Skip Page Banner  
Skip Navigation

Treasury Official Says Obama Has No Plan For Carbon Tax Without Republican Support

Wednesday, November 14, 2012

An Obama administration official said Nov. 13 the president will not lead an effort to tax the carbon content of fuel in upcoming talks over avoiding the “fiscal cliff,” saying the onus is on Republicans to first show they could support such an approach.

“I just want to be clear, the administration has not proposed--nor is it planning to propose--a carbon tax,” Gilbert Metcalf, the deputy assistant treasury secretary for environment and energy, said at an economic forum on carbon taxes.

Metcalf said “any legislative effort to address the risk of climate change will have to have bipartisan support.” He suggested that carbon tax advocates would need to demonstrate that Republicans would be open to the idea before serious talks could begin.

“If there is a desire on the part of Republicans as far as the fiscal reform [negotiations] to include discussions of the carbon tax, then the president is ready to work with Republicans on these issues, ” Metcalf said.

On the heels of the Nov. 6 elections that returned Obama to the White House and extended the Democratic majority in the Senate, environmental groups see an opening for resurrecting action on carbon as Congress turns its attention to the “fiscal cliff” of automatic tax hikes and spending cuts set to go into effect in January.

EU Delays Airlines Inclusion

Metcalf also weighed in on the European Union's decision to delay the extension of its carbon dioxide Emissions Trading System to U.S. airlines. Both the Republican-controlled House and the Democratic-controlled Senate have passed bills to block the EU plan. The EU's one-year delay gives the International Civil Aviation Organization additional time to negotiate a broader deal to cut aviation emissions (see related story).

“We have been opposed to the unilateral approach” the European Union had taken to include U.S. and other foreign carriers in the carbon trading plan, Metcalf said. “It is heartening” to hear that plan may be delayed, “and I think there is a recognition that there are appropriate venues” for negotiating emissions limits for the air sector.

Meanwhile, the House gave final approval Nov. 13 to a bill (S. 1956) that would bar U.S. airlines from participating in the EU emissions trading plan. The bill passed by voice vote and now goes to President Obama for his signature (see related story).

The fact that three think tanks from across the political spectrum held the Nov. 13 carbon tax forum--the conservative American Enterprise Institute, the liberal Brookings Institution, and independent think tank Resources for the Future--spurred some to suggest the forum itself was a signal of renewed interest in carbon tax policies.

Energy industry representative Frank Maisano said the forum gave the carbon tax “some policy street cred” on the heels of the Nov. 6 elections--even if he and other industry representatives say carbon taxes are dead on arrival in Congress.

“I remain highly skeptical of any new energy tax,” Maisano, an energy specialist with Bracewell & Giuliani, told BNA during the forum, “even if passed with offsetting tax reductions elsewhere.”

Benefits of Carbon Tax Touted

In contrast, many of the speakers at the forum--including officials from the International Monetary Fund and Joseph Aldy, formerly a special assistant for energy and environment for President Obama--argued that a carbon tax offers a host of benefits.

They and other supporters said a carbon tax is far less complex than the cap-and-trade approach Obama and other Democrats supported from 2009-2010. Supporters said a carbon tax would allow reductions in other economically inefficient taxes such as payroll and income taxes that act as disincentives for economic growth and that it could raise up to $90 billion in new revenue in its first year.

Aldy, now an assistant professor of public policy at Harvard's John F. Kennedy School of Government, said there is a certain irony to carbon taxes returning to the spotlight in the United States, more than 15 years after European nations touted such taxes as the best approach for cutting global greenhouse gas emissions.

The United States, by contrast, was in the 1990s a strong advocate of a cap-and-trade approach for addressing emissions, Aldy noted. The European Union was ultimately convinced to adopt the U.S.-favored approach and created the EU Emissions Trading System, Aldy said, but the United States then abandoned its own approach with the defeat of Senate cap-and-trade legislation in 2010.

By Dean Scott  


More information on the AEI/Brookings Institution/RFF economic forum on carbon taxes is available at http://www.aei.org/events/2012/11/13/understanding-the-economics-of-carbon-taxes/.