Climate bills test Senate's commitment

As the debate over a carbon tax moves forward, supporters face political danger


The Senate is about to test that dictum again this summer, deciding the fate of climate change legislation that would put a price on carbon, the foundation of all fossil fuels, and remind drivers that the true cost of gassing up includes millions of gallons of crude drenching the Gulf of Mexico.

Oil's true cost also includes the well-known litany of other hidden burdens: military spending to protect Middle East oil, the $1 billion of U.S. wealth and jobs sent overseas each day to buy oil, and pollution of all sorts, including carbon dioxide emissions. None of these costs are included in the price of the fossil fuels Americans use.

"There has to be a price and a reward for moving to low-carbon fuels," said Rep. Pete Stark, D-Calif. Stark may be the only one in Congress who has the temerity to propose a direct tax on carbon. Economists of all stripes have long argued for such a tax as a way to get consumers to use less fossil fuel and more solar, wind or whatever energy sources the market decides are better alternatives, and give investors a reason to finance them.

"There may be more receptivity today to putting a price on carbon, given the price we're paying in the Gulf," said University of California at Berkeley professor Robert Reich, Clinton's former labor secretary. "Yet most Americans still have difficulty making the connection, and anything that's called a 'tax' doesn't stand a chance."

Congress instead is considering cap-and-trade systems for carbon emissions that do the same thing as a carbon tax, as Republicans are quick to point out, labeling them "job-killing energy taxes."

Energy taxes already exist, however. Jay Apt, an economist at Carnegie Mellon University, calculated that a toll increase last year on the Pennsylvania Turnpike amounted to about a $40-a-ton price on carbon.


The leading Senate plan is the American Power Act by Sens. John Kerry, D-Mass., and Joe Lieberman, I-Conn., which would set a gradually declining cap on carbon emissions and auction emissions permits. Revenues would go to alternative energy investments and rebates for low-income consumers. It has no Republican support.

More direct approach

A similar bill, by Sens. Maria Cantwell, D-Wash., and Susan Collins, R-Maine, takes a more direct approach.

A mere 39 pages, it would auction permits for carbon emissions, return 75 percent of the proceeds to all Americans in the form of a monthly dividend, and invest the other 25 percent in research for other fuels.

"It's so sensible it just might pass," said Steven Hayward, a resident scholar at the conservative American Enterprise Institute. The Cantwell-Collins bill also has broad support among environmentalists.

The House passed its own cap-and-trade bill last year, backed by House Speaker Nancy Pelosi, D-Calif. At 1,400 pages, it is bogglingly complex, mainly because it ran into the same problems as Clinton's BTU tax, which would have taxed the heat content of fuels. (BTU stands for British thermal units.)

To get votes, Democrats gave away emission credits to politically powerful industries. Hayward called it the "Keep Coal in Business Forever" act. Some environmental groups disavowed it.

Taxing carbon alone, whether through cap-and-trade or a direct tax, would not end America's addiction to oil, as President Barack Obama vowed recently to do. But raising oil's price is key to reducing demand, as was demonstrated by the 2008 oil price spike when consumers briefly rushed to buy hybrids, the Hummer went out of vogue and investors piled into green fuels.

No cheap alternative

U.S. dependence on fossil fuels is so great, however, that even a steep price on carbon would not begin to eliminate the need for oil. The world consumes 83 million barrels of oil a day, about a quarter of that by Americans, and there is as yet no cheap alternative to the internal combustion engine.

Europeans pay $7-$8 for a gallon of gas, mostly in taxes, and "they still drive," said Severin Borenstein, co-director of the University of California Energy Institute. "They use much less oil per capita than we do, but they still use more than we need to get to."

State and federal gas taxes in the United States average 40 cents a gallon and make up just 14 percent of gasoline's cost.

Americans drive bigger cars and drive more than Europeans do. Cheap oil has shaped U.S. suburbs and homes, making Americans more dependent than ever on fossil fuels.

At this point, even a steep tax would not radically reduce demand, economists said.

Most recommend adding other measures. Apt pointed to California's appliance standards, adopted nationally, that became the "poster child" for huge efficiency savings and innovation.