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Group backing US carbon tax sharpens proposal, adds members

A broad coalition of companies and environmental organizations has finalized the pillars of its plan to create an economywide U.S. carbon tax that the group estimates will halve nationwide carbon dioxide emissions from 2005 levels by 2035. The proposal still faces an uphill battle to gain Republican support in the U.S. Congress, however, where top GOP lawmakers remain leery of a carbon tax's economic impacts.

On Sept. 11, the Climate Leadership Council announced updates to its plan to form an escalating fee on carbon emissions that would start at $40 per ton in 2017 U.S. dollars, with all net proceeds going to Americans in the form of a quarterly dividend. Among other updates, the group said the fee will include an "aggressive" 5% annual price increase above inflation and an "emissions assurance mechanism" to make sure the U.S. hits its carbon reduction targets. The mechanism would temporarily increase the carbon fee at an accelerated rate if the U.S. misses key carbon reductions benchmarks.

The plan also now specifies that all current and future federal carbon emissions regulations for stationary sources will be displaced or preempted by the carbon dividends plan. Previously, the group said much of the EPA's regulatory authority over carbon emissions would be "phased out," including an outright repeal of the Obama administration's Clean Power Plan.

In addition, the council removed language from its plan saying the carbon tax would make the end of federal and state tort liability for carbon emitters possible, now saying it expects Congress "to address the liability issue for historic emissions."

Lastly, the group strengthened the language around border adjustments for carbon-intensive products. Under the updated plan, carbon-intensive U.S. exports to countries without a comparable carbon pricing system will receive rebates for carbon fees paid. At the same time, imports of carbon-intensive products from countries that lack comparable carbon pricing will face fees that are based on the products' carbon content.

"A well-designed system of border carbon adjustments will enhance the competitiveness of American-based firms that are more energy-efficient than their foreign competitors, while preventing carbon leakage and free-riding by other nations," the updated plan said. "This will put America in the driver's seat of global climate policy and encourage other large emitters — such as China and India — to follow America's lead and adopt carbon pricing of their own."

The council estimated its updated plan, if implemented in 2021, will reduce U.S. carbon output by 32% by 2025 and 50% by 2035 compared with 2005 levels. Those reductions would "far exceed" U.S. commitments under the Paris Agreement on climate change. The Paris Agreement, from which President Donald Trump wants to withdraw the U.S., included a pledge to reduce economywide U.S. greenhouse gas emissions by 26% to 28% from 2005 levels by 2025.

In addition to updating its carbon fee plan, the Climate Leadership Council announced Sept. 11 that mining and natural resources firm BHP Group and U.S. electric generator Calpine Corp. have joined the council as founding members. Other founding members include former Federal Reserve chairmen Ben Bernanke and Janet Yellen; former EPA Administrator Christine Todd Whitman; and large companies including BP PLC, Exelon Corp., ExxonMobil, Ford Motor Co., General Motors Co. and Johnson & Johnson.

Support builds, but odds are tough

Democrats in Congress and Democratic presidential candidates all strongly support placing a tax or fee on carbon emissions. And congressional Republicans, including U.S. Sen. Mitt Romney, R-Utah, and U.S. Rep. Francis Rooney, R-Fla., have voiced support for a carbon tax, with the latter sponsoring legislation to place a fee on carbon emissions.

But other GOP leaders, including Senate Environment and Public Works Committee Chairman John Barrasso, R-Wyo., have expressed opposition to a carbon tax. Furthermore, Trump's efforts to revive a struggling coal industry and repeal or ease greenhouse gas regulations make him an unlikely backer of carbon tax legislation.

The Climate Leadership Council is still rallying around its proposal. The group on Sept. 11 announced a new six-figure ad campaign that its advocacy arm, Americans for Carbon Dividends, will launch later this fall in the Washington, D.C., media market. Council spokesperson Carlton Carroll did not have an exact number on how much the group was spending on the ad campaign.