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. nick spinelli

    I think we need to tax taxes.

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

  2. 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

  3. 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.

  4. 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.

  5. “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.

  6. We actually elected a president that believes in science. Boehner will never go for this.

  7. 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.

  8. 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.

  9. 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.

  10. 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.

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

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

  13. 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 – http://capanddividend.org/) 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.

  14. 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.

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