Carbon tax could replace Obama’s climate rules, Democrat says

By Evan Lehmann | 04/23/2015 08:20 AM EDT

Rep. John Delaney told an audience at a conservative think tank yesterday that he’s drafting a bill to tax carbon that could lead to the repeal of President Obama’s signature policy of regulating CO2 emissions at power plants.

Rep. John Delaney told an audience at a conservative think tank yesterday that he’s drafting a bill to tax carbon that could lead to the repeal of President Obama’s signature policy of regulating CO2 emissions at power plants.

"I think it would inevitably lead to that," the Maryland Democrat said.

Delaney made his Earth Day announcement at the American Enterprise Institute, a conservative policy shop that has made splashes in Republican circles, not all of them welcome, by hosting discussions about taxing carbon.


The highest-profile of those, in 2012, were described by conservative critics as occurring in secret, leading to some speculation that AEI might be promoting the tax to replace revenue that would be lost by cutting income taxes.

Supporters see a carbon tax as one way to unlock broader tax reform. The benefit? Lots of cash, lower emissions and smaller taxes elsewhere. Opponents see more taxes.

None of that has happened, but at the time, it prompted the National Review to ask of AEI, "What are they thinking?!"

Those early discussions, which featured AEI economists and others from Democratic-leaning groups, has led to a new book that’s described as a key resource for lawmakers interested in pursuing a carbon tax. It’s named "Implementing a U.S. Carbon Tax" and was unveiled at the event yesterday.

The event’s moderator, Aparna Mathur, a resident economist at AEI, described a carbon tax as arguably the most efficient way to address climate change. It could also raise an estimated $1.2 trillion over 10 years, she said, potentially creating enough revenue to pay for other tax cuts.

No more ‘war on coal’?

That was the backdrop for Delaney’s announcement. The bill, named the "Tax Pollution, Not Profits Act," is in draft form, and he hopes it will generate discussion among lawmakers. It would place a $30 price on each metric ton of carbon dioxide, and it would rise by 4 percent above inflation annually.

Half of its revenue would be applied to reducing the corporate tax rate from 35 percent to 28 percent.

"If we want a competitive corporate tax system, we’ve got to lower the rate," Delaney said. "The problem is you can’t pay for it. There’s no agreement about how to do that. This creates an agreement on how to do that."

Delaney also addresses the Republican argument that emission taxes are a "war on coal." He would use a "multibillion-dollar program" generated from the tax to help coal miners receive retraining, relocation, long-term health care and early retirement.

"In the scheme of the revenues that come from a carbon tax, you can fully take care of these individuals who are great Americans … for the rest of their lives," he said. "So you kind of take that issue off the table."

The rest of the revenue would be used to offset higher energy costs for American households. The bill uses a sliding scale to determine how much in tax credits families would receive, with those under 150 percent of the poverty line getting the most. That translates to a family of four with an income of about $36,000. Families between that level and $48,500 would get fewer tax credits under the bill, and families over that level would be eligible for less.

The bill does not call for the replacement of U.S. EPA’s Clean Power Plan. But Delaney said that he’s open to that outcome if the measure is debated in a legislative process.

"I think that’s something that’s on the table," Delaney said.

Is there support for a carbon tax?

The bill also is not strictly revenue-neutral, because it uses some of the proceeds from taxing carbon to help coal miners. But Bob Inglis, a former Republican congressman from South Carolina, expressed optimism.

"He’s ready as a Democrat to lower the corporate tax rate," Inglis told the audience. "Now that is pretty exciting."

Inglis, who runs the Energy and Enterprise Initiative at George Mason University, has been urging Republicans to support a carbon tax for the dual purposes of addressing climate change and cutting other taxes.

He believes his party has gradually receded from its height of climate denial during the recession. It then moved through an "agnostic" period, he said, in which some politicians would say, "I’m not a scientist." Now, he said, Republicans are in a "defeatist" mode in which they say the nation can’t afford to address rising temperatures. He didn’t mention a specific presidential candidate, but he might have been referring to Sen. Marco Rubio (R-Fla.), who said this week that any solution to climate change will ruin the economy.

"I’ve seen some of my fellow Republicans taking that defeatist position, but you can hear those words around the room and realize you can’t continue that and run for president, saying America’s an exceptional nation," Inglis said. "So ditch that position and go to the obvious one: Free enterprise can solve this problem."

Adele Morris of the Brookings Institution, who helped craft Delaney’s bill and is also an author of the book released yesterday, said that she sees movement around a carbon tax. She credits the Clean Power Plan. In years past, it was easy for policymakers to dismiss a carbon tax because there wasn’t a different mechanism pricing emissions.

Now the status quo is a cumbersome and potentially expensive set of regulations. That might make a carbon tax more attractive, she said.

"A carbon tax has gone from a policy that only an economist could love to #carbontax," Morris said.