When President Joe Biden unveiled ambitious plans to upgrade the nation’s infrastructure, address climate change and shore up safety net programs, an important proposal was missing from his agenda: a carbon tax. As a market-based means of reducing greenhouse gas emissions that holds polluters responsible, the tax has support among economists, environmentalists — even the oil lobby. Broad backing for any new environmental regulation is hard to come by, and the president should embrace this sensible policy.
A carbon tax — also known as carbon pricing — sets a price on the fossil fuel emissions that are driving climate change. By taxing the oil, gas and coal companies that burn fossil fuels, the cost of those harmful emissions is shifted to those producing them, while also creating a financial incentive to develop cleaner energy sources. Economists and conservatives like the concept because it’s a market-driven mechanism, meaning a company can reduce its carbon tax by reducing its emissions, rather than a top-down government mandate. Environmental groups and progressives like it because it aligns with the “polluter pays” principle, making energy companies compensate the public for environmental damage.
In a sign of how palatable and mainstream the idea of a carbon tax has become, the American Petroleum Institute recently came out in favor of it. The oil and gas industry’s powerful trade group had for years stood in staunch opposition to a tax. Their about-face is a recognition that climate change is not only an existential crisis but also a business imperative, as investors put more pressure on companies to be better stewards of the planet’s resources. Carbon pricing’s other unlikely bedfellows: the U.S. Chamber of Commerce, Business Roundtable, a consortium of CEOs, as well as Republican Sens. Mitt Romney and Lindsey Graham. Yet Biden is conspicuously silent on the tax.
He certainly recognizes the urgency of the climate crisis and the opportunity before him. Soon after taking office, he quickly reversed more than 100 Trump-era policies that weakened or rolled back existing environmental protections, putting the country back in forward motion after four years of damaging climate change denial. He has also halted new oil and gas leases on federal lands, cancelled the Keystone XL oil pipeline and rejoined the Paris climate agreement.
The goal of the climate accord is to substantially reduce emissions in order to limit global temperature increases this century to 2 degrees Celsius. The best hope for achieving that may be to make it financially painful to pollute and financially advantageous to innovate. In that light, a carbon tax would buoy Biden’s other goals of eliminating fossil fuel emissions from electricity generation by 2035 and making the U.S. economy carbon neutral by midcentury.
One Treasury Department study estimated that a tax of $49 per metric ton of carbon emissions would raise $2.2 trillion in new revenue over 10 years — money that can assist vulnerable communities, like coastal Florida, in hardening against sea level rise and help low-income households afford higher energy costs. That’s essential since energy prices don’t currently reflect the true cost of emissions and the poor already spend a larger share of their income on energy.
As the world’s largest contributor to global warming, the U.S. needs to use every tool at its disposal to meet the challenge of reducing emissions and protecting human health, private property and the food supply. A carbon tax can advance those goals with the backing of political adversaries. It just needs the president to get on board.
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