News Analysis: Still "too early" for U.S. to implement carbon tax

Without taking new environmental actions, it will be hard for the United States to keep its promise to cut greenhouse emissions it has made within the framework of the Paris Climate Agreement, analysts said.

The United States has been committed to cutting its greenhouse emissions by 26 to 28 percent below 2005 levels by 2025 in Paris Climate Agreement signed by 175 countries, including the United States, in April.

Imposing a national tax on carbon emission can help Uncle Sam fulfill the goal, but when the U.S. government will take the measure is still "too early" to predict.

BENEFIT OF CARBON TAX

If the United States implements the American Opportunity Carbon Fee Act, the country can reduce greenhouse emissions by 43 percent in 2030 below the level in 2005, according to a recent report of Resources for the Future (RFF), a think tank based in Washington D.C.

The act was introduced by two Democrat senators Sheldon Whitehouse and Brian Schatz in June last year, with a view to imposing fees on greenhouse gas emissions, especially on carbon dioxide in the country; but not much progress has been reported since then.

Although it is hard to push forward a unified national action, some U.S. states have already begun to tax carbon emissions in order to realize their own emission cut goals and boost renewable energy development.

Currently, U.S. states are implementing carbon tax through a cap-and-trade program. The program creates a marketplace in which companies can buy extra emission allowances through auctions if their carbon emissions exceed the cap set by the government.

The Regional Greenhouse Gas Initiative (RGGI), the first mandatory cap-and-trade program for carbon dioxide emissions of the United States, has attracted nine states -- Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermon -- to join in. The initiative has significantly reduced the fossil fuels used in the electricity sector in the aforesaid nine states, according to a report of Congressional Research Service in April

The RGGI took effect on January 1, 2009, based on an agreement signed by RGGI governors in 2005. It only applied to the electric power plants with capacities to generate 25 megawatts or more. In 2005, the RGGI states generated 33 percent of their electricity from coal and petroleum, sources of energy with relatively high carbon intensity. In 2015, these sources only generated 8 percent of the RGGI's electricity.

California, the largest state economy in the United States, also launched its carbon tax program in 2012. Last year, it enlarged the scope of carbon tax to cover gasoline and diesel. The price for one ton of emission allowance is 12.73 U.S. dollars according to the recent auction held in February.

"California is a good example of a market-based approach to address climate change," Mark Brownstein, vice president of the Climate and Energy Program at Environmental Defense Fund, told Xinhua

"Very rarely the federal government is the leader on the environmental policy, often they are the followers," added Brownstein.

Analysts also said now it is "the right time" to impose national carbon tax because it will not increase much burden on consumers as the oil price is low and will also help stimulate innovations in the U.S. energy sector.

"This is the right time for carbon tax," Deborah Gordon, director of Energy and Climate Program in Carnegie Endowment for International Peace, told Xinhua.

Gordon expected that carbon tax will only increase the crude oil price to 50 or 60 dollars a barrel in the U.S. market and will bring "real useful innovation" in U.S. energy sector that would help diversify the sector and would help the U.S. economy not swing back to depend more on oil in the future.

DIM PROSPECT OF IMPLEMENTATION

Although the benefit of carbon tax is huge and the forces for the country to implement such policies are growing, the prospect to implement a national carbon tax in a near term is undesirable in the eyes of analysts considering the U.S. political conditions, especially the upcoming general election and the lack of supporting measures for carbon tax.

"I think much will depend on the federal elections," said Brownstein, adding that "We don't know obviously what the result of the federal elections will be. It's still too early to say what will happen in a year or two years from now."

"In the United States, tax is very political," added Gordon.

Apart from political obstructions, some complementary actions have to be taken to balance the cost of taking carbon tax as a national policy because enterprises may transfer this burden completely to consumers.

The carbon tax in California will cost drivers about 2 billion dollars a year if there is no limitation against oil companies to pass the entire carbon tax cost to consumers, according to the California Legislative Analyst's Office.

"Carbon tax can only be pursued in a context of being a shared solution," Tisha Schuller, a strategic advisor to Stanford University's Natural Gas Initiative, told Xinhua, adding that current carbon tax framing is not going to work very well.

Jim Prentice, global fellow in Wilson Center, a think-tank based in Washington.D.C, told Xinhua that "it's extremely important that the three countries (United States, Canada and Mexico) work together," if the United States and North America want to introduce carbon tax in the future.

From 2006 to 2010, Prentice served as a cabinet member of Canadian government.

The research of the RFF also said if the United States wants to implement a national carbon tax, some actions must be taken to respond to the domestic concerns from labor and businesses in specific sectors and regions where manufacturing, jobs and emissions will shift to nations with less-stringent controls.

"Longer-term solutions appear to require the World Trade Organization to design approaches that reconcile international trade and climate regimes but, for now, adequate support seems lacking," said the report. Endi