Report: Carbon Tax Being Considered By Obama Administration

President Barack Obama is reportedly considering a tax on carbon emissions to help cut the U.S. budget deficit. As many know, I am leery of the use of higher taxes in this country and countries like France in the midst of this economic crisis. However, this is one tax that I have long favored — not as a method of deficit reduction but as an effort to force companies to internalize some of the costs of pollution. The key, however, is to allow companies to reduce such taxes by reducing their emissions, creating an incentive to decrease pollution.

The Germans have a comprehensive system for imposing such costs on manufacturers. For example, Germany reduces garbage dramatically by forcing companies to pay for some of the ultimate disposal costs of packaging. In the United States, manufacturers use over-sized boxes and containers as well as large amounts of plastics to improve the appearance of products. This material is simply discarded and fills our dumps and landfills. In Germany and other countries, such packaging is taxed to reflect the ultimate costs to society. This has resulted in far less waste in packaging in Europe where companies tend to be equally creative but more careful in the use of material.

The proposed tax would start at $20 a metric ton of carbon dioxide equivalent and rise at about 6 percent a year. I would like to see a more tailored approach for companies that focuses on the cost of their externalities rather than simply taxing as a method to reduce the deficit.
The current problem with cap-and-trade is that “brokers” are flush with credits and the price is falling to buy the right to pollute. Nevertheless, many have argued for a cap-and-trade on greenhouse gases.

If done correctly, a carbon tax could offer a direct incentive to adopt greater methods of emissions reductions. Rather than rely on solely command-and-control systems which specify things like scrubbers, companies could find creative ways to reduce such emissions and avoid the tax.

What do you think?

Source; Bloomberg

35 thoughts on “Report: Carbon Tax Being Considered By Obama Administration

  1. I think things should go much further than the carbon. Any environmental damage should be born by the company causing it. Companies decimating forests to sell wood should either plant trees, or pay a tax to get trees planted.

    I know it is a bit idealistic of me, but I think this is the way for sustainable development. Anyway, carbon tax is a good start.

  2. Environmental and carbon accounting is what I do.

    Applying a cost to an externality is the purest form of market control there is. Americans should love it.

    Here in Australia we’ve introduced a modest carbon price (cap’n’dividend actually – with lots of loop-holes (unfortunately). Despite reports to the contrary from our neo-cons, the world hasn’t ended, but we’ve begun the long process of decarbonising our economy.

    The Chinese are doing it, and Europe is 10 years ahead of everyone else.

  3. Great posts above. Thank you for the insight on this topic. Important points for further reading and community discussion.

  4. We should have had this kind of Tax many years ago…… To begin to force Major Polluters to cut their Carbon emmisions.

  5. Like it or not, Obama has to ration his political capital and numbers of attention grabbers. It also takes time to let the Congresssional Research Service, CRS and others investigate, build up an unassailable factual case for it, and find the antidotes to the expected soundbites and campaign ads against such a carbo tax.

    I believe Romney and Obama agreed not to include it in the dabate questions. Maybe they saw the rising storms and temps as something they both would be forced to fight later. That and that neither could as them planned do much for reducing the debt.

    And thanks to Zvydorchka for the puff for Europa’s advanced position. We are glad to cooperate and

    demonstrate our different national models. No one size fits all here.

  6. I agree with Professor Turley and think we should use such a system here, with his caveat that we should carefully target the incentives offered. The weakness with cap and trade is indeed that it too finely balances the use of cost/benefit rations to the point where it might be economically rational too pollute.

    Carbon-based emissions should be just one part of this taxing plan. What comes immediately to mind is the river pollution caused by pork and chicken producers who flush their effluvium into their local waters.

  7. I forgot to also mention that this type of taxing is an inherently conservative political solution, since it would actually force and give incentives to companies to innovate making their operations more productive. This is why I why I see today’s conservative movement as being “faux conservatism”. I its laissez-faire attitude towards corporate excess and responsibility, it actually promotes inefficiency, which ultimately skews any market-based corrections.

  8. It really depends on how the tax is implemented. If allowed to swap credits with under carbon producing companies, it just moves the problem somewhere else.

  9. “LONDON (Reuters) – Academics and lawmakers have proposed a U.S. carbon tax to curb carbon emissions and trim the debt pile, but the idea depends on prominent Republican support, so far absent.” I am all in for it but I am also a realist.

  10. Carbon taxes and the like are part of a strategy that may make us feel better about the environment, but which, are, ultimately, the tragically wrong approach. Trying to impose renewable energy and responsible stewardship on an economy dependent on and dominated by carbon-based energy is a policy that has virtually nothing to show for itself after thirty long years of effort.

    More CO2 was released into the U.S. atmosphere last year than any time in history. We simply do not have the time to try to make market-based solutions work. The experts say that we have no more than FIVE TO TEN years to bring our carbon emissions to zero in order to achieve a planet that will heat less than 5 degrees Celsius.

    If we do not accomplish this huge task, a 5C+ world awaits our children and grandchildren. A 5C+ world does not contain civilization as we know it, ladies and gentlemen.

    AGW is the greatest threat to national security the U.S. (and world) has ever faced. But we COULD solve it – we already have the technology to be 100% carbon-free. And we COULD accomplish this in five years.

    But it will take an Executive Directive to nationalize a Federal renewable energy program using massive, centralized installations. For example – a photovoltaic installation covering the Mojave Desert would produce enough electricity to power every calorie of all of our energy needs for the next ten thousand years. Since American taxpayers would foot the bill, they should then receive the electricity at cost – which, folks, is zero. That is what sunlight is, after all – free. Yes, I am proposing spending several trillion dollars – going into more Federal debt – to save our planet and give us all free electricity. Btw, the cost of not keeping us under a 5C world is at least 1024 trillion – so you can see that such a proposal, if it is anything, is cost effective.

    We could employ millions to retrofit our homes and businesses to electrical heating, cooling, and power. We could employ millions more to install inductive charging to our highways and roads, so that even with today’s lousy battery technology we could have a 100% electric fleet in five years.

    We can avert disaster – but we can not do it by using the failed strategy of localized generation and market solutions. We don’t need to to restrict, penalize, antagonize, or ‘take on’ the carbon industry. We need to ignore them and make them obsolete by mandating a federal solution for a national renewable energy utility.

    What I would like to know is – can a President initiate this all by himself? The Department of Energy is an Executive branch entity, after all.

  11. It is interesting to see this couched as a tax on corporations, rather than a tax on consumers. Of course not all costs are passed on to consumers, but I suspect that most of a carbon tax would be because production of energy is (to my knowledge) the biggest source of man-made carbon emissions. And in the case of energy utilities, the rates are based on the cost of production (at least they are where I live.)

    Having written all that, this may be the greatest idea since sliced bread, but I think it is misleading to label it a tax on corporations.

  12. SWM
    What your talking about is most of the power plants in the country who will pass the cost on to its users. In other words a direct tax on the poor

  13. nick spinelli

    I think we need to tax taxes.


    LOL … I bet those 33.3% of Americans who like cavity searches would vote for you if that were your campaign slogan.

  14. blouise17, A value added tax is somewhat like a tax on a tax, and that may be down the road. However, I don’t think Americans would abide a VAT. Well, maybe Californians.

  15. Roger, ” We don’t need to to restrict, penalize, antagonize, or ‘take on’ the carbon industry. We need to ignore them and make them obsolete by mandating a federal solution for a national renewable energy utility.”

    Wise words.

  16. There is another way this could prove beneficial, in addition to the carbon tax scheme, or anything better.

    That would be to do as some American cites have done:

    Scientists are studying up on the skills required to properly convey an unpleasant but necessary message to the public.

    They are concerned with informing the public without angering them or unduly alarming them, as those scientists reveal the dangers civilization faces in the wake of our damaged global climate system (Scientists Seek Strategy to Convey Seriousness of Sea-Level Rise).

    That mission is not an easy task when people along the coast are told that their land is slowly going the way of the fabled Atlantis which sunk below the sea.

    The scientists might point out that Atlantis went in an instant, without the kinds of warnings we have today, good and useful warnings to prepare to move and revolutionize history with the change necessary to kick the fossil fuel habit.

    (Advance To The High Ground). The House GOP deniers are the logjam.

    Perhaps Sandy and A WARNING TO THE MILITARY will catch their brazen fear-based subconscious denial:

    The Pentagon was warned on Friday to stand guard against “climate surprises” which could throw off its efforts to secure America’s future.

    An expert report, prepared for the intelligence community by the National Academy of Sciences, warns that the security establishment is going to have start planning for natural disasters, sea-level rise, drought, epidemics and the other consequences of climate change.

    The Pentagon already ranks climate change as a national security threat, putting US troops in danger around the world and adding fuel to existing conflicts. More than 30 US bases are threatened by sea level rise.

    It has also identified potential new danger zones, such as sub-Saharan Africa.

    The military is also working to cut back on its fuel costs in an age of budget austerity, by installing solar arrays and wind turbines, and monitoring electricity use.

    But Friday’s report suggests strategic planners are going to have make sweeping adjustments to their planning to take account of climate change over the next decade and beyond.

    (US Military Warned). Unless the Republicans get a clue I expect them to lose 50 House seats in the 2014 election.

    My research indicates that the military is far ahead of the civilian denier congress on this issue, as I have stated for several years now.

  17. MikeS, I join hours too late, but it might be good to note that cap and trade has not worked effectively in Europe. Too many loopholes. Straigt regulation and stimulous to energy effectivaation and clean stack gas has done a lot however.

  18. Roger Lambert,

    An eye our destimy is another talent that you have.
    Now is a time for war on carbon burning. Until renewable sources for specialized use the renewable sources can be tolerated.

    The first big brand full-electric car was announced yesterday, 5 years ahead of what the pundits said.

    Let’s cover large portions of the SW (for reduncance) and cable the world with EHV supplied by ABB converters and cablage. Then even the rest can get off the carbon tech.

    No reasons for carbon wars, and an end of oil running our foreign policy.

  19. NickS and Blouise,

    We have a form of VAT. As long as something is sold, each transaction adds 25 percent in VAT to the price, even services. Sure jacks up prices and cost of living.

  20. Dredd,

    The military usually rank low in political planning** but in mil contingencies they are up there as they should be. Ahh bases, let me recite the names…..!

    Gen Alexander Haig who helped Nixon decide to depart had been studying at college on just the subject of the milirary’s role in the political process!! He was Chief of Staff after Halderman had departed, disgraced.

  21. I’m with Roger, a plan with a date certain to remake our energy landscape could employ millions and rebuild a large segment of our manufacturing base. Cut the defense budget by 75%, declare war on wasteful energy and tell the Islamists that they need to chill, we want out of their countries and resources and plan on being a non-presence shortly. I see win, win, win.

    Can we do it? I saw a president say we would have a man on the moon in ten years and it happened. The face of education was changed to produce mor engineers and technical workers as an added benefit and it kick-started our entry into the tech age. Good times. And real leadership at a time when leadership was needed.

    Thanks Roger for that jolt of ‘hope and change’ into my thought process and memory- I will now return to my normal cynical self :-)

  22. ID707: “The Middle East? they have lots of desert.
    Give them the tech and a percent and they will be satisfied.”

    I recall reading a few months ago that a plan to put about a bazillion solar panels in a North African desert and send, via cable, the energy generated back to somewhere in Europe (maybe Germany) had moved beyond the planning stage. It was going to take about 15 years but transform the relevant country into the cleanest energy country in Europe and the Americas. I don’t know how ‘clean’ Iceland is, it satisfies much of it’s needs with geothermal, I can’t vouch for the claim.

    I really don’t recall where I read that, someplace like Discover magazine. I’l try to find it online and post a link. (I should have saved it!) It seemed to me at the time that this was a big step into the future and I was glad some country was doing it. I’ll look for the article. Take my vague recollection for what it’s worth.

  23. Zvyozdochka: “You’re thinking of the Desertec project perhaps?”

    YES!!!!!!! Thank you. I looked through some of my Discover magazines that are laying around but didn’t see the article. I think it’s a marvelous plan. The US wouldn’t even have the problem of transmitting the energy via undersea cable. You saved me an internet search. Thank you again.

  24. Lotta Katz,

    You are right. As Sweden is a base for ASEA which merged to become ASEA Brown Bovery (ABB), LARGE power people, the proposal was noted in the Swedish newspapers.

    It was feasible then and more feasible now, due to advances I won’t take up.

    The project was planned to provide el power to Europe, but coulld meet the needs of the whole of Africa.

    It was based on photovoltaic cells driven by solar radiation, conversion to Estreme High Voltage to reduce losses over large distances, and cable under the Med.

    I’d appreciate hearing on anything more modern on it.

    The stoppers of course are two; big oil opposition and their control of our foreign policy.

  25. Should read intermediate comments, would have saved the verbiage. But I can confirm that these are solid companies and it is quite well-researched, cable developed and would take, I believe, less that 5 years to cutove of first phase. Cable drawing included.

  26. idealist707 1, November 9, 2012 at 6:16 pm


    The military usually rank low in political planning** but in mil contingencies they are up there as they should be. Ahh bases, let me recite the names…..!
    In this case they are dealing with an enemy they can’t fight with weapons of the soldier kind:

    And at the top of the list of those who know what’s going on are the fossil-fuel companies with their unprecedented profits and unbearably overpaid executives and shareholders.

    Just like those running asbestos, lead paint, and tobacco companies who knowingly continued to do harm for profit after the scientific verdicts on their products were in, energy executives undoubtedly are more aware of what the burning of fossil fuels actually means for this planet than most of the rest of us. They certainly don’t know less than the reinsurance types who have launched a campaign of climate change awareness within the insurance business or New York’s Mayor Bloomberg, whose magazine Bloomberg Businessweek just had the blunt cover headline, “It’s Global Warming, Stupid.”

    And if they know and haven’t taken steps to prepare us for a fierce weather future or to switch us over to an alternative energy economy, if they’ve just kept on pouring money and effort and ingenuity into the frizzling of this planet, then let’s face it, they are the business equivalents of terrorists. In fact, for years they’ve funded a massive campaign to deny the reality of climate change. Only recently, Chevron made a last minute contribution of $2.5 million to a Super PAC dedicated to reelecting Republican members of the House of Representatives (who could, of course, block any legislation detrimental to an oil company). Realistically speaking, we should think of them as oil-Qaeda and we already know one thing: the strikes against us that they are at least partially responsible for are only going to grow more devastating.

    (Dealing With Oil-Qaeda). The military are being hit just like the rest of us by Oil-Qaeda.

    Problem for the military is that these terrorists are their bosses.

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