Thursday, November 8, 2012

Sen. Majority Leader Reid: 'Climate Change Is An Extremely Important Issue For Me, And I Hope We Can Address It'

We are seeing a unique confluence of events put a carbon tax squarely back into the national debate: the debt crisis and fiscal cliff, Hurricane Sandy, and the results of the 2012 election.

Sen. Majority Leader Reid said Wednesday:

"Climate change is an extremely important issue for me and I hope we can address it reasonably. It's something, as we've seen with these storms that are overwhelming our country and the world, we need to do something about it."

Back in August Reid spoke to Greenwire following one of the most powerful public speeches on climate that any national policymaker has made in years:

Reid said he hopes the Senate will take up a bill to put a price on carbon emissions if Democrats maintain control of the chamber....

Reid now has a much stronger hand. Democrats picked up 2 seats in the Senate. A few months ago Republicans were thought to have a good chance of seizing control of the Senate - now they have undercut their chances of taking back the Senate even in 2014. And newly elected Senators Angus King (I-ME) and Elizabeth Warren (D-MA) both explicitly campaigned on climate change.

No, Reid can't do this single-handedly. But President Obama, reelected with the help of a decisive youth vote that rightly puts climate change near the top of the list of their concerns, himself said on election night:

"We want our children to live in an America that isn't burdened by debt, that isn't weakened by inequality, that isn't threatened by the destructive power of a warming planet."

In the coming days and weeks, Climate Progress will explore the prospects for a carbon tax from all angles. We'll also explore other policies that could potentially achieve the same kind of reductions. And we'll try to set the record straight when we think the media doesn't get it quite right, as with this CNN Money article, "Climate change is back on the table":

"If we're going to do a grand deal on taxes, [a carbon tax] will be high on the president's list of priorities," said Dan Clifton, a partner at Strategas, a research firm that serves institutional investors. "But it would have to be part of a compromise for Republicans to accept something."

Clifton puts the chances of a carbon tax up for serious debate at 20% currently, but higher if a grand deal on taxes takes shape.

Still, the chances of a carbon tax actually passing remains low.

"I think there will be some opposition from many sides," said Whitney Stanco, an energy analyst at Guggenheim Securities' Washington Research Group. "From conservatives because it's a tax increase, from liberals because it's likely a regressive tax increase and from environmental groups because it would be used to pay down the deficit, not invest in clean technologies."

So a carbon tax will be a high priority of Obama's and the chances of a carbon tax being part of the debate is 20% - or higher - but the chances of it actually passing are low. Hope that clears things up for you.

In fact, while everyone I talk to in DC thinks the chances of a carbon tax are below 50-50, ultimately if the President insists on a carbon tax, it has a serious shot - and Stanco's three points of opposition are each incomplete.

First, it's certainly true many conservatives would oppose any new tax, which is why Obama and Reid would have to put on the table something in return that conservatives want - such as a lower corporate tax. Indeed, as I will explain in a subsequent post, many in Washington think the only way to have any kind of grand deal on taxes is to simply let all the Bush tax cuts expire. That will happen automatically at the end of this year if the House and Senate can't agree on a package that the president will sign in time. In that scenario, the subsequent 2013 deal can be billed as the biggest tax cut in history - and throwing in a carbon tax and lower corporate tax rate wouldn't change that.

Second, a carbon tax is certainly somewhat regressive. But we are probably talking about a tax that is under 1% of GDP - a key point I will elaborate on in subsequent posts - so it won't be a burden on most individuals. And it is perfectly straightforward to rebate some of the tax to those in lower income brackets to eliminate the regressivity. This is certainly not a show-stopper.

Third, environmental groups would be delighted to have a carbon tax - they certainly won't oppose it because the money might be used to pay down the debt (or even to lower taxes for corporations and lower income groups). Also, if there is a grand bargain on taxes it would probably include a final set of tax credits for wind energy and other renewables. I for one would much rather have a permanent carbon tax then permanent clean energy tax credits, especially since the latter have proven anything but permanent.

I'm not saying this deal would be easy to construct and pass through the House and Senate. I'm only saying that one can certainly design a carbon tax as part of an overall tax package to minimize opposition. It then becomes a matter of how much the President and Senator Reid insist that it be part of the final deal.

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