Last month, environmentalists cheered as California launched a cap-and-trade program, but talks of a federal carbon tax raised concerns about double taxation.
The San Francisco Chronicle reports that while the chances of a federal tax on carbon emissions being adopted are still remote, California state officials are worried enough to have started discussing the prospect.
“We are aware that it is a possibility, and we have been considering it as of late,” said California Air Resources Board spokesman Stanley Young. “We want to make sure that California companies continue to transition into the program without any sort of disadvantage.”
“We promote the possibility of the federal government addressing climate change,” he said. “And on our part, we’re prepared to align our program in a way that allows California to move forward.”
One potential solution would be for Congress to exempt California companies that already participate in the state cap-and-trade program from a carbon tax. California officials have also indicated they could tweak their system to harmonize it with the possible federal tax.
“You either have one or the other — you don’t have them both,” said climate economist Jasmin Ansar with the Union of Concerned Scientists, an environmental group. “You’d have the danger of, in effect, double taxation.”
According to the Brookings Institution, a $20 per ton carbon tax that rises 4 percent annually would raise $150 billion per year over ten years and reduce carbon emissions 20 percent below 2006 levels by 2050.
However, a study from the Institute for Energy Research’s Robert Murphy found that a carbon tax would make the tax code more convoluted and hinder economic growth.
Nationally, there has been talk of a growing consensus among lawmakers who support a carbon tax. There are even indications that support for the tax is growing among conservatives as a way to address climate change without having to have as many costly regulations.
Last month, the American Enterprise Institute co-hosted an event with the Brookings Institution, the International Monetary Fund, and Resources for the Future about the economics of carbon taxes that included a keynote speaker from the Obama Treasury Department.
The Chronicle also notes that conservative economist Arthur Laffer and former George W. Bush economic adviser Gregory Mankiw both support putting a price on carbon.
However, a carbon tax would violate the Americans for Tax Reform pledge signed by most Republicans in Congress.