In my humble opinion, if lawmakers seriously want to pass a carbon tax right now, they better start calling it the "Carbon Rebate Plan" and highlight that this is the only deal on the table right now to help low-income families cope with soaring energy costs.
Senator Ron Wyden (a Democrat from Oregon) told The New York Times he's had a carbon tax bill on his desk "for the last three years just waiting for the [right] time." A time of soaring fossil fuel costs would not normally seem like the right time. It would seem rather insane, actually.
So why now? Chiefly because the Democrats' $3.5 trillion bill is in serious jeopardy for lack of sufficient support, as consumers feel the bite of already surging food and gas prices and worry more D.C. spending will make things worse. Now lawmakers are trying to "whittle the original bill to about $2 trillion"--still an enormous figure. But that's putting key Biden agenda items like "clean electricity program" on the chopping block, especially after Senator Joe Manchin (a Democrat--for now--from West Virginia) came out against it last week.
Plan B, according to the Times, is a tax on carbon emissions. The right kind of carbon tax sounds like the one Senator Wyden is proposing--a revenue neutral option that sends money raised from the tax to those households most impacted by it, as opposed to using it to fund other government programs. "An important part of the policy...will be to use the revenue for tax rebates or checks for poor and working-class Americans--particularly those employed in the fossil fuel industry," the Times reported.
And here's the key quote from Senator Wyden: "You've got to show workers and families, when there's an economy in transition, that they will get their money back...They will be made whole."
Just look at what surging costs are already doing to U.S. consumers. "Higher-income shoppers plan to spend 15% more than last year," on holiday shopping, a Deloitte survey found yesterday. "But lower-income groups plan to spend 22% less." And in fact, a proportion of those households aren't spending at all this season. Google searches for payday loans and cash advances are picking up.
Low-income households have triple the energy burden as higher income ones do, nearly 9% of income versus 3%, and in some cases up to 30% of income depending on where they live. And by the way, "low-income" describes 44% of U.S. households, or some 50 million people. Higher food costs work exactly the same (regressive) way.
If anything, the jump in food and energy costs itself could argue for some kind of targeted fiscal relief this year, no matter what else is happening on Capitol Hill. I wouldn't be surprised if a decent portion of the child tax rebates end up footing these bills. And since, as I've argued, we've basically wound up with an effective carbon tax without rebates right now, this might actually be the perfect time to formalize the program, but with the rebates as a central feature to protect the most vulnerable households.
I do think the public feels more urgency to press forward on a clean energy program now than last decade, as long as it's done sensibly (and the Wyden carbon tax would apparently start at a pretty low amount, around $15-18 a ton). The rise of EVs and the plunging cost of renewable energy is also helping to galvanize capital in that direction already. States like Virginia and Illinois are moving towards "net zero" emissions targets anyhow. And why else would Exxon possibly abandon its highest-emitting future fossil fuel projects at a time when prices are soaring?
We don't need a national carbon tax for the energy transition to keep happening. But we do need a safety net for those who are bearing the brunt of it.
See you at 1 p.m!
Kelly
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October 21, 2021 at 10:28PM
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Kelly Evans: The right kind of carbon tax - CNBC
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