This measure would urge the United States Congress to enact a tax on carbon-based fossil fuels.

This measure would urge the United States Congress to enact a tax on carbon-based fossil fuels.

This measure would urge the United States Congress to enact federal policies to further the effort to combat climate change. a tax on carbon-based fossil fuels.

This measure would urge the United States Congress to enact federal policies to further the effort to combat climate change.

WHEREAS, The Intergovernmental Panel on Climate Change has stated in its recently released 5th Assessment Report, Climate Change 2013: The Physical Science Basis, that [w]arming of the climate system is unequivocal and [i]t is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century; and

WHEREAS, In May of 2013, the global atmospheric concentration of carbon dioxide reached 400 parts per million, the highest level in the last 800,000 years; and

WHEREAS, In May 2014, two separate scientific papers were published in journals of Geophysical Research Letters documenting dramatic retreats of Antarctic glaciers and predicting that large-scale destruction of the West Antarctic ice sheets is likely now inevitable and will lead to sea level rises of 10 feet or more; and

WHEREAS, The 2013 Indicators of Climate Change in California, released by the Office of Environmental Health Hazard Assessment, found that continued warming of the atmosphere would cause threats of flooding along the coastline of California; threats to infrastructure, sewage systems, wetlands, and marine life; increased ocean acidification; increased threats from wildfires; threats to the water supply from decreased snow packs; increased asthma and respiratory illness due to higher ozone levels; increased insurance and mitigation costs; and negative impacts to the agriculture, fishing, and tourism industries; and

WHEREAS, Conservative estimates by climate scientists throughout the world state that, to achieve climate stabilization and avoid cataclysmic climate change, emissions of greenhouse gases must be brought to 80 percent below 1990 levels by 2050; and

WHEREAS, The California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) commits the state to reduce greenhouse gas emissions to 1990 levels by 2020, and the Governors Executive Order S-3-05 further calls on the state to establish a policy to reduce greenhouse gas emissions to 80 percent below 1990 levels by 2050; and

WHEREAS, The California Global Warming Solution Act of 2006 has reached its 10-year anniversary and the California economy remains strong; and

WHEREAS, The United States needs powerful new policies to meet its greenhouse gas emission reduction goals established in the 2015 Paris Climate Agreement; and

WHEREAS, The United States Congress can enact a national carbon tax on fossil fuels, based on the amount of carbon dioxide the fuel will emit when burned; and

WHEREAS, For efficient administration, fossil fuels can be taxed once, as far upstream in the economy as practical, or at the port of entry into the United States; and

WHEREAS, A national, revenue-neutral carbon tax starting at a relatively low rate and increasing steadily over future years is a market-based solution that would minimally disrupt the economy while sending a clear and predictable price signal to businesses to develop and use noncarbon-based energy resources; and

WHEREAS, Citizens Climate Education Corporation Commissioned Regional Economic Models, Inc. (REMI) to do a nation-wide macroeconomic study on the impact of a revenue-neutral carbon tax; and

WHEREAS, REMIs study predicted that, after 10 years, a revenue-neutral carbon tax would lead to a decrease in carbon dioxide emissions by 33 percent, an increase in national employment by 2.1 million jobs, and an average monthly dividend for a family of four of $288; and

WHEREAS, Border adjustments, such as carbon-content-based tariffs on products imported from countries without comparable carbon pricing and refunds to our exporters of carbon taxes paid can maintain the competitiveness of United States businesses in global markets; and

WHEREAS, A national carbon tax can be implemented quickly and efficiently, and respond to the urgency of the climate crisis, because the federal government already has in place mechanisms, such as the Internal Revenue Service, needed to implement and enforce the tax and already collects taxes from fossil fuel producers and importers; and

WHEREAS, A national carbon tax would make the United States a leader in mitigating climate change and the advancing clean energy technologies of the 21st Century, and would incentivize other countries to enact similar carbon taxes, thereby reducing global carbon dioxide emissions without the need for complex international agreements; now, therefore, be it

Resolved by the Assembly and the Senate of the State of California, jointly, That the Legislature hereby urges the United States Congress to enact, without delay, a tax on carbon-based fossil fuels; and be it further

Resolved, That the tax should be collected once, as far upstream in the economy as practical, or at the port of entry into the United States; and, be it further

Resolved, That the tax rate should start low and increase steadily and predictably to achieve the goal of reducing carbon dioxide emissions in the United States to 80 percent below 1990 levels by 2050; and be it further

Resolved, That all tax revenue should be returned to middle- and low-income Americans to protect them from the impact of rising prices due to the tax; and, be it further

Resolved, That the international competitiveness of United States businesses should be protected by using carbon-content-based tariffs and tax refunds; and be it further

Resolved, That the Chief Clerk of the Assembly transmit copies of this resolution to the President and Vice President of the United States, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, to each Senator and Representative from California in the Congress of the United States, and to the author for appropriate distribution.

WHEREAS, The Intergovernmental Panel on Climate Change has stated in its recently released 5th Assessment Report, Climate Change 2013: The Physical Science Basis, that [w]arming of the climate system is unequivocal and [i]t is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century; and

WHEREAS, In May of 2013, the global atmospheric concentration of carbon dioxide reached 400 parts per million, the highest level in the last 800,000 years; and

WHEREAS, In May 2014, two separate scientific papers were published in journals of Geophysical Research Letters documenting dramatic retreats of Antarctic glaciers and predicting that large-scale destruction of the West Antarctic ice sheets is likely now inevitable and will lead to sea level rises of 10 feet or more; and

WHEREAS, The 2013 Indicators of Climate Change in California, released by the Office of Environmental Health Hazard Assessment, found that continued warming of the atmosphere would cause threats of flooding along the coastline of California; threats to infrastructure, sewage systems, wetlands, and marine life; increased ocean acidification; increased threats from wildfires; threats to the water supply from decreased snow packs; increased asthma and respiratory illness due to higher ozone levels; increased insurance and mitigation costs; and negative impacts to the agriculture, fishing, and tourism industries; and

WHEREAS, Conservative estimates by climate scientists throughout the world state that, to achieve climate stabilization and avoid cataclysmic climate change, emissions of greenhouse gases must be brought to 80 percent below 1990 levels by 2050; and

WHEREAS, The California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) commits the state to reduce greenhouse gas emissions to 1990 levels by 2020, and the Governors Executive Order S-3-05 further calls on the state to establish a policy to reduce greenhouse gas emissions to 80 percent below 1990 levels by 2050; and

WHEREAS, The California Global Warming Solution Act of 2006 has reached its 10-year anniversary and the California economy remains strong; and

WHEREAS, The United States needs powerful new policies to meet its greenhouse gas emission reduction goals established in the 2015 Paris Climate Agreement; and

WHEREAS, The United States Congress can enact a national carbon tax on fossil fuels, based on the amount of carbon dioxide the fuel will emit when burned; and

WHEREAS, For efficient administration, fossil fuels can be taxed once, as far upstream in the economy as practical, or at the port of entry into the United States; and

WHEREAS, A national, revenue-neutral carbon tax starting at a relatively low rate and increasing steadily over future years is a market-based solution that would minimally disrupt the economy while sending a clear and predictable price signal to businesses to develop and use noncarbon-based energy resources; and

WHEREAS, Citizens Climate Education Corporation Commissioned Regional Economic Models, Inc. (REMI) to do a nation-wide macroeconomic study on the impact of a revenue-neutral carbon tax; and

WHEREAS, REMIs study predicted that, after 10 years, a revenue-neutral carbon tax would lead to a decrease in carbon dioxide emissions by 33 percent, an increase in national employment by 2.1 million jobs, and an average monthly dividend for a family of four of $288; and

WHEREAS, Border adjustments, such as carbon-content-based tariffs on products imported from countries without comparable carbon pricing and refunds to our exporters of carbon taxes paid can maintain the competitiveness of United States businesses in global markets; and

WHEREAS, A national carbon tax can be implemented quickly and efficiently, and respond to the urgency of the climate crisis, because the federal government already has in place mechanisms, such as the Internal Revenue Service, needed to implement and enforce the tax and already collects taxes from fossil fuel producers and importers; and

WHEREAS, A national carbon tax would make the United States a leader in mitigating climate change and the advancing clean energy technologies of the 21st Century, and would incentivize other countries to enact similar carbon taxes, thereby reducing global carbon dioxide emissions without the need for complex international agreements; now, therefore, be it

Resolved by the Assembly and the Senate of the State of California, jointly, That the Legislature hereby urges the United States Congress to enact, without delay, a tax on carbon-based fossil fuels; and be it further

Resolved, That the tax should be collected once, as far upstream in the economy as practical, or at the port of entry into the United States; and, be it further

Resolved, That the tax rate should start low and increase steadily and predictably to achieve the goal of reducing carbon dioxide emissions in the United States to 80 percent below 1990 levels by 2050; and be it further

Resolved, That all tax revenue should be returned to middle- and low-income Americans to protect them from the impact of rising prices due to the tax; and, be it further

Resolved, That the international competitiveness of United States businesses should be protected by using carbon-content-based tariffs and tax refunds; and be it further

Resolved, That the Chief Clerk of the Assembly transmit copies of this resolution to the President and Vice President of the United States, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, to each Senator and Representative from California in the Congress of the United States, and to the author for appropriate distribution.

WHEREAS, The Intergovernmental Panel on Climate Change has stated in its recently released 5th Assessment Report, Climate Change 2013: The Physical Science Basis, that [w]arming of the climate system is unequivocal and [i]t is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century; and

WHEREAS, In May of 2013, the global atmospheric concentration of carbon dioxide reached 400 parts per million, the highest level in the last 800,000 years; and

WHEREAS, In May 2014, two separate scientific papers were published in journals of Geophysical Research Letters documenting dramatic retreats of Antarctic glaciers and predicting that large-scale destruction of the West Antarctic ice sheets is likely now inevitable and will lead to sea level rises of 10 feet or more; and

WHEREAS, The 2013 Indicators of Climate Change in California, released by the Office of Environmental Health Hazard Assessment, found that continued warming of the atmosphere would cause threats of flooding along the coastline of California; threats to infrastructure, sewage systems, wetlands, and marine life; increased ocean acidification; increased threats from wildfires; threats to the water supply from decreased snow packs; increased asthma and respiratory illness due to higher ozone levels; increased insurance and mitigation costs; and negative impacts to the agriculture, fishing, and tourism industries; and

WHEREAS, Conservative estimates by climate scientists throughout the world state that, to achieve climate stabilization and avoid cataclysmic climate change, emissions of greenhouse gases must be brought to 80 percent below 1990 levels by 2050; and

WHEREAS, The California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) commits the state to reduce greenhouse gas emissions to 1990 levels by 2020, and the Governors Executive Order S-3-05 further calls on the state to establish a policy to reduce greenhouse gas emissions to 80 percent below 1990 levels by 2050; and

WHEREAS, The California Global Warming Solution Act of 2006 has reached its 10-year anniversary and the California economy remains strong; and

WHEREAS, The United States needs powerful new policies to meet its greenhouse gas emission reduction goals established in the 2015 Paris Climate Agreement; now, therefore, be it and

WHEREAS, The United States Congress can enact a national carbon tax on fossil fuels, based on the amount of carbon dioxide the fuel will emit when burned; and

WHEREAS, For efficient administration, fossil fuels can be taxed once, as far upstream in the economy as practical, or at the port of entry into the United States; and

WHEREAS, A national, revenue-neutral carbon tax starting at a relatively low rate and increasing steadily over future years is a market-based solution that would minimally disrupt the economy while sending a clear and predictable price signal to businesses to develop and use noncarbon-based energy resources; and

WHEREAS, Citizens Climate Education Corporation Commissioned Regional Economic Models, Inc. (REMI) to do a nation-wide macroeconomic study on the impact of a revenue-neutral carbon tax; and

WHEREAS, REMIs study predicted that, after 10 years, a revenue-neutral carbon tax would lead to a decrease in carbon dioxide emissions by 33 percent, an increase in national employment by 2.1 million jobs, and an average monthly dividend for a family of four of $288; and

WHEREAS, Border adjustments, such as carbon-content-based tariffs on products imported from countries without comparable carbon pricing and refunds to our exporters of carbon taxes paid can maintain the competitiveness of United States businesses in global markets; and

WHEREAS, A national carbon tax can be implemented quickly and efficiently, and respond to the urgency of the climate crisis, because the federal government already has in place mechanisms, such as the Internal Revenue Service, needed to implement and enforce the tax and already collects taxes from fossil fuel producers and importers; and

WHEREAS, A national carbon tax would make the United States a leader in mitigating climate change and the advancing clean energy technologies of the 21st Century, and would incentivize other countries to enact similar carbon taxes, thereby reducing global carbon dioxide emissions without the need for complex international agreements; now, therefore, be it

Resolved by the Assembly and the Senate of the State of California, jointly, That the Legislature hereby urges the United States Congress to enact federal policies that mirror the California Global Warming Solutions Act of 2006 to further the effort to combat climate change throughout the United States; enact, without delay, a tax on carbon-based fossil fuels; and be it further

Resolved, That the tax should be collected once, as far upstream in the economy as practical, or at the port of entry into the United States; and, be it further

Resolved, That the tax rate should start low and increase steadily and predictably to achieve the goal of reducing carbon dioxide emissions in the United States to 80 percent below 1990 levels by 2050; and be it further

Resolved, That all tax revenue should be returned to middle- and low-income Americans to protect them from the impact of rising prices due to the tax; and, be it further

Resolved, That the international competitiveness of United States businesses should be protected by using carbon-content-based tariffs and tax refunds; and be it further

Resolved, That the Chief Clerk of the Assembly transmit copies of this resolution to the President and Vice President of the United States, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, to each Senator and Representative from California in the Congress of the United States, and to the author for appropriate distribution.

WHEREAS, The Intergovernmental Panel on Climate Change has stated in its recently released 5th Assessment Report, Climate Change 2013: The Physical Science Basis, that [w]arming of the climate system is unequivocal and [i]t is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century; and

WHEREAS, In May of 2013, the global atmospheric concentration of carbon dioxide reached 400 parts per million, the highest level in the last 800,000 years; and

WHEREAS, In May 2014, two separate scientific papers were published in journals of Geophysical Research Letters documenting dramatic retreats of Antarctic glaciers and predicting that large-scale destruction of the West Antarctic ice sheets is likely now inevitable and will lead to sea level rises of 10 feet or more; and

WHEREAS, The 2013 Indicators of Climate Change in California, released by the Office of Environmental Health Hazard Assessment, found that continued warming of the atmosphere would cause threats of flooding along the coastline of California; threats to infrastructure, sewage systems, wetlands, and marine life; increased ocean acidification; increased threats from wildfires; threats to the water supply from decreased snow packs; increased asthma and respiratory illness due to higher ozone levels; increased insurance and mitigation costs; and negative impacts to the agriculture, fishing, and tourism industries; and

WHEREAS, Conservative estimates by climate scientists throughout the world state that, to achieve climate stabilization and avoid cataclysmic climate change, emissions of greenhouse gases must be brought to 80 percent below 1990 levels by 2050; and

WHEREAS, The California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) commits the state to reduce greenhouse gas emissions to 1990 levels by 2020, and the Governors Executive Order S-3-05 further calls on the state to establish a policy to reduce greenhouse gas emissions to 80 percent below 1990 levels by 2050; and

WHEREAS, The California Global Warming Solution Act of 2006 has reached its 10-year anniversary and the California economy remains strong; and

WHEREAS, The United States needs powerful new policies to meet its greenhouse gas emission reduction goals established in the 2015 Paris Climate Agreement; now, therefore, be it

Resolved by the Assembly and the Senate of the State of California, jointly, That the Legislature hereby urges the United States Congress to enact federal policies that mirror the California Global Warming Solutions Act of 2006 to further the effort to combat climate change throughout the United States; and be it further

Resolved, That the Chief Clerk of the Assembly transmit copies of this resolution to the President and Vice President of the United States, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, to each Senator and Representative from California in the Congress of the United States, and to the author for appropriate distribution.

 THIRD READING  

Bill No: AJR 43

Author:

:

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 5-1, 8/10/16

AYES: Hertzberg, Beall, Hernandez, Lara, Pavley

NOES: Nguyen

NO VOTE RECORDED: Moorlach

ASSEMBLY FLOOR: 44-29, 6/30/16 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This resolution urges Congress to enact a national carbon tax.

ANALYSIS:

Existing law:

1. Does not impose a carbon tax under either state or federal law.
2. Directs the California Air Resources Board (ARB) to administer the Global Warming Solutions Act of 2006, which requires California to reduce its greenhouse gas (GHG) emissions to 1990 levels by 2020 (AB 32, Nunez, Chapter 288, Statutes of 2006). Under the Act, ARB must adopt regulations to achieve the maximum technologically feasible and cost-effective GHG emission reductions, which currently includes a cap-and-trade program that sets a statewide limit on most sources of GHGs, allocates or sells allowances to emitters, and oversees a market for sellers of allowances to connect with buyers.

This resolution:

1. Urges the United States Congress to enact a tax on carbon-based fossil fuels without delay.
2. States that the tax should be collected once, as far upstream in the economy as practical, or at the port of entry into the United States.
3. Provides that all revenues should be returned to middle and low-income Americans to protect them from the impact of rising prices due to the tax.
4. Says that the tax rate should start low and increase steadily and predictably to achieve the goal of reducing carbon dioxide emissions in the United States to 80% below 1990 levels by 2050.
5. States that United States business should be protected by using carbon-content-based tariffs and tax refunds.
6. Contains findings supporting its purposes.
7. Directs the Chief Clerk of the Assembly to transmit copies of the resolution to the President and Vice President of the United States, the Speaker of the House of Representative, the Majority Leader of the Senate, and to each Senator and Representative from California in Congress.

Background

First imposed by Scandinavian countries in the early 1990s, carbon taxes seek to reduce carbon emissions by increasing its price. While many countries in Europe impose a carbon tax, only the Canadian provinces of Alberta, British Columbia, and Quebec currently levy one at a state level or higher in North America. Representatives in Congress have introduced several bills enacting a national carbon tax in recent years, but none have yet been enacted. Recent efforts to enact state-level carbon taxes are under consideration, and voters in the state of Washington will consider a state-level carbon tax initiative this year.

While the structure of carbon taxes vary, they are usually calculated as a dollar charge per ton of carbon emitted or per kilowatt of electricity or natural gas provided. The tax is imposed upon entities that emit carbon, or other GHGs, such as firms that distribute petroleum, heating or other fuels, and electric and natural gas utilities. As such, carbon taxes attempt to increase prices on fossil fuels to account for its environmental and public health effects, also known as its negative externalities, or the societal or economic costs of a product or service not currently reflected in its consumer price. By increasing the price of fossil fuels, and thereby the cost of providing products and services with carbon as an input, these taxes increase incentives to emit less, and encourage the development of non-carbon based inputs. Additionally, consumers will purchase fewer products and services as producers seek to pass along the carbon tax to consumers in the form of higher prices, whereas producers that can supply products and services using less carbon-based energy need not increase prices as much.

Carbon taxes reduce emissions of greenhouse gasses by increasing its price, resulting in less social, environmental, and economic harm from GHGs. However, a carbon tax will also increase costs for many businesses, which will likely generate fewer profits unless they can pass along these costs to consumers by increasing prices. Consumers may then end up ultimately paying the tax, especially low-income individuals and families that spend a higher percentage of their incomes on energy. The Tax Policy Center estimates that a carbon tax of $20 per ton would account for about 1.8 percent of pretax income for households in the lowest income quintile, as compared to 0.7 percent in the highest income quintile. However, a carbon tax’s impact would be less regressive to the extent that it reduced profits rather than increasing prices, and most estimates of the economic effects of a carbon tax do not include its climate change benefits. Additionally, many carbon tax proposals, including the one called for by AJR 43, return carbon tax revenues to persons of low and moderate income. Experts state that the ultimate economic effects would depend on a number of factors, including the magnitude, design, and use of revenues of the carbon tax.

Carbon taxes are generally considered administratively feasible and reasonably simple for agencies to enforce compliance, but must generally address four key issues, each with significant implications:

• Use of proceeds. By increasing its cost of production, carbon taxes reduce the social and economic costs of GHG emissions, and also generate revenues to be used for other purposes, creating a “double dividend.” Some proposals allocate carbon tax proceeds for general government purposes or to offset other taxes, while others dedicate them in specific ways, such as cash refunds or rebates to residents, tax credits or other subsidies for affected industries to reduce emissions, or financing other renewable energy policies. AJR 43 calls for a national carbon tax in which “all revenues are returned to middle and low-income Americans to protect them from the impact of rising prices due to the tax,” which recognizes that lower income individuals and families generally spend a larger percentage of their income on energy than those of higher incomes, and may bear much of a carbon tax’s incidence. However, by requesting the return of all revenues in this way, AJR 43 rules out other potential uses of carbon tax revenues, such as reducing the federal budget deficit, decreasing other taxes, providing compliance assistance, or funding renewable energy programs.
• Setting a rate. Carbon tax rates can be designed to generate a specific amount of revenue, account for the entire negative externality or social cost of carbon emissions, or meet specific targets for emission reductions over time. Many proposals start at a low rate that increases over time, thereby allowing affected firms the time necessary to make capital investments to reduce emissions and therefore their carbon tax liability, but delaying some of the carbon tax’s benefits. While AJR 43 doesn’t ask Congress to set a specific carbon tax rate, it does state that it “should start low and increase steadily and predictably to achieve the goal of reducing carbon dioxide emissions in the United States to 80% below 1990 levels by 2050.” The resolution states that climate scientists state that reductions of that level are necessary to achieve climate stabilization and avoid cataclysmic climate change. However, a carbon tax that has too high of a rate could result in undesirable impacts to business cost structures and consumer prices.
• Point of collection. Carbon taxes can be imposed “upstream” on suppliers of coal, at natural gas processing facilities, and at oil refineries, "midstream" on electric utilities, or “downstream” at energy-using industries, households, or vehicles, or in some combination thereof. Tax enforcement agencies can generally ensure more compliance the fewer the taxpayers they collect from, especially for carbon taxes, because collecting from every downstream source such as vehicles and livestock would likely be infeasible. However, other non-carbon GHG emissions, such as methane, nitrous oxides, sulfur hexafluoride are more difficult to verify, which could lead to higher administrative costs and non-compliance risks if the tax applied to those emissions too, but experts warn that limiting the tax scope could result in perverse effects, with sources potentially shifting processes, facility size, or location to avoid taxes. AJR 43 calls for a carbon tax that’s collected once, as far upstream in the economy as practical, or at the port of entry.
• Border adjustments. Economists state that by increasing the cost of a key input, carbon taxes shift manufacturing, jobs, and emissions to nations with less-stringent controls, especially for energy intensive manufacturers competing in global markets. These firms and others could also choose to expand in foreign jurisdictions instead of in the United States, resulting in emissions “leakages.” Many carbon tax proposals include border adjustments, such as tariffs, to ensure that firms that export from countries without carbon taxes do not have a competitive advantage. To address this issue, AJR 43 calls for carbon-content-based tariffs and tax refunds. Border tax adjustments such as tariffs on fuels and carbon-intensive imports can help reduce these “leakages,” but currently must comply with World Trade Organization rules. Additionally, some experts state that border adjustments may not be desirable because most domestic emissions occur in sectors that cannot easily be shifted to other jurisdictions.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 8/10/16)

Citizens Climate Lobby

Community Environmental Council

Friends Committee on Legislation of California

OPPOSITION: (Verified 8/10/16)

None received

ARGUMENTS IN SUPPORT: According to the author, “Currently at the federal level there are no statutes addressing carbon levels in the atmosphere, or the long term effects these levels are having with global climate change. The measures proposed in this resolution will benefit the economy, human health, the environment, and national security, even without consideration of global temperatures, as a result of correcting market distortions, reductions in non-greenhouse-gas pollutants, reducing the outflow of dollars to oil-producing countries and improvements in the energy security of the United States. Phased-in carbon fees on greenhouse gas emissions (1) are the most efficient, transparent, and enforceable mechanism to drive an effective and fair transition to a domestic-energy economy, (2) will stimulate investment in alternative-energy technologies, and (3) give all businesses powerful incentives to increase their energy-efficiency and reduce their carbon footprints in order to remain competitive. Equal monthly dividends (or “rebates”) from carbon fees paid to every American household can help ensure that families and individuals can afford the energy they need during the transition to a greenhouse gas-free economy and the dividends will stimulate the economy. The weight of scientific evidence indicates that greenhouse gas emissions from human activities including the burning of fossil fuels and other sources are causing rising global temperatures. The weight of scientific evidence also indicates that a return from the current concentration of more than 400 parts per million (“ppm”) of carbon dioxide (“CO2”) in the atmosphere to 350 ppm CO2 or less is necessary to slow or stop the rise in global temperatures. Further increases in global temperatures pose imminent and substantial dangers to human health, the natural environment, the economy, national security, and an unacceptable risk of catastrophic impacts to human civilization.”

ASSEMBLY FLOOR: 44-29, 6/30/16

AYES: Atkins, Bloom, Bonilla, Bonta, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Dababneh, Dodd, Eggman, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Hadley, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Ridley-Thomas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Rendon

NOES: Achadjian, Travis Allen, Arambula, Bigelow, Brough, Chang, Chávez, Dahle, Frazier, Beth Gaines, Gallagher, Gray, Grove, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Obernolte, Olsen, Patterson, Salas, Steinorth, Wagner, Waldron, Wilk

NO VOTE RECORDED: Alejo, Baker, Brown, Cooper, Daly, Melendez, Rodriguez

Prepared by:

8/15/16 10:21:01

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

Greenhouse gases: climate change

Urges the United States Congress to enact a tax on carbon based fuels.

Background

First imposed by Scandinavian countries in the early 1990s, carbon taxes seek to reduce carbon emissions by increasing its price. While many countries in Europe impose a carbon tax, only the Canadian provinces of Alberta, British Columbia, and Quebec currently levy one at a state level or higher in North America. Representatives in Congress have introduced several bills enacting a national carbon tax in recent years, but none have yet been enacted. Recent efforts to enact state-level carbon taxes are under consideration, and voters in the state of Washington will consider a state-level carbon tax initiative this year.

While the structure of carbon taxes vary, they are usually calculated as a dollar charge per ton of carbon emitted or per kilowatt of electricity or natural gas provided. The tax is imposed upon entities that emit carbon, or other greenhouse gasses (GHGs), such as firms that distribute petroleum, heating or other fuels, and electric and natural gas utilities. As such, carbon taxes attempt to increase prices on fossil fuels to account for its environmental and public health effects, also known as its negative externalities, or the societal or economic costs of a product or service not currently reflected in its consumer price. By increasing the price of fossil fuels, and thereby the cost of providing products and services with carbon as an input, these taxes increase incentives to emit less, and encourage the development of non-carbon based inputs. Additionally, consumers will purchase fewer products and services as producers seek to pass along the carbon tax to consumers in the form of higher prices, whereas producers that can supply products and services using less carbon-based energy need not increase prices as much.

Carbon taxes are generally considered administratively feasible and reasonably simple for agencies to enforce compliance. The Congressional Research Service reports that a well-developed structure for collecting carbon taxes already exists because approximately 13,000 facilities, comprising 90% of greenhouse gas emissions, currently report annual emissions to the United States Environmental Protection Agency. The U.S. Energy Information Administration tracks the production, import, export, storage, and consumption of fossil fuel products. Additionally, refiners and importers of petroleum products already pay a federal per barrel tax to the Oil Spill Liability Trust Fund, and coal mine operators also pay a federal per ton tax to the Black Lung Disability Trust Fund.

Carbon tax proposals must generally address four key issues, each with significant implications:

• Use of proceeds. By increasing its cost of production, carbon taxes reduce the social and economic costs of GHG emissions, but also generate revenues to be used for other purposes, creating a “double dividend.” Some proposals allocate carbon tax proceeds for general government purposes or to offset other taxes, while others dedicate them in specific ways, such as cash refunds or rebates to residents, tax credits or other subsidies for affected industries to reduce emissions, or financing other renewable energy policies.
• Setting a rate. Carbon tax rates can be designed to generate a specific amount of revenue, account for the entire negative externality or social cost of carbon emissions, or meet specific targets for emission reductions over time. Many proposals start at a low rate that increases over time, thereby allowing affected firms the time necessary to make capital investments to reduce emissions and therefore their carbon tax liability, but delaying some of the carbon tax’s benefits.
• Point of collection: Carbon taxes can be imposed “upstream” on suppliers of coal, at natural gas processing facilities, and at oil refineries, "midstream" on electric utilities, or “downstream” at energy-using industries, households, or vehicles, or in some combination thereof. Tax enforcement agencies can generally ensure more compliance the fewer the taxpayers they collect from, especially for carbon taxes, because collecting from every downstream source such as vehicles and livestock would likely be infeasible. However, other non-carbon GHG emissions, such as methane, nitrous oxides, sulfur hexafluoride are more difficult to verify, which could lead to higher administrative costs and non-compliance risks if the tax applied to those emissions too. However, experts warn that limiting the tax scope could result in perverse effects, with sources potentially shifting processes, facility size, or location to avoid taxes.
• Border adjustments. Economists state that by increasing the cost of a key input, carbon taxes shift manufacturing, jobs, and emissions to nations with less-stringent controls, especially for energy intensive manufacturers competing in global markets. These firms and others could also choose to expand in foreign jurisdictions instead of in the United States, resulting in emissions “leakages.” Many carbon tax proposals include border adjustments, such as tariffs, to ensure that firms that export from countries without carbon taxes do not have a competitive advantage.

Seeking to enact a carbon tax at the federal level, advocates for the environment want the Legislature to urge Congress to enact a carbon tax.

Proposed Law

Assembly Joint Resolution 43 urges the United States Congress to enact a tax on carbon based fuels without delay. The resolution states that the tax should be collected once, as far upstream in the economy as practical, or at the port of entry into the United States. AJR 43 also provides that all revenues should be returned to middle and low-income Americans to protect them from the impact of rising prices due to the tax. The measure also says that the tax rate should start low and increase steadily and predictably to achieve the goal of reducing carbon dioxide emissions in the United States to 80% below 1990 levels by 2050. Additionally, the resolution states that United States businesses should be protected by using carbon-content-based tariffs and tax refunds.

The measure makes legislative findings and declarations supporting its purposes, and directs the Chief Clerk of the Assembly to transmit copies of the resolution to the President and Vice President of the United States, the Speaker of the House of Representative, the Majority Leader of the Senate, and to each Senator and Representative from California in Congress.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “Currently at the federal level there are no statutes addressing carbon levels in the atmosphere, or the long term effects these levels are having with global climate change. The measures proposed in this resolution will benefit the economy, human health, the environment, and national security, even without consideration of global temperatures, as a result of correcting market distortions, reductions in non-greenhouse-gas pollutants, reducing the outflow of dollars to oil-producing countries and improvements in the energy security of the United States. Phased-in carbon fees on greenhouse gas emissions (1) are the most efficient, transparent, and enforceable mechanism to drive an effective and fair transition to a domestic-energy economy, (2) will stimulate investment in alternative-energy technologies, and (3) give all businesses powerful incentives to increase their energy-efficiency and reduce their carbon footprints in order to remain competitive. Equal monthly dividends (or “rebates”) from carbon fees paid to every American household can help ensure that families and individuals can afford the energy they need during the transition to a greenhouse gas-free economy and the dividends will stimulate the economy. The weight of scientific evidence indicates that greenhouse gas emissions from human activities including the burning of fossil fuels and other sources are causing rising global temperatures. The weight of scientific evidence also indicates that a return from the current concentration of more than 400 parts per million (“ppm”) of carbon dioxide (“CO2”) in the atmosphere to 350 ppm CO2 or less is necessary to slow or stop the rise in global temperatures. Further increases in global temperatures pose imminent and substantial dangers to human health, the natural environment, the economy, national security, and an unacceptable risk of catastrophic impacts to human civilization.”

2. Worth it? Generally, taxing something results in less of it. Carbon taxes reduce emissions of greenhouse gasses by increasing its price, resulting in less social, environmental, and economic harm from GHGs. However, a carbon tax will also increase costs for many businesses, which will likely generate fewer profits unless they can pass along these costs to consumers by increasing prices. Consumers may then end up ultimately paying the tax, especially low-income individuals and families that spend a higher percentage of their incomes on energy. The Tax Policy Center estimates that a carbon tax of $20 per ton would account for about 1.8 percent of pretax income for households in the lowest income quintile, as compared to 0.7 percent in the highest income quintile. However, a carbon tax’s impact would be less regressive to the extent that it reduced profits rather than increasing prices, and most estimates of the economic effects of a carbon tax do not include its climate change benefits. Additionally, many carbon tax proposals, including the one called for by AJR 43, return carbon tax revenues to persons of low and moderate income. Experts state that the ultimate economic effects would depend on a number of factors, including the magnitude, design, and use of revenues of the carbon tax. The Committee may wish to consider the economic and environmental tradeoffs of a national carbon tax.

3. California knows. Legislation seeking to put a price on carbon emissions generally falls into two categories: carbon taxes and cap-and-trade programs. Experts disagree regarding which of these two approaches is best: advocates for cap-and-trade argue that carbon taxes are less effective because they only seek to increase the price of carbon, and do not set binding emission limits, while carbon tax supporters respond by arguing that cap-and-trade programs lead to volatility in energy prices, and add that taxes are more transparent and easier to administer. In California, the California Air Resources Board currently administers the Global Warming Solutions Act of 2006, which requires California to reduce its GHG emissions to 1990 levels by 2020 (AB 32, Nunez, 2006). ARB must adopt regulations to achieve the maximum technologically feasible and cost-effective GHG emission reductions, which currently includes a cap-and-trade program that sets a statewide limit on most sources of GHGs, allocates or sells allowances to emitters, and oversees a market for sellers of allowances to connect with buyers. Additionally, the most significant federal legislation thus regarding climate change, the American Clean Energy and Security Act of 2009, created a national cap and trade program. The House of Representatives approved that bill, but it was never brought to the Senate Floor. Despite this disagreement, the two approaches are not mutually exclusive; pending legislation in Massachusetts and Washington allow a deduction for carbon tax liability for amounts paid in allowance auctions. The Committee may wish to consider whether the Legislature should urge Congress to enact a carbon tax, a national cap-and-trade program, or some combination thereof.

4. Use of proceeds. AJR 43 calls for a national carbon tax in which “all revenues are returned to middle and low-income Americans to protect them from the impact of rising prices due to the tax,” which recognizes that lower income individuals and families generally spend a larger percentage of their income on energy than those of higher incomes, and may bear much of a carbon tax’s incidence. However, by requesting the return of all revenues in this way, AJR 43 rules out other potential uses of carbon tax revenues, such as reducing the federal budget deficit, decreasing other taxes, providing compliance assistance, or funding renewable energy programs. The Committee may wish to consider the purposes for which national carbon tax revenues may be used.

5. Target correct? While AJR 43 doesn’t ask Congress to set a specific carbon tax rate, it does state that it “should start low and increase steadily and predictably to achieve the goal of reducing carbon dioxide emissions in the United States to 80% below 1990 levels by 2050.” The resolution states that climate scientists state that reductions of that level are necessary to achieve climate stabilization and avoid cataclysmic climate change. Any federal legislation implementing a carbon tax consistent with AJR 43 would likely direct the United States Department of Treasury to calculate such a tax rate, which could result in high tax liabilities, and therefore impacts to business cost structures and consumer prices. The Committee may wish to consider AJR 43’s direction regarding the carbon tax rate.

6. Border adjustments. One risk of enacting a national carbon tax is that firms facing a significant tax liability may seek to shift activity to nations that do not levy one, leading to reduced employment and economic activity domestically, while failing to achieve net global emission reductions. To address this issue, AJR 43 calls for carbon-content-based tariffs and tax refunds. Border tax adjustments such as tariffs on fuels and carbon-intensive imports can help reduce these emissions and employment “leakages,” but currently must comply with World Trade Organization rules. Additionally, some experts state that border adjustments may not be desirable because most domestic emissions occur in sectors that cannot be shifted to other jurisdictions, such as electricity, transportation, and residential buildings. The Committee may wish to consider whether carbon-based tariffs and tax refunds are a necessary part of a national carbon tax.

Assembly Actions

Assembly Natural Resources 7-0
Assembly Floor 44-29

Support and Opposition

(8/4/16)

Support: Citizens Climate Lobby, Friends Committee on Legislation of California, Community Environmental Council.

Opposition: Unknown.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AJR 43

Author:(Williams)

As Amended Ver:June 13, 2016

Majority vote

SUMMARY: Urges the United States Congress to enact a tax on carbon-based fossil fuels. Specifically, this joint resolution:

1. Urges the United States Congress to enact, without delay, a tax on carbon-based fossil fuels.
2. Specifies the tax should be collected once, as far upstream in the economy as practical, or at the port of entry into the United States; the tax rate should start low and increase steadily and predictably to achieve the goal of reducing carbon dioxide emissions in the United States to 80% below 1990 levels by 2050; all tax revenue should be returned to middle- and low-income Americans to protect them from the impact of rising prices due to the tax; and, the international competitiveness of United States businesses should be protected by using carbon-content-based tariffs and tax refunds.
3. Includes related "whereas" statements regarding climate change and a carbon tax.

FISCAL EFFECT: This resolution is keyed non-fiscal by the Legislative Counsel.

COMMENTS: Carbon tax (or fee) and dividend is a market-based, economy-wide approach to pricing carbon and reducing greenhouse gas emissions popularized by Peter Barnes around 2008. It is presented as a more simple, straightforward, and effective alternative to other market-based schemes, including cap-and-trade.

In California, the Air Resources Board has adopted a cap-and-regulation under the market-based compliance mechanism authority granted by AB 32 (Núñez), Chapter 488, a majority vote bill enacted in 2006. The current cap-and-trade regulation applies through 2020. A carbon tax, which would require a 2/3 vote of the Legislature in California, has never advanced.

Several fee/tax-and-divided, cap-and-dividend, and cap-and-trade bills have been proposed in Congress over the past 10 years, but none have passed.

According to the author:

Currently at the federal level there are no statutes addressing carbon levels in the atmosphere, or the long term affects these levels are having with global climate change. The measures proposed in this resolution will benefit the economy, human health, the environment, and national security, even without consideration of global temperatures, as a result of correcting market distortions, reductions in non-greenhouse-gas pollutants, reducing the outflow of dollars to oil-producing countries and improvements in the energy security of the United States. Phased-in carbon fees on greenhouse gas emissions (1) are the most efficient, transparent, and enforceable mechanism to drive an effective and fair transition to a domestic-energy economy, (2) will stimulate investment in alternative-energy technologies, and (3) give all businesses powerful incentives to increase their energy-efficiency and reduce their carbon footprints in order to remain competitive. Equal monthly dividends (or "rebates") from carbon fees paid to every American household can help ensure that families and individuals can afford the energy they need during the transition to a greenhouse gas-free economy and the dividends will stimulate the economy.

The weight of scientific evidence indicates that greenhouse gas emissions from human activities including the burning of fossil fuels and other sources are causing rising global temperatures. The weight of scientific evidence also indicates that a return from the current concentration of more than 400 parts per million ("ppm") of carbon dioxide ("CO2") in the atmosphere to 350 ppm CO2 or less is necessary to slow or stop the rise in global temperatures. Further increases in global temperatures pose imminent and substantial dangers to human health, the natural environment, the economy, national security, and an unacceptable risk of catastrophic impacts to human civilization.

Analysis Prepared by: Lawrence Lingbloom / NAT. RES. / (916) 319-2092 FN: 0003557

Date of Hearing: June 27, 2016

ASSEMBLY COMMITTEE ON NATURAL RESOURCES

Das Williams, Chair

ABPCA Bill Id:AJR 43 (

Author:Williams) – As Amended Ver:June 13, 2016

SUBJECT: Greenhouse gases: climate change

SUMMARY: Urges the United States Congress to enact a tax on carbon-based fossil fuels, as specified.

THIS JOINT RESOLUTION:

1. Urges the United States Congress to enact, without delay, a tax on carbon-based fossil fuels.
2. Specifies the tax should be collected once, as far upstream in the economy as practical, or at the port of entry into the United States; the tax rate should start low and increase steadily and predictably to achieve the goal of reducing carbon dioxide emissions in the United States to 80% below 1990 levels by 2050; all tax revenue should be returned to middle- and low-income Americans to protect them from the impact of rising prices due to the tax; and, the international competitiveness of United States businesses should be protected by using carbon-content-based tariffs and tax refunds.
3. Includes related "whereas" statements regarding climate change and a carbon tax.

FISCAL EFFECT: Non-fiscal

COMMENTS:

1. Background. Carbon tax (or fee) and dividend is a market-based, economy-wide approach to pricing carbon and reducing greenhouse gas emissions popularized by Peter Barnes around 2008. It is presented as a more simple, straightforward, and effective alternative to other market-based schemes, including cap-and-trade.

In California, the Air Resources Board has adopted a cap-and-regulation under the market-based compliance mechanism authority granted by AB 32, a majority vote bill enacted in 2006. The current cap-and-trade regulation applies through 2020. A carbon tax, which would require a 2/3 vote of the Legislature in California, has never advanced.

Several fee/tax-and-divided, cap-and-dividend, and cap-and-trade bills have been proposed in Congress over the past 10 years, but none have passed.

1. Author's statement:

Currently at the federal level there are no statutes addressing carbon levels in the atmosphere, or the long term affects these levels are having with global climate change. The measures proposed in this resolution will benefit the economy, human health, the environment, and national security, even without consideration of global temperatures, as a result of correcting market distortions, reductions in non-greenhouse-gas pollutants, reducing the outflow of dollars to oil-producing countries and improvements in the energy security of the United States. Phased-in carbon fees on greenhouse gas emissions (1) are the most efficient, transparent, and enforceable mechanism to drive an effective and fair transition to a domestic-energy economy, (2) will stimulate investment in alternative-energy technologies, and (3) give all businesses powerful incentives to increase their energy-efficiency and reduce their carbon footprints in order to remain competitive. Equal monthly dividends (or “rebates”) from carbon fees paid to every American household can help ensure that families and individuals can afford the energy they need during the transition to a greenhouse gas-free economy and the dividends will stimulate the economy.

The weight of scientific evidence indicates that greenhouse gas emissions from human activities including the burning of fossil fuels and other sources are causing rising global temperatures. The weight of scientific evidence also indicates that a return from the current concentration of more than 400 parts per million (“ppm”) of carbon dioxide (“CO2”) in the atmosphere to 350 ppm CO2 or less is necessary to slow or stop the rise in global temperatures. Further increases in global temperatures pose imminent and substantial dangers to human health, the natural environment, the economy, national security, and an unacceptable risk of catastrophic impacts to human civilization.

REGISTERED SUPPORT / OPPOSITION:

Support

Citizens Climate Lobby, Santa Barbara Chapter (sponsor)

Opposition

None on file

Analysis Prepared by: Lawrence Lingbloom / NAT. RES. / (916) 319-2092