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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Will The U.S. See A Carbon Tax Under Trump?

Carbon Tax

Last week a group of Republicans and businessmen tabled a proposal for a carbon tax, designed to replace the Obama administration’s string of environmental regulations aimed at reducing climate change-aggravating emissions.

The idea is not new. It has been put forward before by energy industry representatives, including Exxon’s then CEO Rex Tillerson, now Secretary of State, as a transparent and direct way to curb the effects of CO2 emissions on climate, even though the company lobbied against carbon tax bills last year.

Basically, the idea amounts to replacing regulations with taxation—the latter which would be much more efficient in achieving the ends for which the regulations were devised. Starting from US$40 per metric ton of carbon dioxide, taxes would be increased every year to motivate more aggressive efforts to curb these emissions.

Annual revenues from the tax are estimated broadly in the US$200 billion to $300 billion range, and—this is the best bit—this will be distributed to households as quarterly dividends via a special scheme managed by the Social Security Administration. The reimbursements will compensate households for the higher prices of all products resulting from the introduction to the tax.

Although President Trump and many Republicans in parliament have vocally opposed the idea of a carbon tax, this approach is “very Conservative,” said one member of the Climate Leadership Council, which proposed the tax, White House veteran James Baker. Baker went on to add that this is “a free market approach”, admitting, however, the Council would have a hard time convincing anti-tax Republicans about the benefits of the new levy.

Some critics see the proposal as a way to woo younger, more environmentally conscious voters. They also see it as a way of creating a whole new type of entitlement with the dividend payouts, questioning the motivating force of higher prices. Related: Energy Storage Set To Boom In 2017

Others note that dismantling regulations, which would be unnecessary with a direct tax, could make the Environmental Protection Agency a rather irrelevant authority, and would inevitably lead to job losses, and those that stand to lose their jobs won’t go gently. Moreover, David Blackmon writes for Forbes, just because the environmental regulations from the Obama era have become unnecessary doesn’t mean that all of them will be repealed: there is a very strong pro-regulation lobby that has invested too much in promoting the idea that regulation keeps the industry accountable.

Two analysts, authors of a report commissioned by the Climate Leadership Council, estimate that the tax would help the U.S. meet its Paris Agreement carbon emission cut quota better than the Obama regulations would. According to them, Obama’s regulations would lead to a 16-percent cut in emissions between 2005 and 2025, versus 28 percent with a carbon tax.

Other experts also believe that a carbon tax, as devised by the Council, could achieve more than what Obama regulations strived for, prompting an emissions reduction of 40 percent by 2030.

There seem to be enough arguments both for and against the carbon tax proposal, which should keep the debate going for quite some time. However, the chances of it becoming a reality are slim: Bloomberg recalls that last year, the House voted against a carbon tax, with the votes locked in to make it harder for legislators to switch sides at a later stage. Some fear that a carbon tax could start looking attractive against the background of Trump’s plans to cut other taxes, but with the stipulation that none of the revenue from the carbon tax would remain in the treasury, these fears seem insubstantial.

By Irina Slav for Oilprice.com

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Leave a comment
  • Lee James on February 13 2017 said:
    I'd like to add to the article that the Leadership council feels a need to do something, rather than a total nothing. They look at the idea of pricing carbon as a kind of insurance policy. Maybe mankind actually has a role in changing climate?! Seems to be the conservative, prudent thing to do ... place a price on carbon as a reminder to us of what it costs to burn carbon, but return all tax revenue promptly to citizens.

    Beats the command and control of EPA-style regulation.
  • GREGORY FOREMAN on February 14 2017 said:
    The adoption of a carbon tax is the most regressive, counterproductive approach to the CO2 problem imaginable. Why? Because the tax plus the desired profit markup, will be passed on to the consumer in the form of higher prices. We don’t need a “reminder” of the “cost of carbon”. We already have a reminder every month. It comes in the form of a utility bill. Implementation of a CO2 tax would provide the bases of an inflationary spiral creating economic conditions comparable to the late 1960’s and the mid 1970’s.
    A more sanguine approach to the CO2 dilemma would be the adoption and implementation of tax credits aimed at incentivizing the installation of CO2 sequestration technology into coal fired utility systems. Such technology is real and, depending on the particular technology, capable of capturing and sequestrating up to 80% of the CO2 released.
    The fact that many “enlightened” people fall back on taxing the CO2 released is a primitive methodology aimed at “passing on” the cost of CO2 production to those that can least afford the cost. Shame on you.
  • Peter on February 21 2017 said:
    This really worked well for Canada, the price of everything shot up big time. Not only that, now I have to drive twice as much, to go to my second job as we need to survive. Only a green-tard can think up this sort of insanity.

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