CLIMATE:

Experts like carbon tax; lawmakers still wary

The carbon tax has not a had a good week.

The week started well, with a meeting Tuesday on the idea hosted by the conservative American Enterprise Institute. It drew so many policy experts, advocates and hecklers that the organizers had to take down temporary walls to accommodate them all.

Many of those in attendance have worked on this issue for months with the hopes that it might garner enough bipartisan support in Washington to earn a place in a coming "grand bargain" on fiscal reform -- perhaps even in the near future.

But over the following days, it became clear that the only bipartisan agreement among elected officials is to leave the carbon tax alone.

First, President Obama said at his news conference Wednesday that passing a carbon tax would be "hard," as compared with finding consensus on allowing tax breaks for the wealthy to lapse, which, he said, "should be easy."

White House press secretary Jay Carney put it more bluntly yesterday: "We would never propose a carbon tax and have no intention of proposing one."

Obama and his advisers, including Joseph Aldy of Harvard University, who served as an energy surrogate during the campaign, and Gilbert Metcalf, Treasury Department deputy assistant secretary for environment and energy, have hinted that Obama could support a carbon tax if it had Republican support.

But the GOP's entire House leadership team said yesterday, in a statement issued by the conservative group Americans for Prosperity, that it had signed a "no climate tax" pledge after GOP conference organizing elections for the 113th Congress (E&ENews PM, Nov. 15).

At an event in Washington yesterday hosted by Politico, Sens. John Hoeven (R-N.D.) and Joe Manchin (D-W.Va.) also dismissed the idea, saying that climate change should be addressed through support for technology, not tax or regulation.

"You can't tax yourself to prosperity, and you can't actually tax your way to clean up the environment," Manchin said.

At the same event, Sen. Mark Udall (D-Colo.) said that while climate change is occurring -- "if we don't do something about it, we'll rue the day" -- enactment of a carbon tax is not plausible in the near term. He held out the possibility that it could happen in the future, however.

"I could see it as part of a broader tax package, particularly if it's revenue-neutral," he said.

Rep. Ed Whitfield (R-Ky.), who heads the House Energy and Power Subcommittee, predicted: "I don't think there's going to be a carbon tax adopted this year, or in 2013."

"There is man-made warming of the atmosphere," Whitfield continued. "We understand that." But he said climate change was not a top priority compared with the economy.

The two senators who will lead the Energy and Natural Resources Committee in the 113th Congress, Ron Wyden (D-Ore.), the chairman-in-waiting, and ranking member Lisa Murkowski (R-Alaska), also said this week that the policy's short-term prospects are nil (Greenwire, Nov. 15).

Dismissed now, convenient later?

"Virtually everyone in Washington on both sides of the political spectrum have been disavowing a carbon tax left, right and sideways," said Kenneth Green, a fellow at AEI who has looked at the idea of a carbon tax in the past but does not support it.

Green said that both sides of the spectrum appeared to have given up on legislation to curb emissions -- Republicans because they do not support it and Democrats because they already have authority to regulate carbon under existing law.

"The administration has decided that the regulatory path is sufficient for them," he said, "that they can get what they want through the existing levers they have that are exclusively theirs to control, like the Clean Air Act, the Clean Water Act and the Endangered Species Act."

Brookings Institution fellow Adele Morris, one of the organizers of Tuesday's AEI event, said that regulatory, tax and fiscal incentives may combine in the relatively near future to convince conservatives to take another look at the carbon tax option.

At some future date, Congress may be considering broader tax and entitlement legislation and might be looking for a new revenue stream to pay for it, she said. And at the same time, U.S. EPA is poised to finalize Clean Air Act rules to limit carbon from new utilities and to propose rules for existing power plants and refineries.

"So there's this looming regulatory apparatus," Morris said.

In that "deal environment," she said, conservatives might find that a carbon tax is a useful tool to help them accomplish a few of their objectives at the same time -- regulatory reform and tax reform.

But Green said conservatives would be wary about whether any deal involving a carbon tax would end up being what they had bargained for.

"Many of us are extremely skeptical about the prospect of getting those trades," he said. "Instead, we're going to get an extra carbon tax."

Invisible carbon taxes already exist in the increased cost of goods due to regulation, he said. Signing onto a carbon tax would likely amount to swapping an overt cost for a hidden cost.

William Gale, also of the Brookings Institution, agreed that a carbon tax is unlikely to be included in fiscal cliff legislation. But almost every other solution to the avalanche of tax hikes and spending cuts that are set to take effect Jan. 1 is equally unlikely, he predicted.

"There's no solution to the fiscal problem right now that is feasible," Gale said. "So it is not a waste of time to talk about solutions that seem to be impossible -- because all solutions seem to be impossible, and any solution that we come up with is something that is currently seen to be impossible."

Gale said there is some likelihood that lawmakers would have to find agreement first on how much revenue must be raised to fill the funding gap versus how much would come from cuts. When faced with the certainty of needing to raise taxes somehow, lawmakers might find something like a carbon tax acceptable.

Ben Schreiber of Friends of the Earth said that he was more disappointed by the president's statement Wednesday that climate change was not an immediate priority than in his dismissal of the carbon tax specifically. But he echoed Gale's theme that things might change when lawmakers are faced with the immediate need to raise revenue.

"We've always thought that this was a long shot," he said. "I don't think anything has changed."