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Clean Energy Trust

What’s Summertime For, If Not Carbon Tax Policy Announcements?

Apparently this was the summer of carbon tax policies and no one bothered to tell me.

In late June, a new political group, Americans for Carbon Dividends, established itself to push for a carbon dividend. This group is supported by a variety of energy companies (from the oil & gas, nuclear, and renewable sectors) and will be led by some high profile folks, including former Republican Senator Trent Lott and Former Federal Reserve Chair Janet Yellen.

Alex Wong/Getty Images

What is a carbon dividend, you ask? It’s a carbon tax, but called something different for messaging purposes. That, and the idea is that the revenues from the carbon tax are given to American taxpayers (instead of being spent), much like how a corporate dividend functions.

This particular policy prescription also proposing swapping out the carbon tax for a number of energy and environmental regulations. While I don’t think it achieves the right balance there, I think sending a large portion of carbon tax revenues back to consumers is a FANTASTIC idea — it is hard to imagine getting rid of such a policy once it has been put in place because the backlash would be significant.

While we’re spitballing new carbon tax policies, my own personal ideal policy would be one that sends most of the revenues back to American taxpayers, and uses the remaining revenue to invest in infrastructure, early-stage clean energy commercialization (surprise, surprise), and sends some revenues to pay down the national debt.

Not to be outdone, in July Republican Representative Carlos Curbelo released his own carbon tax policy. This one is more-or-less intended to replace the gas tax to fund infrastructure projects. I don’t think this bill spends its revenues all that wisely, but I applaud Re. Curbelo for taking action.

While these conservative-backed policy ideas are a great step in the right direction, it will by no means be easy to gain broader adoption — just three days before Rep Curbelo introduced his bill, the House passed a symbolic measure condemning the idea of a carbon tax. So, there’s that.

Then again, this is how things are supposed to work when it comes to policy — a bunch of different interest groups propose solutions to a problem, and then (sometimes) the details get hammered out and legislation gets passed in the future. While we should not expect the passage of a carbon tax in the near future, interest groups are positioning themselves for if and when the political environment changes. The important thing, after all, is that we collectively agree on what the problem is, not necessarily exactly how to solve it. Also, in the modern era, most major legislative achievements are passed on close votes, and politicians change their positions over time to fit the political environment of the day. So, we should not take the House’s symbolic vote to mean that even some of the Representatives who voted in support of the measure will not also support a carbon tax in 3 or 5 years — time change.

The takeaway:

What’s all this have to do with clean energy innovation? Signals. Back in 2007–2009, investors were convinced there was going to be carbon-pricing legislation in the near future, and many made investments banking on that future. It didn’t happen. This time around, no one is relying on a carbon tax passing as a condition for a successful investment — and most agree it’s still quite a long-shot any time soon.

That said, if and when the United States does formally price carbon, it will have significant ripple effects in the energy sector and beyond. Overnight, technologies that have trouble pitching their cost-competitiveness and payback periods would swing into the money and likely drive significant growth and innovation.

Indeed, a federal carbon capture tax credit was established earlier this year (not to be confused with a carbon tax — a carbon capture tax credit incentivizes technologies which capture carbon emissions from things like thermal power plants and industrial processes). This change is expected drive investment and deployment in carbon capture technologies that were not economic previously. In the absence of cohesive energy policy, a carbon tax would provide significant direction to where energy investments should be made in the future, and the bulk of this spending would be in clean energy projects.



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Ian Adams

I work at Evergreen Climate Innovations in Chicago. I’m passionate about clean energy, innovation, and market driven solutions.