Democrats Weigh Carbon Tax After Manchin Rejects Key Climate Provision
WASHINGTON — Some House and Senate Democrats, smarting from a move by Senator Joe Manchin III, Democrat of West Virginia, to kill a major element of President Biden’s climate plan, are switching to Plan B: a tax on carbon dioxide pollution.
A carbon tax, in which polluting industries would pay a fee for every ton of carbon dioxide they emit, is seen by economists as the most effective way to cut the fossil fuel emissions that are heating the planet.
The almost certain demise of the clean electricity program at the heart of Mr. Biden’s agenda — which comes as scientists say forceful policies are needed to avert climate change’s most devastating impacts — has prompted outrage among many Democrats and has led several to say now is the moment for a carbon tax.
“I’ve had a carbon pricing bill in my desk for the last three years just waiting for the time,” said Senator Ron Wyden, Democrat of Oregon, chairman of the Senate Finance Committee.
“What has been striking is the number of senators who’ve come to me about this since early fall — after Louisiana got clobbered with storms, the East Coast flooding, the Bootleg wildfires here in my own state,” said Mr. Wyden, speaking by telephone on Saturday from Oregon. “Now there are a number of senators, key moderate senators, who’ve said they’re open to this. And a lot of House folks who have said they would support it if the Senate sends it over.”
But a carbon tax can be politically explosive. Industries could pass along their higher costs, leaving President Biden and fellow Democrats vulnerable to claims that they are raising taxes on the middle class, at a moment when inflation and energy prices are rising. Environmental justice advocates say a carbon tax permits companies to continue polluting, albeit at a higher cost, which disproportionately harms low-income communities. And it is unclear if Mr. Manchin, whose vote is crucial to Mr. Biden’s legislative agenda, would support a carbon tax.
As a result, the White House is scrambling to come up with alternatives to replace the $150 billion clean electricity program that had been the centerpiece of Mr. Biden’s climate agenda until just days ago, when Mr. Manchin indicated he strongly opposed it. That program would have rewarded utilities that stopped burning fossil fuels in favor of wind, solar and nuclear energy, and penalized those that did not. It was intended to push the nation’s electricity sector to generate 80 percent of its power from clean energy sources by 2030, from 40 percent now.
As they seek alternatives, White House officials are also weighing a voluntary version of a cap-and-trade program, which would create a market for polluters to buy and sell allowances for a certain amount of emissions. They are also considering adding to the $300 billion in clean energy tax incentives and credits that remain in the bill, while looking for ways to salvage some parts of the clean electricity program.
A White House official said on Saturday that staff members were still engaging with members of Congress and had not yet agreed to a final version of climate provisions.
The cut to the climate change program could be among the first consequential decisions in what will very likely be a painful process for Democrats as they pare their ambitious $3.5 trillion domestic policy package. Mr. Manchin and another Democrat, Senator Kyrsten Sinema of Arizona, have said they cannot support that spending level. Over the next two weeks, the White House will negotiate with Democrats over cuts to dozens of programs, as lawmakers try to whittle the original bill to about $2 trillion.
Mr. Biden suggested on Friday that one of his agenda’s signature items — two years of free community college — was also on the chopping block, and progressive lawmakers worried about whether plans to provide paid family leave and expand Medicare to include vision, dental and hearing benefits could survive.
Mr. Biden and Democratic leaders on Capitol Hill have set a deadline of Oct. 31 for a deal that would enable Democrats to pass the bill with their razor-thin majorities in both chambers of Congress.
In recent days, as White House officials were trying to forge a deal, Mr. Manchin told them he would not support any legislation that includes a clean electricity program. Mr. Manchin, whose state is a major coal producer and who has financial ties to the coal industry, has said that abandoning fossil fuels will harm the country’s energy independence and would make climate change worse.
Once his opposition to the clean electricity program became public on Friday, several fellow Democrats expressed outrage.
“We have a moral obligation and a governing mandate to pass policy that addresses climate change,” the 96-member Congressional Progressive Caucus wrote on Twitter. “Inaction is not an option.” For weeks, progressive Democrats have been holding rallies chanting, “No climate, no deal!” to pressure the White House to include strong climate provisions. Several of those rallies focused on the importance of the clean electricity program.
Congress “cannot afford to gut” the climate provisions in the bill, Representative Alexandria Ocasio-Cortez, Democrat of New York, wrote on Twitter. “This issue is bigger than ideology. It is a moral imperative for humanity and our planet’s future to reduce and eventually eliminate emissions,” she wrote. “There are many ways to do it, but we can’t afford to give up.”
Senator Jeff Merkley, Democrat of Oregon, has been involved with the “No climate, no deal” rallies. “Listen, my state is burning up. We’re losing our snowpack, the ocean’s acidifying, affecting our shellfish,” he said on Saturday. “This is a code red.”
Mr. Merkley said he would not vote for a reconciliation package that did not have “significant climate provisions,” but he said he was open to any option that cut carbon dioxide emissions in half by 2030 and produced carbon-free electricity by 2035.
He suggested additional wind and solar subsidies or proposals to speed up the transition to clean energy vehicles.
“The Biden team is going to have to lay out how they’re going to meet those two goals,” he said, “because that’s the way we stay on track.”
The clean electricity program opposed by Mr. Manchin was notable because it would include both incentives and penalties. Payment to electric utilities to switch to clean energy was the carrot; a penalty for companies that did not replace fossil fuels with clean energy was the stick. A carbon tax might provide a similar inducement, when paired with tax incentives, analysts said.
“If you were to replace the clean electricity program with a price on carbon, I think that would go a long way. It would put back a lot of the stick elements that were removed,” said Zeke Hausfather, a climate scientist and policy analyst at the Breakthrough Institute, an energy and climate research organization.
Mr. Wyden’s staff, which is drafting the carbon tax language, is considering a domestic carbon tax that could start at $15 to $18 per ton, and that would increase over time, according to two people familiar with the matter who were not authorized to speak on the record.
The tax would be applied directly to coal mining companies, large natural gas processing plants and oil refiners, based on the emissions associated with their products, with one exception: Oil refiners would very likely be charged for producing diesel fuel and petrochemicals, but not gasoline — a way to shield most American drivers at the pump.
An important part of the policy, Mr. Wyden said, will be to use the revenue for tax rebates or checks for poor and working-class Americans — particularly those employed in the fossil fuel industry. “You’ve got to show workers and families, when there’s an economy in transition, that they will get their money back,” he said. “They will be made whole.”
Emily Cochrane, Zolan Kanno-Youngs and Jim Tankersley contributed reporting.