Warming Up to a Carbon Tax
With a Growing National Debt, Heightened Concern about Global Warming and Continual Debate over Federal Tax Reform, might a Carbon Tax Lie in Our Future
Herere benefits and disadvantages of a carbon tax, what it would look like, and what design questions have yet to be addressed by the Congress.
Reports made by the United Nations and other groups over the past year have concluded that global warming is a certainty (United Nations Intergovernmental Panel on Climate Change, Pew Center on Global Climate Change and others). Greenhouse gases (GHG) trap heat in the atmosphere that slowly warms the earth. The primary greenhouse gas is carbon dioxide (CO2) generated from the burning of fossil fuels, such as oil, coal and natural gas.
The U.S. is the largest emitter of greenhouse gases (November 2007 report (PDF) from the Climate Change Science Program). Increased world attention to climate change will likely put pressure on the U.S. to reduce its GHG emissions. In addition, many state and local governments have taken actions to address global warming. They will also push for national remedies.
In January 2007, the Senate Committee on Energy and Natural Resources held a hearing on a proposed cap and trade system (a cap and trade system involves a government set limit on GHG emissions for particular industries. Companies are then issued certificates indicating how much they are allowed to emit, with allowances decreasing each year. If a company needs to emit more than allowed, it will need to either find a way to reduce its emissions or purchase certificates from others. This system employs market forces to encourage companies to determine their best reduction strategy.). In November 2007, the Senate Committee on Environment and Public Works held hearings on a climate security proposal (S. 2191).
In addition to discussions at both the federal and state levels on a cap and trade system to reduce GHG emissions, taxes have also been proposed by Congressmen Pete Stark (D-Calif.), John Dingell (D-Mich.) and others.