Assessing the Curbelo Carbon Tax Bill

When Rep. Carlos Curbelo (R-FL) introduced a bill to address dangerous climate change on Monday, it was a notable breakthrough. His bill is one of the first substantive proposals in many years by a congressional Republican to address the central environmental challenge of our time. Though it came days after nearly every House Republican voted for a non-binding resolution declaring their opposition to a carbon tax, it's a sign of progress.

While we're heartened by Curbelo’s recognition that we need decisive action to slow, stop and reverse climate change, NRDC cannot support his bill. It won’t cut heat-trapping pollution fast enough to meet science-based climate protection goals. It should invest far more in emission-reducing energy efficiency, renewable power, and electric vehicles, rather than devoting most revenues to highways. And it would preempt using the Clean Air Act to cut our carbon footprint. We must deploy all available tools, not limit them as this bill does, to head off the worst damages from climate change.

Here are our initial reactions to the MARKET CHOICE Act:

Pluses

• Republican lawmakers offering detailed policy solutions to address climate change. 
• A recognition of the severity of the problem and the need for a multi-sector solution.
• New policy ideas designed to cost-effectively achieve specific emissions goals using market-based approaches. For example, the tax rate rises to increase ambition over time and updates to help achieve the emissions goals.

Minuses

• This bill will not reduce carbon pollution far enough or fast enough to protect Americans against the worst effects of climate change (see figure below):
  • The U.S. should reduce heat-trapping pollution at least 50% below 2005 levels by 2030 to be on a trajectory to exceed an 80% reduction by 2050; but
  • This bill is projected to deliver a 30 to 40% emissions reduction by 2030.
• A comprehensive climate protection program must include science-based carbon pollution limits that guarantee the achievement of climate protection targets. A carbon tax can be an important part of this program. But the bill’s targets and the tax rate escalation clause are not adequate to ensure that we will achieve the near- and long-term emission reductions required by science.
• This bill limits existing authority to set carbon pollution standards under the Clean Air Act and other laws. That would effectively ban initiatives like the Clean Power Plan, designed to limit heat-trapping pollution from power plants, or other EPA pollution standards. To the contrary, we must keep all our climate-fighting tools on the table and should not preempt or limit current authorities. If Congress implements an effective comprehensive climate policy, EPA wouldn’t need to use existing authority.
• The bill focuses funding on increased spending on highways. We think more of these revenues should be devoted to:
  • helping low-income and vulnerable communities reduce their energy costs and improve air quality;
  • worker transition assistance;
  • climate resilience and adaptation; and
  • investing more in programs that reduce emissions at low cost, such as energy efficiency, renewable energy and vehicle electrification. 

GHG Emissions Projections and the MARKET CHOICE Act

The following figure shows business-as-usual GHG emissions projections from Rhodium Group, along with the projected outcome of the MARKET CHOICE Act as analyzed by Columbia University and Rhodium Group. The U.S. commitments under the Paris Accord are also shown, along with NRDC’s analysis of the pathway we need to be on to achieve an 80% emissions reduction by 2050. While the MARKET CHOICE Act would deliver a significant reduction in carbon pollution, the bill's emissions targets and modeled outcome do not deliver the long-term emissions result science says we need to hold global temperature rise to less than 2 degrees Celsius and avoid the worst climate damages.

Background on Carbon Tax vs. Standards or Caps

Carbon limits or caps deliver a known environmental outcome, with the market forces of supply and demand determining the carbon price. In a tax approach, the price is known but the environmental outcome is much less certain. Both approaches use the market to deliver an emissions reduction efficiently and will make clean resources more competitive than dirty resources. Because of environmental certainty, we have long preferred standards or caps over a tax.

Comparison to Other Carbon Tax Proposals

Senators Whitehouse (D-RI) and Schatz (D-HI) and Congressmen Blumenauer (D-OR) and Cicilline (D-RI) have introduced legislation to “place a price on the carbon pollution driving global climate change and putting Americans’ health and safety at risk”. This bill, the American Opportunity Carbon Fee Act of 2018, has important differences with the MARKET CHOICE Act, including:

• The American Opportunity Carbon Fee Act of 2018:
  • Delivers a larger reduction in carbon pollution, starting with a price of $50/ton vs. $24/ton; and
  • Targets revenues generated toward household tax credits and other benefits; and
  • Does not limit or preempt existing EPA authority or other laws.
• The MARKET CHOICE Act has a mechanism to improve the environmental outcome by adjusting the carbon price if emissions targets are not achieved.

The following table provides a more detailed comparison of the two bills.

The bottom line is that the Curbelo bill is a good conversation-starter. We hope more Republicans join the conversation with him, reach across the aisle and work with Democrats to develop a bipartisan measure that, first, preserves existing authority under the Clean Air Act to go after carbon pollution, and, second, adds tools that make further reductions needed to deliver a safer climate to our children and future generations.