Bills
| 3.23.22

Implementing a Carbon Tax & Returning Its Revenue As a Dividend (H.R. 763)

Do you support or oppose this bill?

What is H.R. 763?

(Updated August 25, 2021)

This bill — the Energy Innovation and Carbon Dividend Act of 2018 — would seek to encourage market-driven innovation in clean energy technologies; and promote U.S. interests through the use of clean energy. It has four components: a carbon fee, a carbon dividend, a carbon equalization tariff, and regulatory adjustment -- a detailed below.

Carbon Fee

This would be a gradually rising, upstream fee on fuels’ carbon content, meant to create market-driven demand for cleaner energy technologies and correct market distortions by reflecting the externalities of pollution costs. This fee would be assessed once, upstream, starting at $15 per metric ton of CO2e and increasing by $10 each year. There’s an exemption for agricultural fuels and non-emissive uses. There’s a rebate for carbon capture and storage (CCS). Hydrofluorocarbons (HFCs) are also taxed, at 10% of global warming potential (GWP) of fluorinated gases.

Carbon Dividend

This would rebate 100% of the net revenues from carbon fees to the American people. It’d be administered as an equal share to adults with Social Security Numbers or Taxpayer Identification Numbers. Up to two minors per household would each receive a half share. This dividend would be administered by the Treasury Department, and its administrative cost wouldn’t exceed 2% of revenues. It’d be a one-month advance payment.

Carbon Equalization Tariff

This would levies an equalization tariff on carbon-intensive imported goods if their countries of origin don’t price carbon. Exported goods would receive a refund. It’s intended to remove the incentive for dirty production for all manufacturers from all countries, and creates an economic incentive for all nations to price carbon. This is designed for WTO compliance, and only applies to fossil fuels and carbon-intensive goods.

Regulatory Adjustment

This would adjust certain greenhouse gas (GHG) regulations which would become duplicative with the enactment of this bill. It helps avoid double jeopardy due to both fees on and regulation of certain GHGs). It would only impact certain GHG regulatory authorities, and would keep CAFE vehicle efficiency standards and methane, mercury, and particulate regulations in place. If emissions targets aren’t collectively hit after 10 years, regulatory authority is restored.

Argument in favor

Climate change’s impacts are already being felt, and will only worsen without drastic action. A carbon tax reflects the true price of fossil fuels, and is the type of aggressive measure that’s needed at this point. Without something like this bill, the world’s climate will not be sustainable within this century.

Argument opposed

Emissions pricing schemes merely entrench the fossil fuel-dependent status quo, rather than directly pushing for a shift to clean, renewable energies and this doesn’t go far enough. Alternatively, despite this bill’s claim of a dividend for American consumers they will still bear the costs of its carbon tax through higher energy prices. .

Impact

Taxpayers; carbon-intensive industries; fossil fuels; imports; exports; tariffs; and greenhouse gas regulations.

Cost of H.R. 763

A CBO cost estimate is unavailable — however, this bill is designed to be revenue-neutral, so it should pay for itself.

Additional Info

In-Depth: Rep. Ted Deutch (D-FL) reintroduced this bill from the 115th Congress to price carbon and return 100 percent of the net revenue to American families as a rebate:

“Climate change is an urgent threat that demands urgent bipartisan action. With this legislation, we are making clear to our colleagues that bipartisanship is possible – even necessary – to address climate change in this Congress. Our plan, to put a price on carbon and return the net revenue back to the American people, offers our Democratic and Republican colleagues an effective approach to significantly reduce carbon emissions without shifting the burden to the American people.”

When he introduced this bill last Congress, Rep. Deutch said:

"This aggressive carbon pricing scheme introduced by members from both parties marks an important opportunity to begin to seriously address the immediate threat of climate change. The status quo is unsustainable; the time to act is right now."

Bill cosponsor Rep. John Delaney (D-MD) adds that this type of “big solution with bipartisan support” is needed to truly address climate change:

“If we’re ever going to really mitigate climate change and prevent this looming catastrophe, it’s going to be with legislation like this – a big solution with bipartisan support. Incentives really matter and a carbon tax creates powerful market incentives in the private sector to reduce emissions in the short term and develop alternative energy sources in the long term. This is why I’ve authored my own carbon tax legislation and am proud to cosponsor this bill. The stakes are too high for us not to act and too high for us to be afraid to implement the solutions we know we need. This legislation is a blueprint for how we can combat climate change and bring people together around innovative policy solutions.”

Citizens' Climate Lobby supports this bill. Its executive director, Mark Reynolds, says: 

“Polling shows that more and more Americans are making the connection between climate change and disasters that claim lives and property. As public pressure increases for Congress to take action, the Energy Innovation and Carbon Dividend Act provides a solution that is both effective and family friendly.”

Ted Halstead, CEO of the Climate Leadership Council, a group comprised of oil companies and other business interests who want a carbon tax in exchange for fewer environmental regulations, calls this bill a proof of concept for a conservative-inspired carbon dividends framework:

“The introduction of the Energy Innovation and Carbon Dividend Act provides a clear proof of concept that a conservative-inspired carbon dividends framework can attract bipartisan support. It is no coincidence that the first bipartisan climate bill in nearly a decade is based on carbon dividends. A carbon dividends plan that returns all revenues to the American people is uniquely capable of appealing to all sides of the climate debate.”

Food and Water Watch is critical of this bill. Its executive director, Wenonah Hauter, argues that carbon pricing schemes are false solutions that don't effect real change::

"This carbon tax bill amounts to climate denial, not climate action. Emissions pricing schemes like this one are actually supported by the world’s largest oil and gas corporations because they do nothing more than entrench the status quo – an economy dependent on polluting fossil fuels. This particular bill is potentially even more egregious, as it would reportedly roll back existing environmental regulations on carbon emissions, amounting to a shameful, self-defeating giveaway to the industry.”

In a letter in the Wall Street Journal, Alan Greenspan, Gregory Mankiw, and Ben Bernanke — economists in the Ford, Reagan, and both Bush administrations — called for a national carbon fee and dividend policy and called a carbon tax "the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary." They called a carbon tax a "powerful price signal" to harness the "invisible hand of the marketplace" to steer economic actors towards a low-carbon future.

Americans for Tax Reform opposes a carbon tax, with ATR President Grover Norquist writing of this bill:

"The proposed carbon tax is a gas tax and a tax on your electric bill. Worse, it increases automatically year after year so the politicians can raise your taxes without ever having to vote. The tax will be hidden in the price of all goods and services. A hidden tax. A permanent tax. An uncontrolled tax that increases without end."

In July, over 94 percent of House Republicans voted for a resolution condemning a carbon tax as “detrimental to the United States economy.” The fossil fuel industry, which spent over $31 million to defeat a carbon tax measure in Washington state, is likely to aggressively oppose this measure. Some of the more liberal freshman members of the House Democratic caucus, such as Alexandria Ocasio-Cortez, are also likely to oppose this measure for not being aggressive enough.

This bill has 13 bipartisan cosponsors, including 12 Democrats and one Republican, in the current Congress. Last Congress, this bill had the support of four cosponsors, including six Democrats and three Republicans. In addition to the organizations mentioned above, it also has the support of the Environmental Defense Fund, C2ES, former Democratic National Committee (DNC) chair Howard Dean, and mayors and local legislators across the country.


Of Note: The Trump administration and United Nations have recently released reports warning of the measurable effects of climate change and its likely devastating impacts to humans. The UN report signaled that countries weren’t doing enough to meet their collective goal of keeping global temperatures from rising to two degrees Celsius above pre-industrial levels. At current rates, the UN report found that the global temperature is expected to reach 3.2 degrees above pre-industrial levels by 2100.

This bill’s cosponsors project that it’d:

  • Create 2.1 million net new jobs by the 10th year after implementation;
  • Reduce U.S. carbon emissions by 33% in the first 10 years, and targets a 90% reduction in emission by 2050 (over 2015 levels);
  • Deploy private capital and American innovation to advance clean energy technologies; and
  • Improve health and prevent 13,000 pollution-related deaths annually in the U.S.

There are currently a number of carbon tax proposals in Congress. Rep. Carlos Curbelo (R-FL) introduced a carbon pricing measure this summer, and Sen. Sheldon Whitehouse (D-RI) and other Democrats have their own proposal as well. Additionally. Sen. Chris Van Hollen (D-MD) and Rep. Don Beyer (D-CA) have also introduced a cap and dividend measure.

Noah Kaufman, a researcher at the Center on Global Energy Policy at Columbia University's School of International and Public Affairs says this bill is the most ambitious carbon pricing proposal of those currently proposed:

“By 2030, carbon tax rates under the Deutch proposal would be at least 60 percent higher than under the Whitehouse and Baker proposals and at least two times higher than under the Curbelo proposal.”

However, Dr. Kaufman ultimately concluded that this bill is unlikely to pass in 2019, and that additional analysis is needed to understand the likely impacts of its carbon tax rates.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / heibaihui)