With headlines in the United States of intense wildfires out West and more frequent hurricanes hitting the Gulf and East Coasts, concern that the U.S. is already beginning to experience the impacts of climate change is growing. While most recognize climate change is occurring, the debate over how to effectively address climate change by reducing greenhouse gas emissions rages on.
The Washington Post recently noted carbon taxes have been cited by the United Nations as, perhaps, the most efficient and effective tool to reduce greenhouse gas emissions:
The United Nations contends taxing carbon dioxide emissions is an essential component of halting a steady rise in global temperatures. It was a key element of the world body’s major October report predicting Earth’s atmosphere may warm by up to 2. 7 degrees Fahrenheit over preindustrial levels as soon as 2040, potentially triggering a global crisis decades earlier than expected.
However, imposing new taxes also can have significant economic impacts, particularly on the middle and lower class.
Over the weekend, Reuters reported that Paris was the scene of some of the worst rioting France has seen in a generation. One reason for the protests is a fuel tax imposed by the French government to combat climate change. The fuel tax is one tool in an aggressive plan to reduce carbon emissions by 40 percent by 2030. The purpose of the tax is put incentives in place to encourage less usage of fossil fuel powered vehicles and to create an incentive to convert to electric vehicles.
The protesters believe the fuel tax demonstrates that the French government caters to the rich and elite. They believe the government does not understand that the fuel tax disproportionately impacts the lower and middle class.
U.S. Considers First Bi-Partisan Carbon Tax Bill
The goal of a carbon tax is to impose a price on sources of greenhouse gas emissions in order to create an economic incentive to move toward more efficient and less polluting sources. In the U.S., Congress has yet to act on any comprehensive climate change legislation. That could change with the introduction of a bi-partisan bill that would impose a carbon tax.
In November, a five members of the House introduced the “Energy Innovation and Carbon Dividend Act” which would impose a tax on carbon. As discussed in the Miami Herald, the goal of the proposal is to reduce greenhouse gas emission by 40 percent within 10 years with a 91 percent reduction by 2050. The reductions would be achieved by initially charging $15 per metric ton of carbon emitted and increase the price by $10 every year.
However, unlike other proposals, that would use tax revenues to fund infrastructure or reduce the deficit, the Bill would return the revenue back to citizens in the form of a dividend to offset higher energy costs. The Bill is similar to a proposal put forward by the Climate Leadership Council, led by former Republican Secretaries of State James A. Baker III and George P. Schultz. The Climate Leadership Council proposal called for a $40 per ton price on carbon dioxide emissions with the price rising thereafter. Citizens would receive rebates starting at $2,000 per year for a family of four.
In October 2018, the Climate Leadership Council released a new report titled “The-Dividend-Advantage–The 10 Reasons Why Rebating All Carbon Fee Revenue Directly to the American People Offers the Most Popular, Equitable and Politically Viable Climate Solution” Some of the 10 reasons include:
- Returning revenues to citizens has the highest public support
- Carrots trumps sticks- creating incentives to reduce emissions is better than mandates
- Most equitable- avoids regressive taxes that put the burden on the least fortunate.
It is the last bullet point that ties directly to what is occurring in France. The French Government has directed the revenues from its fuel tax to pay down the deficit rather than returning it to the citizens. This means that the increased cost of fuel is being directly felt by the consumers at the pump. The French Government defends the allocation of the tax revenues by stating that citizens need to be encouraged to do their part to reduce usage of fossil fuels.
The U.S. carbon tax proposal would address the concern that carbon taxes would disproportionately impact lower income Americans by increasing energy prices. As the recent protests demonstrate, climate strategies must be properly balanced so as to not disproportionately impact citizens more vulnerable to prices and tax increases. The French protests are a real world example of failing to account for those impacts.