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Tax on Carbon Emissions Gains Support

Stavros Dimas, the European Union's environment commissioner, said an emissions cap-and-trade system is
Stavros Dimas, the European Union's environment commissioner, said an emissions cap-and-trade system is "functioning very well" in Europe. Five such plans have been proposed in the U.S. Senate. (By Thierry Charlier -- Associated Press)

But Carl Pope, executive director of the Sierra Club, said: "It will be more effective if people know that in year 'X' they will pay this much. Companies are highly motivated by costs." Moreover, he worries that rationing carbon allowances based on historical emissions would reward companies that spew out the most greenhouse gases now and did the least to limit them in the past.

Dan Becker, director of the Sierra Club's program on global warming, said the nation may need to adopt a carbon tax in several years but "we're not there yet."

Some industries that have historically opposed carbon limits embrace the idea of a tax because their sectors would not be singled out for regulation. "A poorly constructed cap-and-trade system can be as punitive as a regressive tax," said Scott Segal, an electric utilities lobbyist.

Red Cavaney, president of the American Petroleum Institute, told a National Press Club audience in February that his industry prefers that lawmakers explore a range of policy options before imposing a cap.

"A cap-and-trade system isn't necessarily the be-all and end-all," he said. "A carbon tax, everything, should be on the table from the beginning."

Few lawmakers, Democrat or Republican, have the stomach for a carbon tax, however. Some are still smarting from a vote in the early 1990s when President Bill Clinton persuaded the House to adopt a BTU tax -- a tax on the heat content of fuels -- only to abandon the effort in the Senate.

Democrats such as House Natural Resources Committee Chairman Nick J. Rahall II (W.Va.) say they have no desire to revisit the issue. "I'm not an advocate of a carbon tax," Rahall said. "That's going to be passed on; the consumer would end up paying for that."

Some analysts said former vice president Al Gore's endorsement of both alternatives in testimony before Congress last week was so politically unpalatable that it was a sign that he is not seriously thinking of running for president.

Only one House Democrat, Rep. Pete Stark (Calif.), has drafted a carbon tax proposal. Stark, who first proposed such a tax 16 years ago as a way to ease the nation's energy crunch, plans to introduce a bill in April that would levy a tax of $25 per ton of carbon released for five years.

"It's more efficient, more equitable, and it's less subject to gaming, I might add," Stark said, estimating that it would raise the cost of gasoline by 10 cents a gallon.

As Congress debates how to regulate greenhouse gases, however, several European officials have said it would be a mistake to choose anything but a market-based trading system that could be linked to the emerging carbon market in Europe.

"Political leaders in the United States need to make a decision, and make it quickly, whether they want to be left behind in a market that is going to evolve, or whether they want to get involved quickly," said Stephen Byers, a member of Britain's Parliament who helped establish the European Union's trading system. "Wall Street could become the world center of carbon trading."

And Stavros Dimas, the E.U. environment commissioner, speaking at a recent lunch hosted by the D.C.-based European Institute, called it ironic that the United States would question the cap-and-trade system, because U.S. negotiators essentially forced Europe to agree to such a system in the Kyoto Protocol negotiations in 1997.

"There was suspicion about market-based instruments," Dimas said. "In a way you did us a favor, because now we also are familiar with these market-based activities. It's functioning very well, actually."

"If we would go together into a world tax regime, that would be preferable," Jos Delbeke, the top E.U. official on climate change, said after a Senate Energy and Natural Resources Committee hearing Monday. "But practically speaking, it is not a likely way to go. Emissions trading is a very solid second best."


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