Some conservatives tout carbon tax to fund Trump’s plan

Source: Arianna Skibell, E&E News reporter • Posted: Thursday, February 1, 2018

With many questions hovering over how to fund President Trump’s much-anticipated infrastructure proposal, the politically divisive option of a carbon tax is gaining some interest and traction.

In his first State of the Union address last night, Trump called on Congress to produce a bill that generates at least $1.5 trillion for new infrastructure investments, $500 billion more than what he proposed last year. The president did not provide details on how that revenue would be generated, other than by saying every federal dollar should be “leveraged” by partnering with state and local governments.

“It’s a lot of money,” Joseph Majkut, a climate scientist at the libertarian Niskanen Center, told E&E News. “And when you think about where you can get that money, I think a carbon tax is preferable to Chinese debt or a lot of other things.”

Almost a year since Trump proposed an infrastructure overhaul for the country’s crumbling bridges and pothole-laden highways, funding mechanisms remain elusive. The U.S. Chamber of Commerce has started lobbying for a 25-cent-per-gallon increase in the federal gas tax, which — as Majkut put it — has carbon tax advocates on both sides of the aisle rolling their eyes.

“After all, how does an increase in the gas tax (used then for productive spending) differ substantially from a carbon tax?” he wrote in a recent blog post. “A carbon tax levied at $25 per ton of CO2 would also increase gas prices about 25 cents per gallon. It could also raise a lot more money for a similar price increase.”

Majkut is not alone with his opinion. Conservative Republicans and libertarians who are pro-market forces and anti-regulation see a carbon tax as an obvious answer for infrastructure reforms.

“A reasonable carbon tax would raise approximately $1.5 trillion over 10 years and is probably one of the most interesting possibilities for an infrastructure package,” Alex Flint, a former member of Trump’s transition team who previously worked as senior vice president of governmental affairs at the Nuclear Energy Institute, told E&E News.

“If you do it the way [the Alliance for Market Solutions] proposes, in which it replaces regulations, it results in growth from regulatory relief and investment in infrastructure and provides for a long-term increase in GDP,” added Flint, who now leads the Alliance for Market Solutions, which advocates for a carbon tax without stipulating how revenue should be used.

George Frampton, co-founder of the Partnership for Responsible Growth, also said a carbon fee could be the only way to generate enough revenue to pay for a “serious” infrastructure program.

“A carbon fee gives you roughly the same increase in retail gas prices but would produce three times as much money,” he said. “If you think a gas tax has some legs, a carbon fee is a much better way to do it.”

According to the Congressional Budget Office, pricing carbon at $25 per metric ton, increasing 2 percent a year, would generate $1 trillion. The U.S. Treasury estimated that $49 per metric ton of CO2 would yield $2.2 trillion.

Majkut noted that under a carbon tax, for the same price hike at the gas pump, more revenue could be raised for infrastructure improvements.

“Or alternatively, the same amount of revenue could be raised at a lower rate by switching from a tax on gas to a tax on carbon,” he wrote in the blog post.

Either way, a carbon tax would result in high social benefits by reducing carbon emissions in a way a gas tax can’t.

But Josiah Neeley, energy policy director for the R Street Institute, said his organization — which supports free markets and limited government — believes a carbon fee should be revenue-neutral.

“It should be used to cut taxes rather than increase spending,” he said. “For that reason, I don’t think infrastructure would be a great vehicle for that.”

Frampton, Flint and Majkut are in talks with Republican lawmakers about a carbon tax for infrastructure but said movement is slow going.

“Do I think we’re going to have a really serious conversation about a carbon tax?” Majkut said. “Given the hotly debated nature of carbon taxing, it’s probably unlikely.”

He added: “But are we going to fund these [infrastructure] packages with 20th-century taxes or 21st-century taxes? I prefer the latter.”

Flint agreed the conversation about funding infrastructure through a carbon fee is just beginning but said Republican policymakers “recognize this option.”