Prominent Dem prepares climate bill as others seek business support for carbon tax

By:  Climate Wire - Evan Lehmann
Source: E&E News

Rep. Chris Van Hollen (D-Md.) is crafting a climate bill that would cap greenhouse gases on upstream emitters while providing payments to the U.S. public, a design that's meant to deflate attacks about its effect on rising energy prices.

The cap-and-dividend bill will be similar to a measure that Van Hollen introduced at the height of climate action in 2009, when his legislation competed with early iterations of the cap-and-trade bill proposed by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.). The bills were introduced within days of each other four years ago.

At the time, there were key differences in how the carbon permits would be distributed and how the revenue raised by selling them would be used. Van Hollen proposed auctioning all the permits to emitters, while Waxman and Markey sought to give some away, in order to soften the economic impact on industry and curry political alliances.

Van Hollen's previous measure also directed the revenue entirely to every U.S. resident with a Social Security number in the form of monthly dividend checks. Supporters of the dividend approach, including Sens. Maria Cantwell (D-Wash.) and Susan Collins (R-Maine), say it can appease economic and political hardships caused by carbon caps, which raise electricity prices.

"Most of the arguments you hear from opponents trying to address this issue is the increased cost to consumers," Van Hollen said yesterday. "This addresses that issue directly."

The upcoming bill will be similar to his previous measure, he said, with the carbon cap placed "way upstream" on industry emitters. The specifics, however, on which sectors will be regulated and whether 100 percent of the permits will be auctioned need to be finalized, he said.

"You want to try and minimize the number of entities [under] the cap," Van Hollen said. "You want to make it as simple as possible. And, of course, the dividend idea is to make sure that any savings is returned to consumers."

'An opportunity' for carbon tax

It's unclear when the bill will be introduced. But the timing could be reminiscent of his previous effort, insofar as having to share attention with separate legislation sponsored by Waxman.

The California Democrat is working with Rep. Earl Blumenauer (D-Ore.) and Sens. Sheldon Whitehouse (D-R.I.) and Brian Schatz (D-Hawaii) to build industry support for legislation to tax carbon. The group released an outline last spring and has been seeking ideas from businesses and experts about its design.

Key questions include how large the tax would be, the time frame over which it would be ramped up and how the revenue would be used. A Democratic aide said industry officials are doing some "head nodding" when asked about the idea but have yet to begin lobbying Republicans on the issue.

Conservatives, however, are hearing from other groups that support a carbon tax that's designed to raise revenue for the purpose of reducing tax rates on businesses and income. The R Street Institute is among them.

"I've had dozens and dozens of meetings where I've discussed things like a carbon tax with people in the business community, the broader community," Blumenauer said yesterday. "It's not just editorial pages and think tanks. More and more people are appreciating that there is in fact an opportunity."

Koch group enters debate

While taxing carbon has its supporters among some conservative economists and think tanks, Republican lawmakers generally reject it outright. The outer ring of GOP luminaries can also be skeptical, even those who seek to douse the sharp partisanship around environmental issues.

In an interview this week, former Interior Secretary Gale Norton, who served under President George W. Bush, didn't close the door on a carbon tax, but she also didn't encourage its pursuit.

"First of all, I think it's important to look for approaches that are not going to skew the economic system," she said when asked about her personal views on a revenue-neutral carbon tax. "I'm also a little leery about the idea that the federal government will ever do away with one tax to adopt another one. There are very few examples where any revenue stream has ever stopped. Usually, they just add one on top of another one, on top of another."

While some conservative groups are promoting carbon taxes, others are preparing a counter-message. The Institute for Energy Research, a group with connections to Koch Industries Inc., is holding an event next week to discredit the tax policy.

"Taking into account political realities ... a unilateral U.S. carbon tax would not deliver on the promises of its supporters," a description of the event says.

For his part, Van Hollen says his cap-and-dividend bill is intended to outline an important climate policy, but he has little hope it will advance under Republican leadership.

"I still think it will get bipartisan support from some Republican policymakers," he said, recalling how carbon legislation was able to attract GOP support before 2009. "But in the House of Representatives these days, it's just a different animal."