Whitehouse bill could pave the way for a bipartisan carbon emissions price

Source: Jean Chemnick, E&E reporter • Posted: Wednesday, November 19, 2014

The carbon pricing bill Sen. Sheldon Whitehouse will release later today is virtually assured to attract support only from the chamber’s Democrats.

But backers of the Rhode Island Democrat’s approach — a carbon “fee” levied on emitters with revenue returned to the public — said they hope it will help pave the way for the most elusive of legislative achievements: a bipartisan climate change bill.

Right now, the odds look long. The Senate came close to passing a bill approving the controversial Keystone XL oil pipeline last night, and with Republicans poised to take control of the Senate next year, more pro-fossil fuel votes seem to be in the offing.

Meanwhile, all of Whitehouse’s current collaborators on the two climate change caucuses he chairs are Democrats. And no Republican lawmaker has signed their name to a piece of carbon-pricing legislation introduced in either chamber since Sen. Susan Collins (R-Maine) released her cap-and-dividend model with Sen. Maria Cantwell (D-Wash.) in 2009.

But that could change quickly, Whitehouse said, as public opinion shifts and some in the business sector find it in their best interest to back a carbon levy.

The bill Whitehouse will unveil this afternoon has been in the works since before he released a discussion draft version with Rep. Henry Waxman (D-Calif.) in March. Last month, he told a gathering at New York University that it would be a “win-win-win,” providing not only carbon reductions but “as much as $2 trillion over the first decade.”

“Every dollar of this revenue should be returned to the American people,” he said at the time. “We can do this lots of ways: cutting personal or corporate taxes, relieving student loan debt, boosting Social Security benefits to seniors, providing transition assistance to workers in fossil-fuel industries or even paying out direct dividends to families. The list goes on.”

Some of those options seem to track with the kind of revenue-neutral carbon tax advanced by a handful of conservative economists and former Republican officials, including President George W. Bush’s Treasury Secretary Henry Paulson and President Reagan’s Secretary of State George Shultz. Other options might not. But those who have been briefed on the Whitehouse measure recently said its final version leaves open the question of how those revenues would be spent as an invitation for would-be Republican collaborators to negotiate.

“I think he’s very serious about wanting to work with Republicans to try to come up with a compromise approach that would put a price on carbon,” said Adele Morris, a Brookings Institution scholar who has worked extensively on the carbon tax issue. “He’s very sincere about this.”

Morris released her own carbon tax proposal last year, which received a prize last month in a competition sponsored by the Massachusetts Institute of Technology Center for Collective Intelligence. Her proposal would direct some revenue to deficit reduction, compensate poor families for costs associated with the tax and offset cuts to the corporate income tax rate.

Conditional supporters of a revenue-neutral carbon tax have said that all revenue must be returned to the public.

“Unless it’s 100 percent revenue-neutral, then it’s a total nonstarter,” said Price Atkinson, a spokesman for the pro-carbon-tax Energy & Enterprise Initiative, founded by former Rep. Bob Inglis (R-S.C.).

But Morris said the Whitehouse bill was evidently intended to be a starting point in the discussion.

“The way I interpret Senator Whitehouse’s bill is as kind of an opening statement from the Democratic side, and then the rejoinder from the Republicans could be a specific proposal on how to use the revenue, maybe a different tax rate, maybe something with regard to [U.S.] EPA’s rulemaking, that kind of thing,” she said.

Most Democratic supporters of EPA’s greenhouse gas rules have said that both are needed — Clean Air Act regulation and a price on carbon emissions. But Whitehouse has sometimes appeared to signal an openness to pre-empting EPA rules. He regularly points to proposed rules for new and existing power plants as one reason why industry might push its Republican allies to come to the table to seek compromise. And non-fossil-fuel businesses could benefit from a rollback in corporate taxes together with reductions in CO2 that may be imperiling their business operations, he said.

Michael Wara, an economist at Stanford University, said that even if climate legislation is not on the immediate horizon, proposals like Whitehouse’s will help familiarize members with the idea of a carbon tax and how it works. Staff on key committees including Senate Finance and House Ways and Means will at least have seen this kind of policy model before.

“Even if they never get out of committee — even if they never get a hearing in committee — it’s a conversation,” he said.

Morris and Wara also hope EPA will make changes to its existing power plant rule that will allow states to opt to use a carbon tax to comply. They have submitted comments to the agency ahead of a Dec. 1 deadline urging it to change the rule’s language to ensure that any mechanism that is enforceable and effective at limiting emissions will be approvable as part of a state implementation plan.