To Tax Carbon or Not to Tax Carbon, That is the Question… for Another Day

In the weeks  since the election, pundits have speculated that a significant push to regulate the advance of climate change will be initiated by President Obama in his second term, many asserting that this initiative will manifest itself in the form of a carbon tax. These conjectures, somewhat timely in the wake of Hurricane Sandy and just before the kick-off of California’s cap and trade program, have so far been dispelled by the Obama administration – the President himself stating that a climate change initiative will not be his number one priority in light of the economy. And while several Republican members of Congress have indicated a willingness to entertain a carbon tax, bi-partisan support is not strong enough at the moment to move the ball forward.

Although a carbon tax is not likely to appear in any part of the fiscal cliff remedy, it is also not likely a dead issue. Exxon Mobil Corp. has publicly backed the institution of a carbon tax and the National Academy of Sciences is moving forward in preparing a carbon tax analysis, which will be presented to Congress this spring. Additionally, while the presidential candidates were virtually mute on the issue of climate change, various commercial entities and organizations that mind the international markets have increased their climate change dialog, suggesting that some type of clear government action is necessary.

Just this past week, for example, a coalition of some of the world’s largest institutional investors sent a letter to governments of the world’s largest economies urging them to establish an investment-grade climate change and clean energy policy, i.e., defined predictable policies that encourage low carbon investment. Although the letter did not explicitly call for the development of a carbon tax, such a policy has been cited by many economists as a simple, cost effective method of regulating carbon emissions with the least amount of impact on financial markets. Among the groups signing on to the letter is the American Investor Network on Climate Risk, whose members include entities like BlackRock, Deutsche Asset Management and TIAA-CREF, as well as public pension funds in California, Florida and New York. The coalition’s letter is available here. Insurance companies and other businesses that assess and attempt to mitigate risk have also cautioned that climate change will bring about a substantial negative economic impact if not properly managed – see for example, the Pricewaterhouse Coopers’ report “Too Late for Two Degrees,” issued on the eve of the presidential election.

So, while the world should not expect to see a carbon tax at the onset of 2013, the issue will most likely resurface again (and again and again) as part of any climate change discussions that take place during President Obama’s second term.

Andrea E. Hayden, Esq.

This entry was posted in CleanTech, Sustainability and tagged . Bookmark the permalink.

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