Carbon Tax Meets New Washington Politics

by Annie Snider (Politico's Morning Energy) President Joe Biden has revived the idea of a carbon tax, but climate hawks on Capitol Hill hope he will give them time to work through the tricky politics of the issue. -- ... THE TRICKY POLITICS OF A CARBON TAX: The Biden administration's sweeping climate change agenda has some lawmakers quietly considering whether to push for a tax on carbon emission, but some of Capitol Hill’s fiercest climate hawks are hoping the administration will give lawmakers time to work through delicate politics, Zack Colman reports this morning.

Biden’s campaign platform included an “enforcement mechanism” for reducing emissions, which many interpreted as a carbon tax. And major trade groups that have long been aligned with Republicans, including the U.S. Chamber of Commerce, American Petroleum Institute and Business Roundtable, have endorsed a loosely defined “market-based” mechanism for dealing with emissions.

But many progressive Democrats have grown wary of carbon tax plans, fearing that they are too modest to fully deal with the emissions problem and that they fail to address the disproportionate impact that pollution has on low-income and communities of color. After running for president in 2016 on the idea of a carbon tax, Senate Budget Committee Chair Bernie Sanders (I-Vt.) appeared to back away from the idea in 2020, although he and Green New Deal co-author Rep. Alexandria Ocasio-Cortez (D-N.Y.) have indicated it could be included as part of climate legislation.

But a carbon tax bill sweetened with goodies to attract the reluctant left could come at the expense of Republicans who are more likely to be swayed by the economic argument that a simple fee is more efficient and offers regulatory certainty to industry. Meanwhile, fossil fuel defenders on the Democratic party’s right flank — notably Sen. Joe Manchin of West Virginia — aren’t budging from their opposition.

Sen. Sheldon Whitehouse (D-R.I.) urged Biden to be patient: “I just don't think he will be as successful if he tries to cook up a climate bill in the opening months of his administration and then present it to Congress. I think it becomes a target at that point,” the carbon price supporter said in an interview.

BILL GATES’ CLIMATE CALL: Bill Gates is not interested in talking about far-fetched ideas like eliminating fossil fuels in a decade, nor in narrow solutions, like trying to make electric vehicles slightly cheaper. What he wants, Gates said in an interview with Kelsey Tamborrino, is for President Joe Biden to push for investment in technology that could eliminate greenhouse gases by the middle of the century, especially from sectors like steel, concrete, aviation and farming, that have seen little progress to date. READ MORE

Excerpt from Politico's Morning Energy: That will keep the focus on the energy transition after oil executives heard a raft a speakers on Monday assert that clean energy sources are attracting a growing share of global investments — and fossil fuel producers who don't adapt face a risk of being left behind, as Pro's Ben Lefebvre reports . Companies that do not follow that financial shift will be "fighting gravity," said Andy Jassy, chief executive of Amazon Web Services. "If something is going to happen, whether it's good for you or not, if it's good for customers, it is going to happen," Jassy said.

Related: The American Petroleum Institute is poised to endorse a price on carbon emissions, The Wall Street Journal reports. "API supports economy-wide carbon pricing as the primary government climate policy instrument to reduce CO2 emissions while helping keep energy affordable, instead of mandates or prescriptive regulatory action," a draft statement seen by the WSJ said.

U.S. TRADE REP CONSIDERING CARBON TARIFFS: The Office of the U.S. Trade Representative will consider carbon border adjustments — tariffs on carbon-intensive goods from nations without their own climate regulation — to tackle climate change, according to this year's Trade Policy Agenda. The agenda emphasized collaborating with trade partners to maintain environmental protection standards and penalizing partners who fail to uphold environmental agreements. Pro's Gavin Bade points out the tariffs could require Congress to enact and could run into issues at the World Trade Organization. READ MORE

Excerpt from Politico's Morning Energy: ABOUT THAT API CARBON PRICE: The energy world was atwitter after a news report that the American Petroleum Institute may be ready to back a price on carbon. API's saying it supports a carbon price isn't necessarily new — it has broached the subject in years past and mentioned it as a possible "market based solution" in a recent annual report — but word that it could be preparing to put its lobbying might where it's PR mouth spurred intrigue among industry lobbyists. An association spokesperson would only confirm to ME that "API and its membership continue to discuss and consider carbon pricing among other policy solutions to reduce emissions and reach the ambitions of the Paris Agreement."

Several lobbyists told ME the "leaked" news of a carbon endorsement was merely the API trying to calm warring factions among its membership, which includes a mix of international companies that may not mind a carbon tax if it keeps them in regulators' good graces and those who want to fight against it. "This is simply a case of Shell and BP pushing the API toward a progressive stance, but it is not a view that is uniformly held by API members," said one source familiar with the group's inner workings. Other lobbyists were less sure. Businesses are coming to grips that Biden at some point will propose a carbon tax, that one could be included in a reconciliation package, and that it might be better for the industry than an emissions limit companies may not be able to meet. "The position that no one supports [a carbon price] but the fruitcakes from the EU, that's definitely not the case," the person said. READ MORE

Excerpt from Politico's Morning Energy: STEEL'S CARBON BORDER TAX: The Climate Leadership Council released a new report today showing that a border carbon adjustment and carbon fee could be a major boost for American steel. Foreign steelmakers who supply the U.S. emit 50 to 100 percent more carbon dioxide per ton than U.S. producers, and a BCA could bolster U.S. steel industry margins by 32 to 41 percent, the report said, based on 2019 steel market figures. It could also reduce imports of foreign steel by 50 percent. CRU International authored the report, which you can read here. READ MORE

Excerpt from Politico's Morning Energy: STRADDLING THE CARBON BORDER: OECD secretary general Mathias Cormann said a carbon border fee mechanism should only be deployed as a “last resort,” warning that a global standard for measuring carbon prices would be difficult to square with World Trade Organization rules. The European Union is considering a carbon border adjustment mechanism, but the OECD head said it would be better to use the threat of a carbon fee to coax other countries into a global climate deal. Actually implementing the mechanism should be for if negotiations fail, he said. More from POLITICO’s Matei Rosca in London.