Let’s discuss the carbon tax

By: Portia Bharath, Columnist

You may or may not have heard whispers on the street about something called the carbon tax. What is it exactly, and what does it mean for us? Will it cause gas prices to shoot up again? Perhaps.

Allow me to introduce H.R. 763 – the Energy Innovation and Carbon Dividend Act of 2019. This bill, introduced to the House in January, is making an array of shiny promises. It is lauded as a market-based, revenue-neutral, bipartisan solution for curbing carbon emissions and encouraging innovation of green technologies. It is supposed to create 2.1 million jobs, improve the health of American citizens, reduce carbon emissions by 33% in the first 10 years, 40% in 12, and reach a 90% reduction from 2015-2016 levels by 2050. These are ambitious numbers – no doubt changes the American people would like to see. But can this bill live up to its promises? Here’s a quick outline of the important points from the text of the bill:

  • The bill will place a tax on producers and suppliers of fossil fuels and carbon-intensive products – mainly oil refineries, coal mines, and natural gas transmission systems.
  • The tax will be equal to the greenhouse gas content of the fuel multiplied by the carbon fee rate, which is set at $15 per metric ton for 2019, with the potential to increase yearly based on an annual assessment of carbon emissions.
  • Exemptions include certain fuels used in farm/agricultural operations (methane produced from livestock can’t be taxed either) and military operations.
  • Facilities that take measures to capture and sequester carbon will receive refunds equal to the amount of carbon they remove from the atmosphere.
  • The bill ensures that companies can’t skirt the tax by importing fuel or carbon-intensive products – they will be required to pay an equalization tax if the source country does not price their own carbon. This is also supposed to incentivize other countries to enforce a carbon tax.
  • Interestingly enough, companies exporting fuel and carbon-intensive products from the U.S. will receive a refund on their tax amount.
  • The bill proposes that a study be conducted to observe the use of biomass as an energy source once it is enacted and its effect on carbon sinks and biodiversity.
  • Regulations that limit greenhouse gas emissions (with exceptions for limits based on human health recommendations) will be cut for the duration of this bill.
  • As for where the money goes, it will be pooled into what is called the Carbon Dividend Trust Fund that will be dispersed to American households (one share per adult, half share per child) and considered taxable income. This is why it is called “revenue neutral” because it is not intended to grow the government.

What H.R. 763 does not mention is that gasoline and energy prices will increase for the everyday consumer, which the monthly dividend is supposed to offset (for example, expect upwards of an 11cents increase per gallon of gas). American citizens may not adjust to these price hikes very well, especially considering that the dividend payout will be an equal amount for everyone, meaning that low-income families will feel the brunt of the rise in cost of living. This bill is riding on the hope that it will stimulate the invention of new green technologies that will move us away from fossil fuel dependence, but we also need to be realistic about the technology that is currently available and about the kind of society we live in. The fossil fuel industry is one of the most lucrative industries globally and whether you support it or not, our country’s standard of living rests heavily on fossil fuels; not to mention other renewable sources are simply not as energy-dense as fossil fuels, meaning they are significantly less efficient and contain hidden environmental costs. Unfortunately, there is no perfect energy source. H.R. 763 has good intentions, a sufficiently solid plan, and has made the trust fund a major selling point, but the execution may prove to be a risky move that will exchange one set of problems for another.

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