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Boxer, Sanders Introduce Bill to Require Carbon Tax Payment by Fossil Fuel Producers

Friday, February 15, 2013

Sens. Barbara Boxer (D-Calif.) and Bernie Sanders (I-Vt.) introduced a sweeping climate change bill Feb. 14 that would require several thousand coal, oil, and gas producers to pay a $20-per-ton carbon fee, which the two senators touted as a simpler alternative to the Democrat-led, economywide, cap-and-trade approach that collapsed in the Senate in 2010.

Boxer, who chairs the Senate Environment and Public Works Committee, said she plans to move the Climate Protection Act of 2013 (S. 332) through the committee in the next several months.

“I think I'm looking at around summertime [as] a good time to bring this bill to the floor,” she said at a press conference flanked by supporters from the Sierra Club, Public Citizen, and other climate bill advocates.

The initial $20-per-ton carbon fee, essentially a tax on the carbon and methane content of fossil fuels, would be increased by 5.6 percent each year, compounded over a 12-year period.

The Congressional Budget Office has projected that a fee of $20 per ton subjected to the same annual increase would raise roughly $90 billion in the first year, rising to $150 billion a year by 2022, for a total of $1.2 trillion in new revenue over the next decade.

EPA Regulation of Fracking

The bill also includes provisions that would strengthen the Environmental Protection Agency's authority to regulate hydraulic fracturing, or “fracking,” including requirements to have gas operations disclose chemicals they inject into wells. EPA also would be authorized to assess civil penalties for violations of those regulations--up to $10,000 per day but capped at a maximum of $125,000.

The Sanders-Boxer bill is the opening salvo in Democrats' efforts to get a climate bill passed in the 113th Congress, but it likely faces an uphill battle because Democrats right now do not appear to have support from Republicans, which would be crucial to bring the bill to the Senate floor for a vote.

The legislation is a departure from many previous climate bills, including several offered by Boxer, which would have required all emitters--from electric utilities to manufacturers to oil and gas producers--to purchase tradable allowances, or permits, for the greenhouse gases they emit.

Funds Set Aside for Consumer Protection

The Sanders-Boxer bill does not include mandatory caps on U.S. emissions but includes a provision stating that it is the “sense of Congress” that the United States “should carry out activities” to ensure that it cuts greenhouse gas emissions 80 percent by 2050 from 2005 levels.

In a departure from previous economywide cap-and-trade bills, the Senate bill takes an “upstream” approach--similar to a 2009 bill by Sens. Maria Cantwell (D-Wash.) and Susan Collins (R-Maine)--in targeting only U.S. fossil fuel producers. The fee would not be levied on downstream industries, including coal-fired power plants, utilities, and manufacturers.

But the impact of the carbon fee would ripple through those industries, analysts say, because fossil fuel producers inevitably would pass along the $20-per-ton cost in the form of higher energy costs.

The Sanders-Boxer bill includes provisions to set aside a significant portion of the revenue raised by the $20-per-ton levy that would be rebated to households, although it is a smaller portion than Cantwell and Collins envisioned in their 2009 “cap-and-dividend” bill (S. 2877) (236 DER A-32, 12/11/09).

Under the Sanders-Boxer Bill, 60 percent of the annual revenue collected from the fees would be set aside to be rebated each month to consumers to offset any increased energy or fuel costs passed along to consumers. The Cantwell-Collins measure would have rebated three-quarters of those funds.

The Sanders-Boxer bill does not include estimates of what those payments would amount to each year, but the rebates projected for the Cantwell-Collins bill ranged from $196 for individuals in the first year after enactment, with that amount rising to $331 in 2030.

The bill calls for EPA to administer the rebate program, but aides familiar with the drafting of the bill said that decision had more to do with ensuring the bill remains under the jurisdiction of the Senate environment committee--at least until it can be marked up by Boxer's panel this spring. After that, one aide said, the program is likely to be moved under the Treasury Department.

Efforts to Shield Energy-Intensive U.S. Manufacturers

The Treasury Department is to administer another fund that would be authorized under the bill--the Pollution Reduction Trust Fund--which would be used to help offset impacts on U.S. manufacturers. A total of $7.5 billion a year for 10 years, also funded through the levy of the carbon fee, would be set aside for “energy-intensive and trade-exposed” U.S. industries, including steel manufacturers.

Those provisions were designed to help ensure that any increased energy costs from the carbon fee do not put U.S. industries at a disadvantage to those in China or other nations if they do not impose similar carbon limits on their economies. In a related move, the bill would impose a carbon equivalency fee on carbon-intensive imported goods and use a portion of that revenue to fund U.S. and international adaptation efforts to help local communities prepare for rising sea level and other climate impacts.

The carbon equivalency fee would be calculated so that importers were paying an amount equivalent to the increased costs borne by U.S. manufacturers.

The legislation also would authorize EPA to establish a Sustainable Technologies Finance Program, a series of loans, loan guarantees, public-private partnerships, and other approaches, which also would be funded from carbon fee revenue. The bill would authorize $5 billion in total funding for the program.

Other Programs Could be Funded

Darren Springer, an aide to Sanders, told BNA that some renewable energy and weatherization programs also could be awarded funding through the elimination of fossil fuel subsidies, under a bill Sanders also unveiled Feb. 14, the Sustainable Energy Act.

That bill would eliminate more than $110 billion in tax subsidies for those programs over 10 years.

Any remaining funds collected from the carbon fee would be used to reduce the federal deficit, according to the bill.

By Dean Scott  


The Climate Protection Act of 2013 (S. 332) is available at http://op.bna.com/env.nsf/r?Open=smiy-94wplq.