Today’s news included some interesting tidbits related to carbon pricing that I wanted to share, but first some context.
Democrats are busy negotiating a “framework” for the reconciliation bill that can pass the Senate, including getting the blessings of Senators Manchin and Sinema. They are hoping to release such a framework this week.
The reason for the rush is two things. First, they want to send Biden to the climate COP in Glasgow with some credibility that the US will deliver on emissions reduction promises. Second, they are hoping that with a clear enough framework that the House will be able to pass the Bipartisan Infrastructure Framework (BIF) before the surface transportation funding expires on the 31st (if not they would have to pass another extension of that funding).
We don’t know for sure what will be in the framework related to climate but they will probably announce some provisions this week. But today we did hear this from Sheldon Whitehouse:
“Ongoing discussions include assurance to Senators that emissions goals, including the role of a carbon polluter fee, will be addressed after a reconciliation framework is agreed to.”
Then this article came out in the Hill which is mostly about the methane fee (which people are optimistic will be included) but also included some info about carbon pricing:
The carbon fee will be negotiated at a later date, possibly on the basis of legislation that passes the House, although House Democrats have so far shown less appetite for passing a carbon pricing plan than some key players in the Senate such as Finance Committee Chairman Ron Wyden (D-Ore.).
“The thing to pay attention to is we’ve been told is there will be two iterations. One is the climate spending piece, which is going on right now…. And once that’s settled, there will be a separate emissions review” and that will be the chance to add a carbon tax, said the lawmaker.”
“The source also said the climate provisions are going to be separated into two buckets, with the first package focused on tax breaks for clean and renewable energy sources, investments in clean energy infrastructure and research and development and the methane fee.
The first bucket will also include legislation to establish the Civilian Climate Corps, a priority of Sens. Chris Coons (D-Del.) and Ed Markey (D-Mass.).
The second bucket will include more controversial proposals that have yet to be worked out — such as carbon pricing and a border adjustment fee for carbon intensive imports — and its future is much less certain.
My interpretation of this is that they plan to release a framework this week (first bucket) that includes tax breaks, investments, and a methane fee. They will then continue negotiations on the second bucket, which includes a carbon polluter fee, after the framework is released, during the time when they are drafting the details of the reconciliation legislation.
While we would have preferred that carbon pricing was part of this week’s framework, it is good news that it will still be considered after the framework is released.
So keep up the good work. Keep the pressure on the White House to stand strong in the negotiations.
Tony thanks for that read out. How do you read this, and does it comport w other intel? It seems to indicate a BCA is off the table, and is so because carbon pricing is also off the table?
SEN. WHITEHOUSE SAYS CARBON IMPORT FEE IS OFF THE TABLE: Sen. Sheldon Whitehouse of Rhode Island confirmed yesterday that Democrats are going to leave a border carbon adjustment out of their reconciliation package.
That’s not a surprise, since the Democratic proposal, authored by Sen. Chris Coons of Delaware and Rep. Scott Peters of California, would not have been paired with a corresponding domestic system for trading or pricing carbon emissions. Instead, their proposal was designed to match the costs already facing U.S. companies from a hodgepodge of state and federal environmental regulations and policies.
That means it’s questionable whether it would have made it through the budget rules of reconciliation, because the projected revenue generated from it could not be guaranteed.
“It’s hard to get that through a Byrd bath,” Whitehouse previously told Josh and co-host Neil Chatterjee on our “Plugged In” podcast last month.
Whitehouse argued then that President Joe Biden has “very broad tariff authority” to impose a fee on imports of carbon-intensive goods through executive action, a point he raised again yesterday.
“The Biden Administration has broad tariff authority and may be able to act later through executive action,” Whitehouse said in a statement.
My understanding is that Sen. Whitehouse is saying that they do not expect to do a border carbon adjustment during reconciliation. He thinks that can be done via executive action. I might also suggest that Congress could pass a BCA through regular order.
Our sense is that an effective BCA relies on a carbon price, but they could still try doing it without a carbon price. Not sure that would stand up to WTO or not.
Sen. Whitehouse has said clearly that corporate pollution fees are still to be discussed and that includes both methane and carbon fee. So this announcement of a framework does not say one way or another if they are in.
Whitehouse has been such a huge champion. No doubt he'll do everything possible to secure both a domestic price on carbon and a border adjustment too. We owe him enormous thanks for his enormous efforts.
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