A Carbon Tax in 2011 for Fiscal Conservatives?

The tax can be revenue-neutral if the money raised is returned to citizens by reducing other taxes

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WASHINGTON—The grassroots side of Charles Komanoff wasn’t exactly dancing in the streets of New York City Nov. 2 when Republicans drop-kicked Democrats from their majority perch in the House of Representatives.

But the number-crunching, energy-policy-geek part of him sniffs an unusual opportunity for his beloved carbon tax to gain traction on Capitol Hill.

“Maybe this is totally wishful thinking, but one possible halcyon effect of Tea Party ascendancy might provide greater latitude for Congress and its ability to tolerate real mavericks instead of phony mavericks,” the 63-year-old founder of the Carbon Tax Center told SolveClimate News in an interview.

Komanoff’s “Exhibit A” is Democratic Rep. John Larson of Connecticut.

The congressman, elected to a seventh term, has written one of several carbon tax bills elbowed aside by what emerged as the bully of the Hill—a failed cap-and-trade measure. When the 112th Congress convenes in January, Larson has vowed to reintroduce “America’s Energy Security Trust Fund,” a proposal he rolled out in 2009.

Komanoff isn’t optimistic that Congress has the fortitude to craft legislation to curb heat-trapping gases in the two years prior to a presidential election. But he’s hopeful legislators can at least kick the tires on a carbon tax during a round of congressional hearings.

That potential is motivating him and fellow advocates to bump up an education campaign, expand grassroots support and convince the mainstream environmental movement to join their cause. Their effort was galvanized during “The Pricing Carbon Conference” Nov. 19-21 at Wesleyan University in Connecticut.

“We are really in this for the long haul,” notes Komanoff, a Harvard-educated economist and policy analyst who still circulates a Washington Post opinion piece he wrote in 1989 outlining the merits of a carbon tax. “We’re focusing our efforts on planting the seeds to make it possible to have meaningful carbon legislation.”

What Makes a Carbon Tax Palatable?

During the midterm elections campaign, Republicans slammed the cap-and-trade approach to restricting emissions of greenhouse gases as “cap and tax.” But Democrats and more leftist environmental organizations also raised a stink about the American Clean Energy and Security Act the House passed in June 2009.

They criticized it as executing carbon trading behind the public’s back because it was too complex, too reliant on a topsy-turvy Wall Street and too cozy with well-connected energy interests.

“I’m a trained economist and it took me months to understand the merits of cap and trade,” Komanoff says. “If it was so difficult for me to grasp, how would it be for the average American?”

Supporters praise a carbon tax as simple to understand and easy to implement. They say polluters will reform their dirty habits when they are forced to pay steeper amounts every year for each ton of carbon dioxide they emit. What appeals to fiscal conservatives is the idea that the tax can be revenue-neutral if the money raised is returned to citizens by reducing other taxes.

“Early on, I was captivated by the principle of having energy prices tell the truth about the cost of energy,” Komanoff stresses. “That is as essential a step for successful energy policy as there is.”

Putting a price on carbon, he says, will emphasize how expensive the fossil fuels status quo is. That will motivate operators of power plants and factories, as well as the average American to lead a clean technology revolution.

Daphne Wysham, a fellow at the Washington-based Institute for Policy Studies who studies energy issues, said in an interview that she understands the appeal of a carbon tax.

“We do have an interesting array of organizations from the left and the right saying a carbon tax is much better than cap and trade,” Wysham says. “I think a payroll tax shift is one possible approach that could work. In this current economic climate, it may stimulate employers to hire more people. And if a dividend was being returned to people, it would be even more palatable.”

Honing the Security Argument

Those enamored with a carbon tax are fond of making the sound-bite argument that this energy policy potentially provides a triple victory because it creates homegrown green technology jobs, cleans up air sullied with pollutants from burning fossil fuels and makes the nation less reliant on oil imported from less-than-friendly countries.

Komanoff has a few quibbles with the last point about energy security.

“The carbon tax is not quite the direct route to energy security that some people make it out to be,” he says, adding that the main target of the tax is coal because it emits more carbon dioxide per British thermal unit.

Coal use would decline further and faster because electricity can be generated by such a broad sweep of alternatives, including solar, wind, geothermal and nuclear, he notes. Substituting for the petroleum used to power airplanes, vehicles and other transportation sources is trickier because replacements such as biofuels aren’t as diverse.

As well, even with the advent of electric cars, incentives to cut back on transportation fuels won’t be as sweeping or clear-cut, he says. That’s because it’s a more complicated mix of encouraging fuel efficiency and creating a network of options that incorporates sustainable city living with mass transit and bicycling.

Distributing the Tax Dollars

While most legislative solutions call for using the carbon tax to offset payroll or income taxes, non-legislators such as James Hansen offer a less complicated solution. Hansen, who heads the NASA Goddard Institute for Space Studies in New York City, advocates that all families should receive a “green” check to help them cover higher electricity and fuel costs and invest in more energy-efficient and environmentally sustainable lifestyles.

“Hansen’s “fee and dividend” is closest to what I advocate because of its simplicity and elegance,” says Komanoff, adding that tax shifts don’t resonate with most people. “I’m much more interested in reaching people in a way so they are going to turn from opponents to allies.”

He emphasizes that the Carbon Tax Center doesn’t want the government earmarking a penny of carbon tax revenue for clean technology or green energy.

“The government track record on picking winners is abysmal,” says Komanoff, pointing to energy funding from the American Recovery and Reinvestment Act as evidence. “Creating a truly level playing field among fuels is going to accomplish most of the heavy lifting on the road to clean technology.”

That belief puts him at odds with people such as Wysham at the Institute for Policy Studies.

The transformation to a clean technology future will be lengthy, daunting and costly enough, she maintains, to justify spending mega-amounts of federal dollars in stimulus-like fashion. She says she sees no reason why that money to spur the growth of renewable energy and public transportation can’t be diverted from the defense budget and fossil fuel subsidies on an interim basis.

“Until the technology is accessible and affordable, this will be expensive for the average person,” Wysham says. “We can’t put this on the backs of consumers right away. Even with the dividend, few people would have the wherewithal to purchase an electric vehicle.”

Timing Is Everything

Navigating a way forward on any global warming legislation is treacherous territory when so many lawmakers seem to have soured on the topic.

“The question is,” Wysham asks, “how can you frame it to make it go through that sausage factory, the one that has Republicans breaking out in hives if they hear the words climate change?”

Komanoff has waited decades for dominant environmental groups—often referred to as “Big Green”—to embrace a carbon tax. He thought the energy stars might be aligned in his favor almost four years ago when he launched the Carbon Tax Center.

But, alas, his center’s January 2007 debut was overshadowed by an announcement from the Environmental Defense Fund and the Natural Resources Defense Council that conservation organizations would be forming an alliance with major corporations to create the U.S. Climate Action Partnership—to rally around cap and trade.

“Over the last four years, we’ve expended 10 times as much energy trying to create political space for a carbon tax,” he explains.

“The one thing that makes me hopeful about the next two years is the prospect that the mainstream environmental groups are finally going to unclench their fingers and give up their death grip on cap and trade as a climate policy.”

Illustration: Hannah Sassoon

See Also

Outgoing Rep. Bob Inglis Still Touting Revenue Neutral Carbon Tax

In Rubble of Cap-and-Trade, Big Green Taking a Beating

New Mexico Adopts Emissions Cap, But Challenges Expected

GOP Leaders with Poor Green Voting Records to Call the Shots in the House

Despite Electoral Outcomes, Poll Shows Voters Want Clean Economy

Could GOP Election Victories Improve Odds of Climate and Energy Law?