States Leading the Way on Carbon Fees

Some states have decided to stop waiting for Congress to take action on climate change and are trying to move ahead on their own. The list includes Oregon, Washington, and Massachusetts, where the Joint Committee on Telecommunications, Utilities and Energy held a hearing October 27 on S. 1747, authored by Senator Mike Barrett.

Co-sponsored by 20 percent of the State Legislature, the proposal would create a revenue-neutral carbon fee, with the proceeds flowing to state residents and employers. The fee would start at $10 per ton and increase $5 each year until reaching $40.

“This is really about a single idea,” Barrett testified. “If you post a complete price for a product that is underpriced today, people will react to the complete price by using less. That’s it. Carbon pricing in a nutshell. Massachusetts can legislate a nation-leading strategy against climate change by applying one simple approach to fossil fuels: The price of a product should include the expense associated with it.”

Barrett’s proposal includes this unusual provision: If the entire amount collected from fees is not returned in rebates, salaries would be reduced for the governor, secretary of administration and finance and secretary of energy and environmental affairs.

It’s great that some lawmakers and other leaders are springing into action. But it would be a whole lot smarter and efficient if Congress created a fee that would help the entire country tackle climate change. Together.

To push Congress into action, the Partnership for Responsible Growth suggests that half the proceeds of a fee go toward reducing the corporate tax rate from 35 percent, the highest among industrialized countries, to 25 percent.

Since a carbon fee would bump up the price of gasoline (about 28 cents per gallon if the fee were $30), the other half of the proceeds could go to low- and middle-income consumers as reimbursement. According to a September survey by three GOP pollsters, 54 percent of conservative Republicans would support a carbon tax if the money were rebated.

To encourage our trading partners to price carbon and to make sure that U.S. companies would not be at a disadvantage, our system would impose a WTO-compliant border tax adjustment on imports and include a credit for energy-intensive exports.

A carbon fee works. British Columbia has had one since 2008. It has reduced per capita fossil fuel consumption by 16 percent, while use in the rest of that country has risen by 3 percent. Meantime, British Columbia’s GDP growth has outperformed Canada’s.

We have held more than 175 meetings on Capitol Hill, focusing on House and Senate members who serve on the five committees that have jurisdiction over tax, environmental, and energy matters. We found receptiveness to our carbon fee idea, provided there is sufficient support from businesses back home. The most logical time for action would be in 2017, once the debate has had time to progress and a new president and Congress have taken their oaths.