Possible Bipartisan Support for Carbon Tax

[Frodo]

There is a possibility that we could follow Australia's lead in adopting a carbon tax:

Long-shot carbon tax suddenly part of fiscal cliff debate

By Valerie Volcovici
WASHINGTON | Thu Nov 8, 2012 5:37pm EST

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.

[morgieb]

If it wasn't bipartisan in Australia, it sure as hell won't in America.

And they couldn't pass cap-and-trade despite Congress being way more favourable for Team D.

[Simfan34]

What makes you think that if the Heritage Foundation's carbon trading scheme can't get passed, a tax will?

[Link]

People are already less than thrilled about their electric bills.  Do you think they are going to have much enthusiasm for a rate hike?  Also which Republican is going to throw coal country under the bus?  Coal was one issue that actually worked for Romney... for the good it did him.

[🐒Gods of Prosperity🔱🐲💸]

What makes you think that if the Heritage Foundation's carbon trading scheme can't get passed, a tax will?

An carbon trading scheme advantages some companies at the expense of others depending on what benchmark is used, and the total emissions cap for the nation is centrally determined rather than flexible enough to respond if demand outweighs the increased price from the tax.  After the financial crisis, the idea of creating another complex trading scheme doesn't look so good.

I think a carbon tax is probably the way to go for environmental reasons, but with energy prices as high as they are now it makes sense for them to be offset to be revenue neutral.

[Queen Mum Inks.LWC]

I'd prefer the Cap-and-Trade option.

[politicallefty]

If cap-and-trade couldn't even get through a Democratic Congress, I really cannot see how a carbon tax gets through this or the upcoming Congress. I'd like to think we can get some adequate scheme in place, but I'm not very hopeful.

[True Federalist (진정한 연방 주의자)]

Personally I support the use of a carbon tax and oppose the use of cap-and-trade.  However, I seriously doubt it would be used as part of the solution for the fiscal cliff.

[Blue3]

I'm an environmentalist, but I'm a realistic environmentaliist.

I really, highly doubt that the House will pass a carbon tax.

Obama's policies are already building up the clean energy industry (particularly Wind power) and decreasing how much total foreign oil we import. He should just stay on that path for the rest of his second term.

Carbon tax should be proposed by the next generation of Democratic candidates, when the economy is booming again.

[RI]

From an economic perspective, cap-and-trade is generally a better option than a tax if it's administered properly. A carbon tax is too inflexible and blind to industry costs whereas a permit market is self-adjusting (barring monopoly take-over; fortunately, the gov't could always inflate the permit market or redistribute).

[True Federalist (진정한 연방 주의자)]

From an economic perspective, cap-and-trade is generally a better option than a tax if it's administered properly. A carbon tax is too inflexible and blind to industry costs whereas a permit market is self-adjusting (barring monopoly take-over; fortunately, the gov't could always inflate the permit market or redistribute).

I seriously doubt the ability of the government to properly administer a cap-and-trade regime, especially with the current schemes that provide often dubious credits for supposed methods of carbon absorption.  A carbon tax provides for a predictable cost.  Cap and trade is far less predictable in its costs.

[RI]

From an economic perspective, cap-and-trade is generally a better option than a tax if it's administered properly. A carbon tax is too inflexible and blind to industry costs whereas a permit market is self-adjusting (barring monopoly take-over; fortunately, the gov't could always inflate the permit market or redistribute).

A carbon tax provides for a predictable cost.  Cap and trade is far less predictable in its costs.

A carbon tax would have to be indexed to inflation and industry costs (specifically marginal abatement costs) or else it would be largely ineffectual at curbing emissions. Furthermore, an effectual and efficient carbon tax would need to be based upon the equilibrium of the market MAC and marginal social benefit curves, both of which (though especially the latter) are hard to accurately quantify. An inaccurately assessed tax would be either crippling for businesses or ineffectual. Additionally, while the nominal cost of a carbon tax would be fixed, the real price would fluctuate greatly based on industry and firm costs, which could be accounted for, but not necessarily quickly and efficiently enough to be desireable.

On the other hard, a cap-and-trade system is as self-sufficient (or moreso) than your average market. Cap-and-trade is not affected by inflation and self-adjusts for changes in the MACs of businesses. Futhermore, unless the MSB is highly elastic, cap-and-trade will naturally result in a level of emission abatement closer to the socially optimal level than an assessed fee as it doesn't rely on potentially inaccurate estimates. Cap-and-trade has a market-determined price that is based upon more organic mechanisms than a carbon tax.

Of course, cap-and-trade is not without its problems as well. Some of these can be easily remedied by an automatic safety valve price and by safeguards based on permit concentration when automatic permit issuance is ordered. Additionally, initally permit designation would be a challenge, but not an insurmountable one.

[True Federalist (진정한 연방 주의자)]

I'll agree that if your primary concern is hitting a specific emissions target, cap and trade makes it easier to hit that target, but the cost of hitting that target is not very predictable.  Conversely a carbon tax makes the economic costs predictable, but the emissions effects less so.  However, the major problem with cap and trade is in its method of allocating the quotas initially.  Frankly, I do not trust them to be allocated efficiently, especially with the credulity for various carbon credit schemes that the market regulators have shown.  Also the economic effects of the carbon tax can to some extent be ameliorated by using the tax raised to cut other taxes.  That can't happen with cap and trade and its grandfathered quotas that are handed out for free in the politically acceptable schemes that have been put in place so far.

[Bacon King]

A carbon tax is much simpler than a cap-and-trade scheme, which would require a ton of bureaucracy. Why should we burden industries by forcing them to predict their emissions, and hire brokers and such to keep up with the system? It doesn't make sense, economically or environmentally. 

[Southern Senator North Carolina Yankee]

I think the carbon tax is better than the Cap and Trade system but I wouldn't support either as a unilateral action. Unless China and India are on board, you will get neglible benefits for certain economic losses to them and they will likely more than make up for the emissions themselves and then some. Plus every factory over there is one less complying with our environmental standards in other areas of concern.

[Fmr President & Senator Polnut]

If it wasn't bipartisan in Australia, it sure as hell won't in America.

And they couldn't pass cap-and-trade despite Congress being way more favourable for Team D.

To be fair, Abbott supported a carbon tax when the CPRS was being flagged

[Lief 🗽]

Grover Norquist, the current leader of the Republican Party, gives it his stamp of approval: http://wonkwire.com/2012/11/12/norquist-says-swapping-taxes-wouldnt-violate-pledge/

[Bacon King]

Are committee assignments made yet for the 113th Congress? I hope Manchin isn't the deciding vote on the Senate Energy Committee any more, because he's the biggest obstacle I can see.

[Blue3]

Are committee assignments made yet for the 113th Congress? I hope Manchin isn't the deciding vote on the Senate Energy Committee any more, because he's the biggest obstacle I can see.

The fiscal cliff will probably be dealt with before Christmas

[bedstuy]

I'll agree that if your primary concern is hitting a specific emissions target, cap and trade makes it easier to hit that target, but the cost of hitting that target is not very predictable.  Conversely a carbon tax makes the economic costs predictable, but the emissions effects less so.  However, the major problem with cap and trade is in its method of allocating the quotas initially.  Frankly, I do not trust them to be allocated efficiently, especially with the credulity for various carbon credit schemes that the market regulators have shown.  Also the economic effects of the carbon tax can to some extent be ameliorated by using the tax raised to cut other taxes.  That can't happen with cap and trade and its grandfathered quotas that are handed out for free in the politically acceptable schemes that have been put in place so far.

Even if you allocate inefficiently, it won't change the efficiency of the end result.  The parties will trade and the result will be an efficient allocation.

[Benj]

I'll agree that if your primary concern is hitting a specific emissions target, cap and trade makes it easier to hit that target, but the cost of hitting that target is not very predictable.  Conversely a carbon tax makes the economic costs predictable, but the emissions effects less so.  However, the major problem with cap and trade is in its method of allocating the quotas initially.  Frankly, I do not trust them to be allocated efficiently, especially with the credulity for various carbon credit schemes that the market regulators have shown.  Also the economic effects of the carbon tax can to some extent be ameliorated by using the tax raised to cut other taxes.  That can't happen with cap and trade and its grandfathered quotas that are handed out for free in the politically acceptable schemes that have been put in place so far.

Even if you allocate inefficiently, it won't change the efficiency of the end result.  The parties will trade and the result will be an efficient allocation.

The central conceit of cap and trade is that trading will happen efficiently and will not be biased by the initial distribution. It's pretty clear from a practical examination of economic behavior that the Coase Theorem is false in reality (and that was Coase's point in developing the theory, though weirdly latter day theorists have taken it as gospel instead).

[bedstuy]

I'll agree that if your primary concern is hitting a specific emissions target, cap and trade makes it easier to hit that target, but the cost of hitting that target is not very predictable.  Conversely a carbon tax makes the economic costs predictable, but the emissions effects less so.  However, the major problem with cap and trade is in its method of allocating the quotas initially.  Frankly, I do not trust them to be allocated efficiently, especially with the credulity for various carbon credit schemes that the market regulators have shown.  Also the economic effects of the carbon tax can to some extent be ameliorated by using the tax raised to cut other taxes.  That can't happen with cap and trade and its grandfathered quotas that are handed out for free in the politically acceptable schemes that have been put in place so far.

Even if you allocate inefficiently, it won't change the efficiency of the end result.  The parties will trade and the result will be an efficient allocation.

The central conceit of cap and trade is that trading will happen efficiently and will not be biased by the initial distribution. It's pretty clear from a practical examination of economic behavior that the Coase Theorem is false in reality (and that was Coase's point in developing the theory, though weirdly latter day theorists have taken it as gospel instead).

Perhaps.  That can be true though and cap-and-trade might still be better than a tax. Maybe a somewhat efficient market is significantly better than the other solutions.  And maybe you can craft a carbon trading system that's more efficient than most markets.     

[Skill and Chance]

Let's think about how a Carbon Tax vote would go down.  Assume the House agrees to wrap it into a large-scale budget deal and it moves to the Senate (big assumption, I know):

Likely Democratic Nays

Manchin
Landrieu
Begich
Heitkamp

Possible Democratic Nays

Pryor
Rockefeller (would vote for it only if he is retiring)
Baucus (would presumably vote for any budget he crafted, though)
Tester (would probably vote with Baucus)
Casey (will want natural gas concessions)
McCaskill
Donnelly

Likely Republican Ayes

Collins
Ayotte
Kirk

Possible Republican Ayes

Heller (solar)
McCain (solar)
Grassley (biofuels)
Ron Johnson (biofuels)

It looks plausible to pass it in a budget agreement under reconciliation, but it could never be done as a stand-alone.

[Ban my account ffs!]

I like the idea of a carbon tax phased in over a couple years coupled with tax free investment in carbon emission reduction technology (based on amount of emissions reduced).

Also, and most importantly:  Allow an equivalence of carbon dioxide emissions be deducted for each unit of non-CO2 ghgs reduced.  Methane is 25+ times more potent as a greenhouse gas than CO2.  Allow companies to absorb some of the tax early on by focusing on reducing the much more potent, but easier and less costly to reduce, emissions of Nitris Oxides and Methane.

And no.. Sandy was not caused by global warming.  Major hurricane landfalls on the U.S. east coast were much more common from 1918-1965 than they were from 1965-present.  And because tropical storm observing was spotty at best prior to the launch of satellites, we have no way of knowing just how many storms formed out in the Atlantic and fizzled before they ever reached land.

We know that many of the numerous storms that have formed in recent years have done just that.  Taking that into account, it is safe to assume there were periods in the late 19th century that were at least as active as the Atlantic now.  But we didn't have the ever watching eye of satellites and there were many fewer boats and coastal dwellers to suffer through them.

Human suffering from storms is increasing.. no doubt about that... but it has more to do with increasing numbers, living in vulnerable places, and increased real-time communication than something that is easy to blame, like "global warming".

It should also be noted that the warm waters that fed Sandy have been stirred up and have cooled dramatically.  Water temps off the southeast are now much cooler than normal.. indicating that the anomalously warm sea water that enhanced Sandy's development were fleeting and quite shallow.  We've had more powerful storms in the same spot and they haven't cooled the ocean nearly as much (thanks to more robust heat content in the ocean there)

[Benj]

Let's think about how a Carbon Tax vote would go down.  Assume the House agrees to wrap it into a large-scale budget deal and it moves to the Senate (big assumption, I know):

Likely Democratic Nays

Manchin
Landrieu
Begich
Heitkamp

Possible Democratic Nays

Pryor
Rockefeller (would vote for it only if he is retiring)
Baucus (would presumably vote for any budget he crafted, though)
Tester (would probably vote with Baucus)
Casey (will want natural gas concessions)
McCaskill
Donnelly

Likely Republican Ayes

Collins
Ayotte
Kirk

Possible Republican Ayes

Heller (solar)
McCain (solar)
Grassley (biofuels)
Ron Johnson (biofuels)

It looks plausible to pass it in a budget agreement under reconciliation, but it could never be done as a stand-alone.

Not sure why you have Heitkamp down as likely nay (unless she's said something explicitly anti-carbon tax). I would think the natural gas industry would love a carbon tax as it dramatically increases natural gas's competitive advantage over coal and oil. Otherwise, I don't think we know anything about Heitkamp's environmental views.

Similar for Casey, though natural gas is not that big in PA yet and unlikely to become so soon as the bottom has really fall out of natural gas exploration for the time being. The glut in supply has caused prices to drop too low for new exploration to be economical.