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Carbon Tax Good for Vermont

The following column by VNRC Executive Director Brian Shupe ran Sunday, November 23, 2014 in the Times Argus and Rutland Herald as part of the Weekly Planet series.

 

Carbon Tax: Not New, Not Radical, and Good for Vermont

By Brian Shupe

Last week, VNRC joined low-income advocacy partners, business and academic leaders and other environmental organizations to call for putting a price on carbon pollution and sending the money back to Vermonters.

The plan was accompanied by an economic study that showed that a carbon pollution tax, coupled with cuts in other taxes, would create jobs and reduce Vermont’s greenhouse gas emissions. (The study, by Regional Economic Models Inc. or REMI, can be found at energyindependentvt.org).

As we begin to debate the pros and cons of this proposal, it’s worth noting a couple of things. First, the concept of a carbon pollution tax, along with corresponding cuts in other types of taxes, is neither radical nor cutting-edge. Second, it is largely a tax shift, not a net tax increase.

It’s becoming more and more likely that there will be prices on carbon in the future and American corporations are already preparing. In 2013, Carbon Disclosure Project (CDP) of North America released a report of corporate disclosures (these disclosures are voluntary) showing that some of world’s largest firms already use an “internal carbon price,” or proxy carbon price, for making business projections.

Royal Dutch Shell and BP, for example, use a cost of $40 per ton, according to CDP. Walt Disney prices carbon between $10 and $20 per ton, and Google comes in at $14 per ton. Exxon Mobil counts carbon at $60 per ton. And, this September, over 70 countries and 1,000 businesses and investors supported declarations putting a price on carbon. More and more businesses are taking this step because they believe it’s prudent from a financial standpoint.

Carbon taxes are already in place in several countries and regions around the world, including the province of British Columbia, which passed a tax in 2008.

In addition, a growing number of high profile conservative public policy experts are promoting the adoption of a carbon pollution tax.

For instance, Henry Paulson, treasury secretary under George W. Bush, supports it. In an op-ed in the New York Times this past June he warned of the economic dangers of climate change.

“The solution can be a fundamentally conservative one that will empower the marketplace to find the most efficient response,” he wrote. “We can do this by putting a price on emissions of carbon dioxide — a carbon tax. Few in the United States now pay to emit this potent greenhouse gas into the atmosphere we all share. Putting a price on emissions will create incentives to develop new, cleaner energy technologies.”

Republican strategist George Shultz, who served as Ronald Reagan’s Secretary of State and Richard Nixon’s Secretary of Labor, and who worked on George W. Bush’s 2000 election campaign, also supports such a tax. Writing jointly with Gary Becker, a 1992 Nobel laureate in economics and professor of economics at the University of Chicago, Shultz argued for such a tax in a Wall Street Journal op-ed in April of 2013. He suggests that different types of energy should bear the full costs of the energy they provide, and said that a revenue neutral carbon tax could “go a long way toward leveling the playing field.”

The REMI report released last week envisions a carbon pollution tax in Vermont, phased in over a decade, coupled with tax rebates and corporate income tax cuts. Under the plan, a full 90 percent of the money raised by the carbon tax provides this new tax relief, with a dedicated portion going directly to low income Vermonters. Ten percent is proposed to flow into Vermonters pockets as well, through a fund that will help people invest in energy efficiency, renewable, transportation and other energy-saving solutions for their homes and businesses.

All indications are that putting a price on carbon and sending money back to the public will be debated this year in the Legislature, and this is a good thing. It’s my hope that it is a fair debate based on facts. It is also my hope that we can shape a smart policy that will help Vermonters save their hard-earned cash, build Vermont’s 21st century economy and move the state toward a cleaner energy future.