New paper advocates U.S. carbon tax shift

Elaine Kamarck, former domestic policy advisor to Vice President Al Gore and the co-founder of the U.S. Climate Task Force, has added her voice to the growing chorus recommending a carbon tax in the U.S.

Kamarck unveiled a paper today that examines lessons learned from previous efforts to legislate on climate change and how these can be applied to help pass an emissions policy in the 111th U.S. Congress.

Specifically, she’d like to see revisions to the latest U.S. legislation, known as the Waxman-Markey bill, which would establish a “cap-and-trade” market for greenhouse gases (see Obama administration could fast track cap-and-trade, RPS in '09).

Kamarck told the Cleantech Group that the use of carbon must be reduced and a price needs to be put on it, but that she doesn’t think a cap-and-trade system is the way to do it. Instead, she’d prefer to revert back to where her old boss Al Gore started, with a carbon tax shift.

“There’s an opportunity to improve this bill,” she said, in the keynote address at an exclusive salon dinner event in San Francisco, Calif. “But we don’t have time to fool around. We don’t have time to get it wrong.”

Her paper, “Addressing Climate Change: The Politics of the Policy Options,” (read here) is intended to introduce a new idea into the debate and possibly make changes to the bill as it goes through the Senate this summer and fall, she said. The U.S. House of Representatives narrowly passed the bill June 26 (see Rice calls carbon cap-and-trade 'ridiculous').

If the bill should fail, Kamarck wants to ensure there’s an alternative ready. A carbon-based tax could be phased over a period of 10 years, she said, allowing businesses and consumers to know how much their gas and energy would cost so they could plan accordingly.

Her group’s idea is that a carbon tax would rebate revenue back to Americans, shifting the burden of taxation from employment to pollution. If Americans were to be taxed more for gas and electricity, the federal government would cut payroll taxes. Revenue from the carbon tax would go back to pay for Social Security.

“You don’t want climate change legislation to die,” she said. “We want to be ready with plan B, and we think this is plan B.”

She indicated one disadvantage of a carbon tax is the absence of a cap, but that “hard targets” could be set for emission reductions. Carbon dioxide emissions could be evaluated every three to five years and the tax could be adjusted to keep emission declines on target, according to the white paper.

Future 500 CEO Bill Shireman said a carbon tax is the better alternative, but questioned whether the politics are there to approve it. He said he thinks without major changes, the Waxman-Markey bill is about 20 votes shy of being able to pass in the Senate.

Shireman’s nonprofit company engagements brand name companies with activist groups to look for the systemic roots to problems. He’s in favor of carbon tax shift that would lower payroll taxes and drive 2 percent to 3 percent annual reductions in carbon emissions.

He said many cleantech companies he’s talking to are symbolically happy with the legislation because it’s a move forward, but disappointed with the cap-and-trade component of it. Coal companies, the National Mining Association and companies such as Duke Energy have been supportive of the legislation.

In a March interview with the Cleantech Group, Tony Haymet, director of the Scripps Institute of Oceanography in San Diego, said that although he’s in favor of a carbon tax, it seems to be losing out to a cap-and-trade system (see Forget what you know about carbon emissions).

Europe and California already have their own systems, and the RGGI U.S. Northeast consortium has been auctioning off credits for its cap-and-trade system. Australia was also planning to implement a complicated system where every industry has a special deal, he said.

The European system has been in trouble because of the economic downturn (see Indian firms drop carbon trading plans in favor of renewable projects).

“The price has plummeted to $9 a ton. You really need system that works in economic up times and down times, and a tax is certainly that. I kind of like to call it a user fee, but the common language is tax,” Haymet said.

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