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H.R. 7173 (115th): Energy Innovation and Carbon Dividend Act of 2018

Should America institute a tax on the main pollutant contributing to global warming?

What the bill does

The Energy Innovation and Carbon Dividend Act would create a $15 tax per metric ton of carbon dioxide, the main pollutant contributing to global warming. That tax would then increase by $10 per year.

In addition, it would create a tariff for “carbon-intensive imported goods” coming from countries without their own carbon tax. The bill’s sponsors claim that all the revenues collected would be rebated back to American taxpayers.

The bill was introduced in the House on November 27 as H.R. 7173 by Rep. Ted Deutch (D-FL22).

What supporters say

Supporters argue that the evidence that human-caused climate change is real is overwhelmingly supported by scientists, that the effects would be irreversible unless change occurs soon, and that a carbon tax is the best way (or one of the best ways) to stop it.

“If we’re ever going to really mitigate climate change and prevent this looming catastrophe, it’s going to be with legislation like this — a big solution with bipartisan support,” cosponsor Rep. John Delaney (D-MD6) said in a press release.

“Incentives really matter and a carbon tax creates powerful market incentives in the private sector to reduce emissions in the short term and develop alternative energy sources in the long term,” Rep. Delaney continued. “The stakes are too high for us not to act and too high for us to be afraid to implement the solutions we know we need. This legislation is a blueprint for how we can combat climate change and bring people together around innovative policy solutions.”

What opponents say

Opponents counter that a carbon tax would be stifling economically, especially when 62.9% of U.S. energy production last year came from fossil fuels, according to the U.S. Energy Information Administration.

“A carbon tax will mean that families and consumers will pay more for essentials like food, gasoline, and electricity,” read a Republican-led House resolution which passed in July. “[It] will fall hardest on the poor, the elderly, and those on fixed incomes… [and] will increase the cost of every good manufactured in the United States.”

“United States energy policy should encourage continued private sector innovation and development and not increase the existing tax burden on manufacturers,” the resolution continued. “A carbon tax would reduce America’s global competitiveness and would encourage development abroad in countries that do not impose this exorbitant tax burden.”

A recent vote on essentially the opposite bill

A July resolution in the House expressing that a potential carbon tax would be detrimental to the economy passed 229–180. (It was a “sense of Congress” resolution which didn’t alter federal law.) Only seven Democrats supported, while only six Republicans voted against.

Interestingly, one of the three Republicans who voted for that resolution now supports the Energy Innovation and Carbon Dividend Act: Rep. Dave Trott (R-MI11). Trott has not indicated why he changed his mind.

How bipartisan is it?

The Energy Innovation and Carbon Dividend Act earned headlines calling it “the first bipartisan carbon tax bill in a decade.” That’s technically true. Democrats have introduced at least one carbon tax bill every Congress since then. Meanwhile, three Republicans broke from their party to introduce a carbon tax bill in July called the MARKET CHOICE Act, which no Democrats cosponsored.

However, calling this new legislation the the first bipartisan carbon tax bill in a decade — while technically accurate — fails to indicate that this remains almost entirely a Democratic priority.

Odds of passage

Still, this could serve as a template for Democratic legislation in the new Congress which convenes in January, although it would face nearly impossible odds getting past the Republican Senate or President Trump.

A previous somewhat-similar version of this legislation passed the Democratic-led House in June 2009, yet it never received a Senate vote — even though the Senate was also controlled by Democrats. There were several reasons, including far more Senate focus on economic issues during the Great Recession and health care during the Obamacare fight, as well as a lack of significant public engagement on the issue.

Last updated Dec 14, 2018. View all GovTrack summaries.

The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Nov 27, 2018.

Energy Innovation and Carbon Dividend Act of 2018

This bill amends the Internal Revenue Code to impose a fee on the carbon content of fuels, including crude oil, natural gas, coal, or any other product derived from those fuels that will be used so as to emit greenhouse gases into the atmosphere.

The fee is imposed on the producers or importers of the fuels and is equal to the greenhouse gas content of the fuel multiplied by the carbon fee rate. The rate begins at $15 in 2019, increases by $10 each year, and is subject to further adjustments based on the progress in meeting specified emissions reduction targets. The bill also imposes a specified fee on fluorinated greenhouse gases.

The bill includes:

exemptions for fuels used for agricultural or nonemitting purposes, rebates for facilities that capture and sequester carbon dioxide, and border adjustment provisions that require certain fees or refunds for carbon-intensive products that are exported or imported. The fees must be deposited into a Carbon Dividend Trust Fund and used for administrative expenses and dividend payments to U.S. citizens or lawful residents. The fees must be decommissioned when emissions levels and monthly dividend payments fall below specified levels.

The bill also amends the Clean Air Act to suspend certain regulations that limit greenhouse gas emissions. The suspensions expire if the emissions targets established by this bill are not reached after a specified time period.