Analysts: Democrats have opportunity to push for carbon tax with GOP reform effort

The reform plan released this week by President Trump and congressional leaders doesn’t mention the highly controversial idea of a carbon tax, but analysts believe there’s a real opportunity for Democrats to push for fees on emissions as part of a broader, once-in-a-generation compromise on taxes.

The tax reform effort comes as prominent Republicans, such as Sen. Lindsey Graham of South Carolina, have voiced strong support for placing new taxes on carbon emissions. The senator said last week he’s working on a bipartisan proposal to that effect.

While there’s no sign that leaders in either party want to tie carbon fees to the bigger tax push — the House Ways and Means Committee on Thursday, for example, reiterated opposition to such a move — the combination of bipartisan support for a carbon tax and the desire of both parties to secure a significant tax overhaul seems to provide a unique opening.

“There’s absolutely an opportunity because the reform package we’ve seen doesn’t seem to be recovering a lot of revenue. There’s a lot of cuts happening but they’re lacking on the [tax] base-broadening aspect,” said Aparna Mathur, a scholar at the American Enterprise Institute who studies carbon taxes. “Maybe they do use it as a bargaining chip if they want to get Democrats on board, maybe that’s the thing they will negotiate on … I don’t think there’s as much actual opposition to a carbon tax as there’s made out to be.”

House Speaker Paul D. Ryan’s office on Thursday referred all questions to the Ways and Means Committee. A representative for that panel reiterated that the committee chairman, Rep. Kevin Brady, Texas Republican, remains opposed to any taxes on energy production.

A frequent criticism of any carbon tax plan is that it would drive up energy costs, since power plants are one of the greatest sources of emissions. Supporters of a tax say that in the current scenario, any increased costs to energy companies or power plant operators could be more than offset by lower corporate tax rates.

Even as the Trump administration dismantles many Obama-era programs on climate change, Republicans increasingly are warming to the idea of taking at least some limited action. In the House, 29 Republicans are now members of the Climate Solutions Caucus, which seeks bipartisan action to fight global warming.

The Climate Leadership Council, which includes a number of prominent former Republican officials, has spent much of this year pushing hard to put a price on carbon.

Just last week, Mr. Graham broke with many of his Senate colleagues in not only acknowledging humans’ direct impact on the climate but calling for a tax to help address the problem.

“I’m a Republican. I believe that the greenhouse effect is real, that CO2 emissions generated by man is creating our greenhouse gas effect that traps heat, and the planet is warming,” he said during a speech at Yale University. “A price on carbon, that’s the way to go in my view.”

Mr. Graham reportedly is working on a carbon tax plan with Democratic Sen. Sheldon Whitehouse of Rhode Island, though it’s unclear whether GOP leadership in the chamber would entertain allowing such a measure to even reach a committee vote.

While the politics remain tricky for Republicans, specialists say the recent GOP defeat on health care reform could pave the way for more bipartisanship on tax reform, possibly allowing a carbon tax measure — especially if it were co-sponsored by an high-profile Republican such as Mr. Graham — to find its way in to the broader package.

“We really believe the Republicans who are interested in that permanent major tax reform that needs to be done … on a bipartisan basis, they’re going to be thinking about how do we get a few Democrats on board with something, and how do we pay for it and not blow up the deficit and have it last,” said Jesse Vogel, managing director of the Partnership for Responsible Growth, which strongly advocates the notion of a carbon tax.

There are a host of ideas of exactly how a tax would work, but Ms. Mathur said the most effective scenario would be a relatively low cost-per-ton structure imposed on businesses. While they’d be paying a new tax, the potential reduction in overall corporate tax rates could more than make up for it, and, theoretically, there would be little if any financial impact on consumers.

“You would start with something low, like $15 to $20 per ton of CO2 emissions, then ramp up slowly over time as companies are able to adapt to better technologies,” she said.