Rep. Stark Introduces Carbon Tax Legislation

On October 24, Representative Pete Stark (D-CA) introduced H.R. 3242 , the “Save Our Climate Act” which would put a price on carbon dioxide (CO2) emissions. The bill, co-sponsored by eight other Representatives, would amend the Internal Revenue Code to levy a tax on the carbon content of fossil fuels as measured at their entrance into the market – either on the manufacturer, producer or importer. However, the bill also includes biomass and municipal solid waste as taxable energy sources. For more information and analysis, read EESI Policy Associate, Ned Stowe's, commentary from SBFF .

The tax would start at $10 per ton and increase by $10 each year until emissions levels drop 80 percent below 1990 emission levels. According to the Carbon Tax Center, an organization advocating for a national carbon tax, the bill should reduce U.S. carbon emissions by 25 percent within the first ten years.

The tax would cover coal, petroleum, natural gas, biomass, municipal solid waste, and any other organic matter that is sold for energy purposes. Fuel stored in the Strategic Petroleum Reserve would be exempt, and the tax would be refunded for the carbon content of any fuel that is either not burned for energy or for which the emissions are sequestered. Exported fuels would also be exempt from the tax, and rebates would be provided for fuels imported from countries with a similar carbon tax which exceeds the one prescribed in the bill.

The bill would generate up to $480 billion in revenue over ten years for each $10 per ton tax increment. This revenue would be used to reduce the federal budget deficit and to establish a “Healthy Climate Trust Fund,” which would provide citizens with an annual climate dividend. Rep. Stark cited a Carbon Tax Center estimate that each consumer would receive an annual dividend of $160 in the second year after implementation, which would increase to $590 by the fifth year and $1,170 by the tenth year.

The two primary goals of the bill are to spur massive investment in cleaner fuels and to incentivize other countries to impose similar taxes. "We have a moral obligation to act to prevent catastrophic climate change and preserve our planet for future generations," said Rep. Stark in a press release. "The Save Our Climate Act is a first step toward meeting that obligation and creating a sensible tax code that incentivizes innovation, reduces the deficit, and protects families from rising energy costs."

Rep. Stark sponsored a similar bill in January 2009, H.R. 594 , the Save Our Climate Act of 2009. That version only taxed fossil fuels—coal, petroleum and natural gas. It sought to impose an annually increasing $10 per ton tax on CO2 emissions, but it lacked many features of the current bill. The 2009 version lacked the border adjustment which would provide refunds for tax imposed on imports from other countries with a higher carbon tax. It also proposed to use the revenue to reduce taxes on low and middle income taxpayers or to fund research and development for alternative energy sources, whereas H.R. 3242 seeks to reduce the federal budget deficit and directly refund $2 trillion of the money to taxpayers over the first ten years to offset increased energy prices.

H.R. 3242 was referred to the House Committee on Ways and Means on October 24.