The U.S. has long lacked a national strategy for reducing carbon emissions. To fill the void, various agencies have proposed a variety of regulations under existing laws, such as efforts to reduce methane emissions in oil-and-gas operations, limit carbon carbon emissions from the power sector (the Clean Power Plan), and promote environmental review of the greenhouse gas impacts of various federally approved projects.

With the death of a proposed federal cap-and-trade program in 2010 under a Democratic congress, some climate advocates now see hope in developing a national carbon tax. This approach makes a lot of sense: it could tax upstream emissions for carbon-based fuels like coal, oil and gas, thereby discouraging their use both by industry and by consumers, who may then seek to reduce consumption of things like coal-based electricity and gasoline for transportation. The revenue in turn could be used to fund various climate-friendly projects or be returned to taxpayers as a dividend.

Supporters actually include some Republicans, who prefer this more minimalist government approach to combating climate change instead of heavy-handed regulations or mandates, such as we see in states like California. To that end, a Florida Republican, Rep. Carlos Curbelo, is about to introduce a carbon tax proposal that is unlikely to go anywhere in this Congress but could serve as an opening salvo and building block for future policy.

E&E News received a copy of the legislation and had this to say about it:

A copy of the draft bill obtained by E&E News calls for eliminating the federal gas tax and replacing it with a $23-per-ton tax on carbon emissions from oil refineries, gas processing plants and coal mine mouths beginning in 2020. Industrial sectors such as cement, aluminum, steel and glass would also pay the fee for emissions stemming from physical or chemical reactions outside of energy production. Sources said Curbelo’s office was shopping that version of the bill last week.
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It would halt — but not kill — EPA regulations on greenhouse gas emissions so long as the tax meets its goals to cut carbon emissions. The draft legislation contains check-in points in 2025 and 2029 to consider reinstating regulations if the tax hasn’t curbed enough greenhouse gases. The moratorium would sunset after 2033 if emissions goals are met. That provision is meant to address concerns from Democrats and environmental groups, which generally oppose forfeiting EPA’s authority to regulate carbon in exchange for a carbon tax.

Significantly, seventy percent of the revenues would go to the federal Highway Trust Fund to help shore up the dwindling gas tax revenue. The remaining revenue would go to state grants for low-income families to offset higher energy costs, research and development programs, and financing coastal restoration projects.

Meanwhile, companion research from libertarian-oriented think tanks modeled the greenhouse gas benefits. They suggest that emissions would drop 1.2 percent at a tax of $14 per ton, 3.2 percent at $50 per ton and 3.5 percent at $73 per ton. Cubelo’s research shows the policy would reduce greenhouse gas emissions 24 percent below 2005 levels by 2020 and 30 percent below 2005 levels in 2032, exceeding the targets for the U.S. under the Paris accord.

The modelers also claim the carbon tax would have negligible macroeconomic effects, with little change to U.S. GDP. The oil and gas sector would not be affected much, although transportation-sector emissions would generally drop 2 percent. The power sector would see much larger reductions, due to decreased reliance on coal-fired power plants.

The question for Democrats and other climate advocates is whether they would accept a national carbon tax that would displace the various climate regulations — and possibly preempt state action on climate. As my colleague Dan Farber noted on Legal Planet, jurisdictional and regulatory fragmentation on climate policy is advantageous to building political resilience. We’ve seen this play out in practice: the election of someone like Trump poses less of a threat when climate policies are embedded in multiple agencies, statutes, and state and local jurisdictions. A national carbon tax, while perhaps more effective in reducing emissions, flies in the face of that logic because it could swiftly be reversed by a future congress and president.

While decisions won’t have to be made soon on this bill, given the current political climate, climate advocates may soon have to grapple with the carbon tax option — and it’s potential political downside.