By Valerie Volcovici
WASHINGTON, Nov 8 (Reuters Point Carbon) – A potential tax
on big polluters, a taboo subject in the United States in recent
years, has come back into the spotlight as some sense potential
for a revenue windfall at a time lawmakers look for ways to the
so-called “fiscal cliff” of tax rises and spending cuts due in
early 2013.
The aftermath of Superstorm Sandy, which devastated parts of
the U.S. East Coast last week, has raised fresh questions about
the links between climate change and extreme weather events,
which also makes the idea of a carbon tax more appealing.
A carbon tax is a mechanism to charge emitters of greenhouse
gases, such as power plants and oil refiners, for each ton of
carbon dioxide they emit.
Prospects for such a tax as a way to address pollution and
climate are probably dim in a still deeply-divided Congress, but
some analysts say the measure would be more attractive if
positioned as a source of new revenue.
In fact, a recent report by the Congressional Research
Service, suggesting a $20 per ton tax on carbon emissions could
halve the U.S. budget deficit over time.
Such a tax would generate about $88 billion in 2012, rising
to $144 billion by 2020, the report said, slashing U.S. debt by
between 12 and 50 percent within a decade, depending on how high
the deficit climbs, the report said.
A handful of former Republican policymakers – ones most
likely to reject new or higher taxes as a matter of principle –
has been touting its potential to raise revenue for a
cash-strapped federal budget.
In research notes after Tuesday’s presidential election,
analysts at global banks HSBC and Citigroup flagged a carbon tax
as a program that could potentially emerge in President Barack
Obama’s second term.
“One major fiscal possibility is a new carbon tax, which is
likely to garner far more support this time around than at any
time in the past and could become an appealing part of an
emerging consensus on how to avoid the fiscal cliff,” said a
note from Citigroup’s investment research group.
Paul Bledsoe, an independent policy consultant, said a
carbon tax on polluters would be “better for the economy than
our current taxes on work.”
The measure would garner more support if its economic
benefits are touted rather than its ability to help the
administration achieve its green goals, said Bledsoe, who served
as staff on the Senate finance committee during the 1993 budget
negotiations.
NUMBER CRUNCHING
The U.S. Treasury has funded a major carbon tax analysis
that will explore how the country’s tax code can be used to cut
greenhouse gas emissions.
The report is being drafted by the National Academies of
Science (NAS), which has commissioned a panel of economic
specialists to analyze how to reform the way the government
raises revenue to encourage cuts in emissions of gases that are
blamed for climate change.
The committee, which has met five times since April 2011,
is reviewing how direct taxes, such as fuel-related provisions,
and indirect measures, such as home mortgage deductions, will
increase or decrease emissions rates.
The paper was commissioned by legislation enacted during the
George W. Bush administration in 2008, but not funded until
2009. It will be submitted to Congress next spring.
UNLIKELY SUPPORTERS
In recent months, a number of moderate Republicans,
including a few economists that advised Republican presidential
candidate Mitt Romney, have declared their support for a carbon
tax, leading some to believe there is a chance for bipartisan
support in Congress.
Harvard professor Gregory Mankiw, economic adviser to
Romney, wrote in a 2007 column that “if we want to reduce global
emissions of carbon, we need a global carbon tax.”
Former Republican Congressmen Sherwood Boehlert and Wayne
Gilchrest joined Democrats Henry Waxman and Ed Markey to support
a carbon tax in February.
In July, former Republican Congressman Bob Inglis launched a
think tank to promote a plan to raise taxes on fossil fuels
while cutting income tax, a concept previously supported by
former Democratic Vice President Al Gore.
Even George Shultz, Ronald Reagan’s former Secretary of
State and a fellow at the Hoover Institution, entered the fray,
saying that a carbon tax that returns revenue to taxpayers could
garner the support of his party.
“The fact that you are seeing more voices come into the
conversation and talk about it is a welcome one,” said Nat
Keohane, vice president at the Environmental Defense Fund and
former special assistant to Obama on energy and environmental
issues.
“Hurricane Sandy has helped reboot this conversation,” he
said, by becoming just the latest in a year of extreme weather
events in the United States, including major droughts and
historic wildfires.
Some remain unconvinced that the Republican-controlled House
Of Representatives will be anything but hostile to attempts to
price carbon, despite the post-election, post-Sandy buzz.
“I’m quite a skeptic regarding carbon taxes, and I doubt
that President Obama could gain enough support in the House to
enact one even as part of a broader tax-reform package,” said
Kenneth Green, a resident scholar at the conservative American
Enterprise Institute. “But I could be wrong.”
A conference on the “Economics of Carbon Taxes” will be held
in Washington on Tuesday by AEI and other groups, including
International Monetary Fund and the Environmental Protection
Agency.
