Democrats want carbon tax to buy support for infrastructure bill

Through Laura Davison, Ari Natter and Jennifer A. Dlouhy to 09/26/2021

WASHINGTON (Bloomberg) – Senate Democrats are crafting a carbon tax proposal that could potentially be used to offset some of the costs of a hefty social spending bill as well as direct cash payments to households, according to a key lawmaker.

“It is predicted that charging polluters – when combined with clean energy tax credits – would lower the cost of clean electricity for Americans,” the chairman of the finance committee said. Senate Ron Wyden in a statement to Bloomberg News on Friday. “I’ve been working on it for years and have continued to develop the proposal as part of my menu of options for the caucus.

A “substantial portion” of the revenue generated from a carbon tax would flow to Americans in the form of cash payments, Wyden said. This could help increase public support for the tax, but would also mean less money to offset the cost of the so-called reconciliation bill of up to $ 3.5 trillion.

This bill, incorporating the bulk of President Joe Biden’s long-term economic agenda, includes overhauling climate investments and allocating funds to health and education programs. Negotiations are underway at Capitol Hill.

The New York Times previously reported on Wyden’s plans to pursue a carbon tax.

Industry position

The momentum for such a tax is growing as a way to fight climate change. And economists have long favored a carbon tax as a direct approach to putting a price on greenhouse gas emissions.

Advocates say it would encourage businesses and consumers to pollute less. The American Petroleum Institute, the petroleum industry trade group that includes Exxon Mobil Corp. among its members, and the Chamber of Commerce both approved a price on carbon, which could take the form of a tax.

But industry supporters generally want the carbon tax imposed as a substitute for existing greenhouse gas regulations – a compromise that likely won’t be part of the plan for Democrats to come together.

Although several Senate supporters have viewed the reconciliation bill as a potential route for the tax measure for more than a year, it has gained momentum in recent weeks, according to a person familiar with the negotiations on the question. The tax is attractive because of its role as a potential source of income, but lawmakers are also working to ensure that a significant portion of the revenue goes to middle- and low-income families.

A carbon tax could attract more support as a way to replace other sources of revenue, allay moderates’ concerns about the size of the package, and give the Biden administration tangible proof of strong US plans to cut gas emissions at greenhouse effect ahead of a critical UN summit in five weeks.

Still, a tax that could increase the costs of driving, flying and consumer goods is likely to face strong political resistance from some quarters, and Republicans have already voted against the concept of imposing a tax on dioxide. of carbon. Some moderate Republicans, including Lisa Murkowski of Alaska and Mitt Romney of Utah, have indicated they are receptive to the idea.

The GOP opposition would not be able to reject the proposal as Democrats aim to pass the tax and spending bill in a party line vote. Still, Democrats have tight majorities in both chambers, which means they need nearly every member of the House and all 50 Senate caucus members to support the legislation.

Coal country

Senator Joe Manchin, a moderate Democrat who represents coal-dependent West Virginia, would be a key part of drafting a carbon tax. Manchin did not make a commitment on the issue, but voted with his party members on a courier amendment earlier this year in favor of such a tax.

Proponents argue that a national carbon tax should be paired with an import tax – known as the carbon border adjustment tax – to protect American workers in energy-intensive industries and to ensure that companies are not moving manufacturing out of the United States to countries with lax environmental regimes.

National Climate Advisor Gina McCarthy Bloomberg said in July that while “it’s not excluded,” there are strategies other than a border adjustment carbon tax that may be more beneficial. Despite this, the President’s special climate envoy John Kerry on Wednesday raised the prospect of a tariff on carbon-intensive imports if other countries do not limit their emissions and dependence on carbon. coal-fired energy to fuel inexpensive manufacturing.

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