a very important topic in today's society because of the growing threat of global warming. Yes, a carbon tax would be a step in the right direction, since there are many negative externalities in the production process. However, it should not be put into effect if there were to be so many negative trade offs. If big companies were not to be held liable for their actions, they would be able to do as they please. So if that means that the trade off of putting a tax on emissions is that big businesses are free to do as they please, this is not the right way. However, according to the 'calculations' the carbon tax would reduce emissions so it potentially could be the right thing to do. However, with many powerful people in Congress (progressives) not willing to take losses, it is unlikely that something like that would actually be approved. The dividends idea is a step in the right direction though, because it entices people to join the train and support the cause since they would be making money from it. In summarization, the two points at the end of the article are valid. And i do agree that the cap-and-trade option should be analyzed further and taken into perspective greatly.

Nick Arciszewski

Janelle Gonzalez said...

I found the above article interesting, especially during times in which environmental issues are being seen as less important and relevant as they really are. I believe that the efforts discussed, such as the carbon tax mentioned, would be a good step. I believe that this step would be beneficial because it is much easier to implement. When dealing with the public, ideas must be realistic, meaning easily implemented into regulations.

In terms of special interests interfering with green efforts, the carbon tax would allow for less of this kind of issue.

Bradley Pidgeon said...

The carbon tax is a great idea that will of course come with some road bumps upon implementation. I think the most effective aspect of a carbon tax is encouraging firms and individuals to transition to cleaner energy forms, and subsequently encouraging and subsidizing engineers to find and source greener energy. Part of the reason a carbon tax is not currently implemented is because every single industry we know on Earth revolves around carbon use in some way or another. People are averse to change and are presently biased- not concerning their decisions with future environmental or economic situations as a result of global warming. The dividends proposal is a nice idea, to encourage people to take part in green energy.

Chase Harnett said...

The concept of carbon taxation seems to be a good way to make sure industry and individuals think about their use of and creation of carbon. It puts a numerical value on something intangible. The concept that the ozone is a resource that we can use up or degrade makes it a commodity. To use this commodity at no cost relates yet again to the tragedy of the commons. It is a common grounds and resource that will inevitably be abused if it is not regulated much like extra lanes on a highway.

Katherine Murphy said...

It's concerning to see how the importance of environmental issues is slowly lessoning, as if we as a country are taking a step back. The carbon tax is a great way to have places of business and or industries think about the significant amount of carbon they release. Not only would it reduce a drastic amount of carbon emission, but also promote energies that are more efficient, Like the article says, "Thus trading away the Clean Power Plan for a tax that could scour fossil fuels from the entire economy is like swapping an aging ballplayer for the next superstar.", regarding the promotion of energy efficient production. It is specifically great in the sense that it forces these businesses to put a money value on it, which is mainly the reason carbon emissions will lesson, due to companies wanting to spend less money. Baker is setting a standard with this carbon tax idea, making Republican climate-deniers look at the big picture. This article really had me thinking more clearly between both the carbon tax plan and cap-and-trade, and how it defines a big part of the subject of environmental issues for our future.

Anonymous said...

The carbon emission tax seems like it is almost a wake up call for many corporations in a sense that it will eventually force them to seek alternative ways to use other sources of energy, cleaner sources of energy. Having a carbon tax would be ideal for saving the environment, however, we are all very aware that there is much more that goes into the debate than just a phrase "its good for the environment." Taken into consideration are government policies, parties in charge & connections. Having the carbon tax would be beneficial because no company likes to lose money or pay out money or taxes as a matter of fact, therefore if it were implemented it would obviously make the companies that produce carbon reconsider the amount of emission or simply find alternative ways to get rid of it. If one company does it, i am sure other companies will blaze in their trails. Also with the carbon tax, other industries that are producing clean energy will start booming therefore creating jobs, incomes & boosting the economy as a whole, just in a better way. post created by


Angelique Cardoza said...

We are well aware of what carbon emissions have done to climate change and the environment. Corporations like power plants contribute to the sacrifice of ecosystems in the United States. Carbon is heavily relied on in this country, and the carbon tax is a great way to minimize use while keeping efficiency. If firms will not take actions to explore new clean energy sources such as wind and solar energy, carbon taxes must be implemented. The carbon tax will set incentives to use less of what is creating the pollution. The carbon tax and the cap-and-trade are both good methods however I believe the carbon tax is the best route. Although extra taxes are usually not favored, they are what gets corporations rethinking their decisions. With this tax, we are moving in the right direction for a cleaner world.