Making the Carbon Tax Pitch

November 12, 2019

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by Kelsey Tamborrino (Politico's Morning Energy) More than 800 volunteers across the U.S. will be on Capitol Hill today to meet with lawmakers on the Energy Innovation and Carbon Dividend Act, H.R. 763 (116), on behalf of the Citizens' Climate Lobby. The group's "lobby day" today follows the release of a new report from Columbia University last week that studied the carbon tax and dividend bill.

The legislation in question would impose a fee on the carbon emitted from fuels including crude oil, natural gas and coal. That fee is imposed on the producers or importers of the fuels and is equal to the greenhouse gas content of the fuel multiplied by the carbon fee rate, which would begin at $15 in 2019 and increases by $10 each year. The fees would be deposited into a "Carbon Dividend Trust Fund" for payments to U.S. citizens.

The bill is backed by 69 co-sponsors — the most out of the several carbon tax bills introduced this Congress — though only one of which is a Republican: outgoing Florida Rep. Francis Rooney. Democratic Rep. Ted Deutch, also of Florida, is the lead sponsor.

The recent Center on Global Energy Policy study of the bill found it would lead to economy-wide net greenhouse gas emissions reductions of 32 percent to 33 percent by 2025 and 36 percent to 38 percent by 2030 from 2005 levels. Most of the near-term emission reductions occur in the power sector, the report found, where emissions fall 82 percent to 84 percent by 2030.

Recall: A carbon tax is among the ideas being floated by some trade associations looking for ways to embrace climate change policies that would go beyond previously vague calls for action, as Pro's Zack Colman reported.

ACROSS THE AIRWAVES: EDF Action is announcing an ad buy today thanking bipartisan House lawmakers for their action on clean energy. The $600,000 mail and digital advertising campaign will thank Reps. Harley Rouda (D-Calif.), Cindy Axne (D-Iowa), Sean Casten (D-Ill.), Francis Rooney (R-Fla.), Brian Fitzpatrick (R-Pa.), Joe Cunningham (D-S.C.) and Donald McEachin (D-Va.). Watch the ads for Rouda, Axne, Casten and Cunningham. READ MORE

An Assessment of the Energy Innovation and Carbon Dividend Act (Center on Global Energy Policy (CGEP) at Columbia University’s School of International and Public Affairs)

Group launches six-figure pro-carbon tax ad campaign aimed at Congress (The Hill)

AD TOUTS CARBON TAX: (Politico's Morning Energy)

How to Cut U.S. Carbon Pollution by Nearly 40 Percent in 10 Years -- A bill in Congress could slash American greenhouse-gas emissions. It’s even bipartisan—if you squint. (The Atlantic)

NEW YOUNG GOP CLIMATE GROUP FORMED: (Politico's Morning Energy)

CARBON DIVIDENDS GROUP GROWS: (Politico's Morning Energy)

Jacob Miller: Virus compels us to price carbon (Topeka Capital-Journal)

Excerpt from Center on Global Energy Policy: The Center on Global Energy Policy (CGEP) at Columbia University’s School of International and Public Affairs launched a Carbon Tax Research Initiative in 2018 with the goal of enabling the design and thoughtful consideration of federal carbon tax policy in the United States. The initiative is a collaboration among scholars at CGEP, the broader Columbia University faculty, and independent external experts. This paper is a collaboration between CGEP and Rhodium Group, an independent research provider.

EXECUTIVE SUMMARY

Growing public concern about the social, economic, and environmental impacts of climate change, along with pressure for lawmakers to introduce policy proposals that reduce emissions, have brought carbon taxes to the center of policy discussions on Capitol Hill. Thus far in 2019, seven different carbon tax legislative proposals have been introduced in Congress. The proposal with the most cosponsors, totaling 64 Democrats and 1 Republican as of the end of September 2019, is the Energy Innovation and Carbon Dividend Act (EICDA), introduced in February 2019 by lead sponsor Ted Deutch (D-FL). This study assesses the potential impacts of EICDA on the US energy system, environment, and economy.

EICDA establishes a fee on each ton of greenhouse gas (GHG) emissions. It covers over 80 percent of gross national emissions. The fee starts at $15 per metric ton and increases by $10 or $15 each year, depending on future emissions levels. Revenue raised by the carbon fee is used for “carbon dividends,” a rebate to every eligible US citizen or lawful resident. The bill also includes measures to protect US competitiveness and to reduce the risk that companies will relocate their operations to a different country with laxer climate laws. Through the carbon fee and additional regulations if necessary, EICDA targets 90 percent emissions reductions by 2050 compared to 2016 levels.

This study is part of a joint effort by Columbia University’s Center on Global Energy Policy (CGEP) and Rhodium Group to help policymakers, journalists, and other stakeholders understand the important decisions associated with the design of carbon tax policies and the implications of these decisions. This analysis uses a version of the National Energy Modeling System maintained by the Rhodium Group (RHG-NEMS) to quantify the energy and environmental implications of EICDA, focusing on outcomes through 2030. Supplemental analyses provide insights on how EICDA would affect households, the economy, and government budgets.

The following are key results:

GHG emissions decline substantially. Compared to 2005 levels, implementing EICDA as a stand-alone policy leads to economy-wide net GHG emissions reductions of 32–33 percent by 2025 and 36–38 percent by 2030. These emissions reductions exceed the targets in the EICDA proposal through 2030 and exceed the US commitments to the Paris Agreement over this period. Most of the near-term emission reductions occur in the power sector, where emissions fall 82–84 percent by 2030.
Air pollution also declines. EICDA reduces local air pollution from power plants. Sulfur dioxide (SO2) and mercury emissions from the power sector decline by more than 95 percent and emissions of oxides of nitrogen (NOx) decline by about 75 percent by 2030 relative to a current policy scenario.
Electricity generation shifts to cleaner sources. The price on carbon causes the US economy to shift from carbon-intensive energy sources to low- and zero-carbon energy sources. Coal is nearly eliminated from the power sector by 2030, with solar, wind, nuclear, and natural gas with carbon capture and storage all providing significantly larger generation shares compared to a current policy scenario.
Energy prices rise but do not skyrocket. The price on carbon causes energy prices to increase for all carbon-emitting fuels, which leads to significantly higher overall energy expenditures, though within the range of recent historical variation. Taking two prominent examples, results show EICDA causing national average gasoline prices to increase by about 12 cents per gallon in 2020 and 90 cents per gallon in 2030 and causing national average electricity prices to increase by about 1 and 3 cents per kilowatt hour in 2020 and 2030, respectively. EICDA causes per capita energy expenditures to increase by $200-$210 in 2020 and $1,160-$1,170 in 2030 compared to a current policy scenario. In all years, annual per capita energy expenditures remain below the recent historical peak during the commodities crisis in 2008.
The carbon dividend cushions energy price impacts. EICDA generates substantial revenue that is distributed in the form of equal dividend payments. EICDA generates $72–$75 billion in carbon tax revenues in 2020 and $403–$422 billion in 2030. This translates into an annual dividend for eligible adults of $250-$260 in 2020 and $1,410-$1,470 in 2030, with half those amounts also paid to eligible children. On average, the carbon dividend payments are comparable to the changes in energy expenditures caused by EICDA. Because higher-income households purchase far more carbon-intensive goods and services, distributing dividends equally implies that average low- and middle-income households receive more in dividends than they pay in increased economy-wide prices for goods and services resulting from the carbon tax.
Net government revenue declines slightly, at least initially. Carbon tax-and-dividend policies are often described as “revenue neutral,” but the impacts of EICDA on government revenue are uncertain and likely negative in the near term. We estimate that the net government revenues under EICDA decline by roughly 10 percent of the annual carbon tax revenue in the early years of the policy. This estimate considers government revenue gains from taxing emissions and dividends, dividend payouts, and government revenue losses from reduced income and payroll taxes from those who pay the carbon tax. However, the proposal will also affect government revenue in other ways that are beyond the scope of our analysis, so the overall impacts on net government revenue is uncertain. READ MORE

Excerpt from Politico's Morning Energy: AD TOUTS CARBON TAX: Americans for Carbon Dividends launched a six-figure digital advertising campaign promoting a carbon tax-and-dividend proposal that will run on Facebook, Hulu, Twitter and websites for The Washington Post, Fox News and Wall Street Journal. The spot, the first for the Climate Leadership Council's lobbying arm, touts its plan as a bipartisan solution that will halve greenhouse gas emissions, generate a $2,000 dividend for a family of four and ditch "unnecessary regulations."

Americans for Carbon Dividends CEO Ted Halstead said his group wants to create political space for a business-backed, bipartisan climate policy. Several major oil and gas companies, along with environmental organizations, have thrown their money behind the carbon dividend, which would put a price on emissions in exchange for shelving regulations, returning revenues to Americans. Halstead said his group's approach could attract Republicans who have expressed growing interest in tackling rising emissions but aren't enamored by Green New Deal-style policies or the prospect of continuing past prescriptions of regulating emissions and subsidizing clean energy.

"It's essential going into the 2020 election that this not be viewed as a partisan issue," Halstead told ME. "Without that third lane of climate policy, we have a very skewed debate." READ MORE

Excerpt from Politico's Morning Energy: NEW YOUNG GOP CLIMATE GROUP FORMED: A group of young college Republicans today (December 10, 2019) announced the formation of a new organization that will lobby their party in congressional districts and Capitol Hill to adopt the Baker-Shultz carbon dividend plan, which would return all revenues from a steadily increasing carbon price to U.S. citizens. "There definitely is a vacuum," said Kiera O'Brien, one of the leaders of the Young Conservatives for Carbon Dividends. "If we [Republicans] don't offer our own solutions, what is the American public left to choose from?" The group has begun to hire some regional directors and plans a robust presence at CPAC in 2020. They'll also eventually lobby directly on Capitol Hill. READ MORE

Excerpt from Politico's Morning Energy: CARBON DIVIDENDS GROUP GROWS: Americans for Carbon Dividends, the advocacy arm of the Climate Leadership Council, raised over $5 million in 2019 in contributions including newly announced ones from IBM, Ford, GM, Vistra Energy and Calpine Corp. as it seeks to ramp up its direct lobbying and staffing in 2020. It's a signal the group's funders extend beyond the utility and energy sectors to now include major automakers and a tech giant. "We've always known this was going to be a marathon and not a sprint," said Greg Bertelsen, executive vice president of the Climate Leadership Council. "It's clear that this is a solution that the nation's business leaders want. They understand there is a way to address climate change that is pro-growth and pro-environment." Former Rep. Ryan Costello, managing director of the group, will be eligible to lobby Congress in January. READ MORE