Americans Already Pay a Carbon Tax


One of the many amendments that didn’t pass in the Democrats’ 2014 budget bill would have permanently barred any attempt to pass a carbon tax.

But it turns out that Americans are already paying a carbon tax.

“If the total cost of climate disruption in 2012 were paid in each state like a sales tax, it would add 2.7 percent to every purchase in the United States,” says Peter Lehner in a Natural Resources Defense Council

blog. His colleagues did the math.

Extreme weather during 2012 shaved about 1 percent off our country’s GDP, reaching a staggering $140 billion in damages.

Although South Dakota failed to pass legislation that would add a penny to the sales tax, the state’s residents are paying a far higher, hidden tax, Lehner says. “Last year’s prolonged and severe drought, which reduced corn yields 18 percent and led ranchers to sell off their cattle and sheep, cost the state an estimated $1.7 billion — the equivalent of tripling their sales tax rate, from 4 percent to 12 percent.”

And this climate disruption tax won’t fix potholes nor build elementary schools. It just adds to the burden, because it has to be used to dig people out of snowstorms or rebuild washed-out roads. In contrast, a real tax on carbon, “one of the obvious solutions to our budget, energy and environ- mental problems — the one that would be the least painful and have the best long-term impact — is off the table,” says Tom Friedman in the New York Times. “Shrinking the tax deduction for charity is on the table. Shrinking Social Security, Medicare and Medicaid are on the table. But a carbon tax that could close the deficit and clean the air, weaken petro-dictators, strengthen the dollar, drive cleantech innovation and still leave some money to lower corporate and income taxes is off the table,” he says.

Friedman isn’t the only one pushing for a carbon tax. James Hansen, retired chief climate scientist at NASA, says that climate change cannot be addressed without it. The twin goals of eliminating fossil fuel subsidies and implementing a carbon tax are strongly advocated by the International Energy Agency and the International Monetary Fund. Even Exxon and the conservative think tank American Enterprise Institute favor a carbon tax, because it would forestall heavy-handed regulation and could reduce corporate taxes. A recent Congressional Research Service analysis concludes that a modest carbon tax of $20 per ton, rising 5.6 percent a year, would cut the projected 10-year deficit in half, from $2.3 trillion down to $1.1 trillion.

If designed correctly, a carbon tax would shift the bur- den of paying for pollution from taxpayers to polluters, and generate revenue that could be used to pay down the debt, incentivize clean energy and build our resiliency to climate change.

Carbon Tax Legislation in the Senate

And that’s exactly what legislation introduced in the Senate would do. Sens. Bernie Sanders (I-Vt.) and Barbara Boxer (D-Calif.) have developed comprehensive legislation that deserves a vote.

Under this bill, 2,800 of the biggest polluters, accounting for 85 percent of US greenhouse gas emissions, would be charged $20 for every ton of carbon or methane emissions, rising 5.6 percent a year for a decade. Sixty percent of that fee would be returned to Americans as a rebate against any rise in energy prices. Remaining proceeds would fund renew- able energy and energy efficiency, as well as bring down the U.S. deficit.

“To transform our energy system, this legislation makes the boldest ever investment in energy efficiency and sustain- able energy,” said Sanders. “That includes weatherizing 1 mil- lion homes a year, as President Obama called for previously. It means tripling the budget for ARPA-E to do advanced research, and investing hundreds of billions through incentives and a public-private Sustainable Technologies Fund focusing on energy efficiency, solar and wind and geothermal and biomass, and clean transportation technology. We also provide funds to train workers for jobs in the sustainable energy economy. We provide funds to help communities become resilient in the face of extreme weather, and we pay down the debt by roughly $300 billion over 10 years.”

The carbon tax would generate $1.2 trillion in the next decade, according to the Congressional Budget Office, and would cut greenhouse gas emissions 20 percent below 2005 levels by 2025. And emissions would be cut much further through investments in clean energy. The bill also closes the Halliburton loophole, which exempts the natural gas industry from Safe Drinking Water Act regulations, and requires disclosure of fracking chemicals.

The model is based on Alaska’s oil dividend program. The oil industry pays royalties to the state, and every legal resident gets a monthly check for their share.

There are two bills, the Climate Protection Act and the Sustainable Energy Act. Download a summary of the bills here:

Rona Fried, Ph.D., is president of, the online community for green business: daily green business and investor news, green jobs and the green investing newsletter, The Green Investor. Contact Fried at


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