Sen. Durbin’s carbon pricing bill joins other similar initiatives in Congress

By Myra Bajwa, Policy Director at Undivided Planet

The America’s Clean Future Fund Act, authored by Senator Dick Durbin (D-IL), is the newest carbon pricing initiative introduced to the 116th U.S. Congress. The bill would institute a carbon fee of $25 per metric ton of carbon dioxide emitted; the fee will increase by $10 each year. Durbin’s latest bill joins eight other carbon pricing bills in various stages of legislation.

Each of the nine bills are similar when it comes to annual adjustments and the general implementation of the carbon taxes. However, the core differences between each bill lie in the proposed allocation of the revenue generated from the carbon fees.

Carbon pricing is a popular climate policy approach that implements a tax on corporations that emit carbon. One of its main benefits is that the tax revenue it generates can be cycled back into sustainable energy investments and can offset economic damage caused by a reduction in carbon emissions. Cap-and-trade programs, on the other hand, are a way to reduce carbon use by both restricting yearly carbon emissions for certain industries and providing allowances that can be used or sold.

Durbin’s bill is similar to the Energy Innovation and Carbon Dividend Act, which proposes a carbon tax and originated in the House in January. The Act is co-sponsored by 80 representatives across both sides of the aisle. The main difference between the Durbin bill and the bipartisan House bill is that the latter opted to start with a fee of $15 per metric ton of carbon dioxide emitted rather than a fee of $25. Nevertheless, the fees in these two bills are rather lenient relative to the American Opportunity Carbon Fee Act and America Wins Act, which have the highest carbon fees of $52 per metric ton.

Sen. Durbin’s plan would provide grants to communities dependent on fossil fuels to help them transition away from a heavy reliance on carbon as well as to lower and middle income individuals who assist in carbon reduction measures such as carbon sequestration and storage.

The Energy Innovation and Carbon Dividend Act offers a monthly dividend for family units, adding up to approximately $4,410 in annual carbon dividends for a family of four. Indeed, this plan stipulates that 100% of the excess revenue generated will be directed back to American families. However, the bill does not allocate funds specifically for low-income communities that may struggle from the economic impact of potential carbon fees; these communities may require a higher share of revenue to compensate for this damage.

The COVID-19 pandemic has made Americans wary of implementing economic measures that do not yield immediate benefits. Most of the bills currently making their way through Congress will only take effect after the pandemic is over, or per Sen. Durbin’s press release, after “the U.S. economy is no longer in economic turmoil.”

With that said, COVID-19 has interestingly led to a predicted 7% drop in global carbon emissions compared to 2019 levels — levels not seen since 2010. While this is positive news, it is important to note that carbon emissions have been surging since the end of World War II and will likely continue to rise sharply after strict pandemic protection measures are lifted. Fortunately, America’s Clean Future Fund Act and similar pieces of legislation stipulate that the carbon fees take effect before 2030.

The World Economic Forum released their 2020 benchmarks that countries must adhere to in order to move up in the Energy Transition Rankings. The implementation of carbon pricing policies and an overall reduction in carbon emissions are benchmarks the United States has failed to meet, which is unfortunate as these policies are crucially important in the fight to keep the global rise in temperature below two degrees celsius.

While most of the carbon pricing bills will not become law, introducing legislation to combat climate change is the first step in meeting World Economic Forum benchmarks and reducing the negative effects of climate change.