The Carbon Tax Center told the U.S. Senate Finance Committee today that an economy-wide tax on the carbon content of coal, oil and gas will cut U.S. CO2 emissions more than twice as fast as proposed clean-energy subsidies delivered as tax credits.
This finding leads a new 22-page analysis, “Design of Economic Instruments for Reducing U.S. Carbon Emissions,” that we submitted today to Senate Finance Committee Chair Max Baucus. Our analysis is in the form of “Comments” on a Committee “Discussion Draft” that proposes replacing 42 federal energy tax subsidies with either credits for “clean (low-carbon) electricity” production and “clean fuels,” but also asks for input on the merits of a tax on carbon pollution instead.
Our comments can be boiled down to this ringing conclusion: A carbon tax will do everything the clean-energy credits will do, and much more. While simplifying and rationalizing the current hodgepodge of energy subsidies is all to the good, only a carbon tax can course through our entire economy and reward energy efficiencies and conservation along with low-carbon production.
Moreover, with the right design, a carbon tax can protect lower-income families and energy-intensive U.S. industries alike, at no cost to the Treasury. In contrast, even the proposed streamlined clean-energy subsidies could cost taxpayers more than $30 billion a year.
Estimated CO2 reductions from a carbon tax are 2.4 times as great as those from clean-energy subsidies.
We performed our analysis using the Carbon Tax Center’s carbon tax spreadsheet model, which may be downloaded via this link. With the model, we estimated that the proposed subsidies would reduce U.S. carbon dioxide emissions by roughly 400 million metric tons a year, whereas an economy-wide carbon tax set at the same level as the subsidies would eliminate 960 million metric tons of emissions. (For comparison purposes, U.S. carbon dioxide emissions from burning fossil fuels totaled 5,221 million metric tons in 2012, the last year for which data are available.)
The Senate Finance Committee’s Dec. 18 statement, Baucus Unveils Proposal for Energy Tax Reform,” is available by clicking here. That two-page letter contains a link to the Committee staff’s 8-page discussion draft, which solicited comments on both the proposed subsidies realignment and on alternatives that would tax carbon emissions directly.
Our comments were submitted on behalf of the Citizens Climate Lobby and the Citizens Climate Education Corp. CCL/CCEC are the most visible and vociferous grassroots organizations advocating for a revenue-neutral U.S. carbon tax, and we are proud to stand with them. CCL chapters and members across the U.S. submitted their own comments backing a carbon tax as well.
Our hope is that the Senate Finance Committee’s discussion draft signals a new interest in carbon taxing among the tax-writing committees on Capitol Hill . . . and that CTC’s comments along with those from others will persuade incoming Committee Chair Sen. Ron Wyden (D-OR) to convene informational and/or legislative hearings this year on the optimal choice of economic instruments to reduce U.S. carbon emissions. (Longtime Committee Chair Baucus is leaving the Senate to serve as U.S. Ambassador to China.)
In the interim, we believe that our comments stand as the first broad quantification of the relative efficacy of a carbon tax vs. energy subsidies (even rationalized ones) to reduce emissions. As the figures in the table indicate, a carbon tax wins hands down.
CTC’s comments were researched and written by CTC director Charles Komanoff and CTC senior policy analyst James Handley. Support for their preparation and submittal was provided by the Alex C. Walker Educational and Charitable Foundation. We are grateful for their support.
Michael P Totten says
Outstanding work Charlie and James! These are impressive figures. I certainly hope it gets wide circulation and drives action forward. Thanks so much for your great analysis.
Mary Davies says
Great to see this, so helpful. I’m wondering if within the spreadsheet model lies the answer to the question, what would be the effect on the XL pipeline of a carbon tax? I’m thinking of how we respond to “They’re just going to get that tar sand out in any case.” Are they? Even if this carbon-expensive fuel is appropriately taxed? My link doesn’t seem to get me to anything I can recognize (though that may be just me). Do we have any figures?
Conn Nugent says
A robust carbon tax is the most consequential public policy available to retard climate disaster and incentivize a greener economy. That Charlie and James can make this case through impeccably-researched papers is a terrific asset. We need these guys.
Charles Komanoff says
If Canada had a carbon tax, the huge carbon inputs into tar sands manufacture would at least be partially reflected in the product’s cost. If the U.S. had a carbon tax, U.S. oil extractors could petition the office of the United States Trade Representative to impose a tariff on tar sands imports that would effectively levy the U.S. tax on those carbon inputs. The result in either case would be to price tar sands oil out of the export market (if Canada had the tax) or, at least out of the U.S. market (if the U.S. did).
None of this is in the CTC spreadsheet model or our new report. (Jim) Hansen and (Bill) McKibben of 350.org get this, you can be sure.
Richard Ottinger says
Well done, Charlie. This is a splendid presentation. Nevertheless it is a tax and is premised on recognition that climate change is real and human-caused, both anathama to the crazies. You had better start drinking lots of tea. Best. Dick Ottinger
Jan Freed says
Recent studies indicate we need to reduce emissions worldwide by about 6%/year (starting now, each year worse!) to be within 2 deg C, by 2050.
The carbon tax (poor terminology: it is NOT a tax on citizens, but more like a “pollution dumping fee” paid by carbon industries) would take a 20% bite out of U.S. emissions and bend the curve of other nations’ footprints through the “green tariff” provisions we could implement. Because the U.S. is such a major emitter, that 20% cut and green tariff might just get us to 6% cuts worldwide.
Dick Smith says
On behalf of 18 CCLers from Madison, Wisconsin who sent letters to Chairman Baucus, I can assure you that when incoming Chairman Wyden holds the hearing you (and we) called for, we’ll be proud to stand with you and CCL Executive Director, Mark Reynolds, as you make the case for a carbon tax.
Laura Bonahm says
It’s exciting to see this moving forward. And, it’s about time. Thanks for your excellent work.
Rick Knight says
I hope this is just the first step on a long road to a nationwide CO2 dumping fee that is 100% rebated to households. The cynical beltway pundits say “of course, there is no chance of passing a carbon tax.” But that is only true as long as the people who understand its value remain quiet. If you don’t fight for what is right, what’s the point of complaining?