The Washington PostDemocracy Dies in Darkness

Opinion Pay for Biden’s $3 trillion infrastructure plan with a carbon tax

A flare stack is pictured next to pump jacks and other oil and gas infrastructure near Odessa, Tex., on April 24.
A flare stack is pictured next to pump jacks and other oil and gas infrastructure near Odessa, Tex., on April 24. (Paul Ratje/AFP/Getty Images)
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BETTER LATE than never: The American Petroleum Institute, accepting the reality of climate change and the need to do something about it, has officially called for government to set a price on carbon emissions. We can’t help but wonder how much better off the planet might be if the API had come to this position sooner. What seems most important now, however, is the fact that, given similar previous statements from the Business Roundtable and U.S. Chamber of Commerce, the API’s new stance creates a broad private-sector front. Though the API and the other business groups aren’t using the precise words “carbon tax,” the language of their proposals makes clear that it would be acceptable.

The shift is obviously in response to President Biden’s defeat of his climate-indifferent predecessor, Donald Trump, in November, and is especially opportune in light of Mr. Biden’s next big legislative priority: a major package, priced at up to $3 trillion over a decade, to rebuild and revamp U.S. infrastructure, with a view toward making the economy less carbon-intensive.

New revenue is appropriate for this purpose because, unlike the freshly passed covid-relief plan, this program is a long-term measure, not an emergency plan, which should be paid for to the greatest feasible extent. Treasury Secretary Janet Yellen embraced that very approach at a March 23 congressional hearing. It is likely — and, in principle, welcome — that Mr. Biden will propose stiffer taxation of corporations and of households earning more than $400,000. Yet the need for funds is so great, and energy-saving such an important goal of the administration, that new revenue from carbon taxation should not be left out. Analysts at the Tax Policy Center have estimated that a $43 per metric ton carbon tax, rising annually by inflation plus 5 percent, would have raised about $180 billion this year and nearly $300 billion in 2031.

What’s more, higher taxes on income do not directly affect incentives to consume fossil fuels, but carbon taxes — or their equivalent — would. To illustrate the point, Transportation Secretary Pete Buttigieg said Friday that the idea of a vehicle mileage tax to pay for new roads “shows a lot of promise,” which is true in part because gasoline taxes, the existing funding source, will level off or fall as more electric vehicles hit the road.

Opposition to carbon pricing may be fading in the business community, but it’s rising on the progressive, green left of all places. The Green New Deal, authored by Rep. Alexandria Ocasio-Cortez (D-N.Y.) and Sen. Edward J. Markey (D-Mass.), pointedly omitted it. The left has a point: Like other excise taxes, including the existing state and federal gas taxes, a carbon tax could impose a disproportionate burden on the poor and middle class. That could be fixed by rebating some of it. One possibility: Use it to pay for making the new child tax credit permanent for households earning less than a certain income. Properly adjusted, a carbon tax certainly might reduce even more emissions, less regressively, than electric vehicle tax credits and other targeted breaks — which tend to favor upper-income taxpayers.

Fiscal sustainability, fairer taxation and carbon reduction — with the right mix of policy, the United States really can have them all.

Read more:

Read a letter in response to this editorial: Carbon dividends are an important part of a carbon tax

Read a letter in response to this piece: A true infrastructure plan needs to be implemented on a massive scale

The Post’s View: The danger of climate change is imminent. The Senate must approve a strong policy.

Letters to the Editor: Maybe a carbon tax isn’t such a good idea after all

Letters to the Editor: Flaws in the carbon-pricing plan

Letters to the Editor: In support of a carbon tax

Sheldon Whitehouse and James Slevin: Carbon pricing represents the best answer to our climate danger

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