In December 2014, Rhode Island’s U. S. Senator Sheldon Whitehouse introduced an excellent carbon-tax bill into the Senate, and I wrote a generally laudatory blog about the legislation.
On Wednesday, June 10, 2015, Senator Whitehouse reintroduced a similar, but somewhat more refined, version of the bill, S-1548. Here is a link to the text of the bill; and here are the high points (with the relevant page numbers for those who are interested).
Senator Whitehouse’s bill imposes a tax on carbon emissions. This alone is a very big deal, but there are two aspects that make it even better.
First, the carbon tax starts at the hefty rate of $45 per ton, and ratchets up at the rate of 2% per annum, plus inflation. [Page 4, line 21; page 15, line 3.] It is worth comparing this to the clearing price of carbon in the most recent auction in the Regional Greenhouse Gas Initiative (RGGI) that all six New England states are part of, $5.50 (RGGI Auction 28, held June 3, 2015). That is, the price of carbon in the Whitehouse bill starts more than 700% higher than the carbon price under RGGI, and it goes up from there. Most economists believe that society will have to price carbon emissions at a minimum of $82 per ton in order to achieve the carbon-emission reductions necessary to avert a climate disaster. The ramp-up provided for in the Whitehouse bill gets us further than that, to $88.23 by 2050 (before factoring in inflation).
Second, RGGI applies only to the electricity sector; the Whitehouse bill applies to the entire economy. [Page 15, line 3.] Nationally, the electricity sector is the largest emitter of carbon; but here in New England the sector of the economy that is both the largest contributor of carbon pollution and the fastest growing is not electricity but the transportation sector. Thus, the fact that Senator Whitehouse’s S-1548 affects the entire economy is critically important.
Although my December blog was generally quite laudatory about Senator Whitehouse’s carbon tax bill last year, I did note one major problem, the provision on so-called “Border Adjustments. I said:
This provides that any mined or manufactured goods that are exported from the U.S. get a full refund on the carbon tax paid . . . The bill creates a perverse incentive to mine zillions of tons of coal for export to China; and drill zillions of new oil and gas wells to export the oil and gas to China. No carbon tax is paid on that coal (or oil or gas), but when the coal is burned in China, the carbon goes into the same atmosphere as if it were burned in the United States. (That is, climate change is a global problem, not a U.S. problem.)
Unfortunately, in this year’s bill that problem has not been fixed; the identical provision appears in S-1548. [Page 11, lines 7 – 16.] This was not a small problem last year, and it is not a small problem this year.
This year, Senator Whitehouse’s bill is revenue neutral, and this fact may appeal to fiscal conservatives. (Although last year’s bill purported to be revenue neutral, it did allow for some expansion of government programs; this year the bill purports to be revenue neutral and actually is.) Here is where the money would go:
- The bill cuts the top marginal corporate tax rate from 35% to 29%. [Page 24, line 14.]
- The bill provides a $500 tax credit per taxpayer ($1,000 for couples filing jointly) [page 26, line 7], to be adjusted for inflation. [Page 27, line 17.]
- The bill provides an analogous $500 benefit to Social Security recipients and veterans program beneficiaries who might not qualify for the tax credit otherwise. [Page 29, line 6.]
- The bill provides up to $20 billion per year to the states for distribution to low-income households, rural families, and workers in industries (like coal mining and oil drilling and refining) who will be especially hurt as the economy transitions away from reliance on fossil fuels. [Section starting on page 31.] This last point is especially important because it seeks to mitigate the effects of the change on vulnerable workers.
Senator Whitehouse is serious about climate change. He has now given over 100 weekly speeches on the Senate floor addressing one subject only: climate change (and the urgency of addressing it).
Two days before S-1548 was introduced, I heard Senator Whitehouse speak in Newport at the annual symposium of the New England Conference of Public Utilities Commissioners (NECPUC). Although he could have addressed any subjects he wanted, Senator Whitehouse stuck to only one: climate change. He said, in part:
Eighty-three percent of Americans, including six in ten Republicans, want action on carbon emissions. And with young Republican voters, more than half would describe a climate-denying politician as “ignorant,” “out-of-touch,” or “crazy.”
Having worked in the field myself for some years, I am not sure that Senator Whitehouse is entirely correct about the breadth of popular opinion on climate change. But I am sure that he believes that himself, and is acting on that belief in a way that few elected officials at the national level are doing.