April 2013
U.S. Policy
Carbon Pricing Proposals of the 113th Congress

Market-based policies that put a price on greenhouse gases can achieve cost-effective reduction in emissions while driving clean energy innovation. In the United States, attention has recently turned to the possibility of a carbon fee as an element of a broader package addressing tax or budgetary issues. Below is a comparison of a proposal that has been introduced in the U.S. Senate and a discussion draft released by a group of representatives and senators.

The following table compares the Climate Protection Act of 2013 (S. 332), as introduced by Sens. Bernie Sanders (I-VT) and Barbara Boxer (D-CA) on February 14, 2013, and the Carbon Pollution Fee discussion draft, as released by Rep. Henry Waxman (D-CA), Sen. Sheldon Whitehouse (D-RI), Rep. Earl Blumenauer (D-OR), and Sen. Brian Schatz (D-HI) on March 12, 2013.

While both proposals would institute a fee on carbon (i.e., a carbon tax), the proposals differ on the coverage and scope of the respective programs. For instance, the Sanders-Boxer proposal would require certain upstream or midstream fossil fuel sources (i.e., coal mines, refineries, natural gas processing plants, or importers) to pay a fee on greenhouse gas emissions while the authors of the discussion draft would require the largest sources covered by the U.S. EPA Greenhouse Gas Reporting Rule to purchase permits for their direct greenhouse gas emissions.

In addition, the proposals differ on: the starting price of the carbon fee, how much to increase the fee each year (i.e., the escalation rate), and how to use the revenues. The Sanders-Boxer proposal would establish a $20 per ton carbon fee, rising 5.6 percent a year over a 10-year period, and would direct 60 percent of the revenues back to consumers through a rebate, and the rest towards investment in renewable energy and energy efficiency, and deficit reduction. The authors of the discussion draft are considering various initial carbon fee and escalation rates as well as uses for generated revenue.

The authors of the discussion draft are seeking public comments on a range of topics, including the use of revenues. Note that certain provisions in the discussion draft are bracketed, which suggests a number of provisions will be refined based on additional analysis and deliberation.

Policy Features Sens. Sanders and Boxer's
Climate Protection Act of 2013
Rep. Waxman, Sen. Whitehouse, Rep. Blumenauer, and Sen. Brian Schatz
Carbon Pollution Fee discussion draft
Start Date The earlier date of January 1, 2014, or the first calendar year beginning at least 180 days after enactment January 1, 2014
Regulating Authority Environmental Protection Agency (EPA) Jointly administered by Treasury Department and EPA. EPA would implement and enforce emissions reporting under EPA's Greenhouse Gas Reporting Rule. Internal Revenue Service (Treasury) would assess, collect, and enforce the fee requirements.
Substances Covered Under a Carbon Pollution Fee Carbon polluting substance defined as: coal, petroleum, petroleum products, or natural gas that when used, will release greenhouse gas emissions. Carbon pollution defined as any greenhouse gas—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and other fluorinated greenhouse gases—identified in Table A-1 to Subpart A of the GHG reporting rule.

Excludes from coverage:
  • Emissions reported for products that are exported.
  • Carbon pollution that is reported but is associated with a product that has non-emissive use.
  • Quantities of carbon pollution that are attributed to a supplier of natural gas or oil, and are contained in a product that is transferred to an entity that reports direct emission from burning or releasing such product.
  • Quantities of carbon pollution that are permanently sequestered in subsurface geologic formations.
  • Quantities that are biogenic CO2 under the reporting rule (excluded through 2014) and carbon pollution from burning renewable biomass, as defined by the Secretary of Agriculture and the EPA Administrator through joint rulemaking (excluded starting in 2015).
Requires any revisions to the U.S. EPA Greenhouse Gas Reporting Rule after the date of enactment of this Act to maintain or enhance the accuracy and completeness of the information required to be reported.
Point of Coverage (i.e, covered entity) Any manufacturer (such as an oil refinery or natural gas processing facility), producer, or importer of a carbon polluting substance.

(Sanders-Boxer estimate their proposal would cover 2,700 facilities, or 85 percent of the U.S. greenhouse gas emissions)
Covered entities are those required to report emissions under the U.S. EPA Greenhouse Gas Reporting Rule requirements of 40 CFR 98. This includes owners and operators of facilities (such as electricity generators) and suppliers of products (such as oil refineries).

Facilities are not covered if they emit 50,000 metric tons or less of carbon dioxide equivalent per year in combined annual emissions from stationary fuel sources.

Certain sources of fluorinated greenhouse gases are exempted where the associated carbon pollution is also reported by another covered entity.

(The sponsors estimate their discussion draft would cover 7,000 facilities, or 85-95 percent of U.S. greenhouse gas emissions)
Emission Targets and Timetables Bill expresses the sense of Congress that the United States carry out activities to reduce emissions by at least 80 percent below 2005 levels by 2050. Greenhouse gas emission targets and timetables not specified, except for a 90 percent reduction of emissions from HFCs attributed to specified entities.
Emission Allowance N/A A covered entity must purchase a carbon pollution permit for the compliance year by May 1 of the following year.

Unless authorized by the Secretary of Treasury, permits are only valid for the specified calendar year and cannot be traded, sold, or banked.
Escalation Rate Fee imposed on full carbon content of product (including fractional amount).

The fee would start at $20 per ton of carbon dioxide content (including carbon dioxide equivalent content of methane) of the carbon polluting substance. In subsequent years, the tax increases by 5.6 percent (rounded to the nearest dollar) above the previous year's amount.

Year Applicable amount
1 $20
2 $21
3 $22
4 $23
5 $24
6 $25
7 $26
8 $27
9 $29
10 $31
11 $33
12 or thereafter $35
Five years after enactment of this Act, the EPA Administrator would submit recommendations to Congress on how to best administer the carbon fee program after the 12th calendar year, including recommendations on a future fee schedule.
Fee imposed on carbon pollution emitted during, or attributed to, a compliance year (rounded to the nearest whole ton) as reported by the covered entity under the U.S. EPA Greenhouse Gas Reporting Rule.

Sets a carbon permit fee of [$15/$25/$30] per ton of carbon dioxide equivalent of carbon pollution emitted, or attributed, for 2014, increasing at a real rate [2%-8%] annually.

Year Applicable amount (in 2014 dollars), (the low rate starts at $15 per ton with a 2 percent escalation; the high rate starts at $30 with an 8 percent escalation)
2014 $15.00 - $30.00
2015 $15.30 - $32.40
2016 $15.61 - $34.99
2017 $15.92 - $37.79
2018 $16.24 - $40.81
2019 $16.56 - $44.08
2020 $16.89 - $47.61
2021 $17.23 - $51.41
2022 $17.57 - $55.53
2023 $17.93 - $59.97
2024 $18.28 - $64.77
2025 $18.65 - $69.95
Sets an excess carbon pollution penalty of three times the applicable permit fee per ton of carbon pollution emitted (or for which it was attributed) without a permit.
Credits or Refunds Not specified. Requires the Secretary of Treasury to refund fees for any extra permits obtained by a covered entity for a compliance year.
Energy Intensive, Trade Exposed Imposes a carbon equivalency fee on imports of carbon-intensive goods.

This annual fee would be differentiated by classes of products and country of origin, taking into account the amount of greenhouse gas emissions released during the manufacture and transport of the carbon pollution-intensive good.

This fee would expire when exporting countries adopt equivalent measures, or the EPA Administrator deems it no longer appropriate.
Exported products whose emissions are required to be under EPA's Greenhouse Gas Reporting Rule are excluded from purchasing a carbon pollution permit.
Use of Revenue 60 percent of the revenues (not including the import fee) would be rebated to U.S. citizens and legal residents on a monthly basis.

40 percent of the revenues will be allocated to a Pollution Reduction Trust. For each of the first 10 years, this fund will allocate: $7.5 billion to mitigate impacts of the fee on energy intensive-trade exposed industries; $5 billion for weatherization of low income homes; $1 billion for clean energy job training; $2 billion for ARPA-E; and the balance would go toward deficit reduction.

Carbon equivalency fee on imports would be evenly split between building/improving critical infrastructure and improving resiliency to climate change.
[To be supplied. Seeking comments on the use of revenues, such as: mitigating energy costs for low-income households, reducing the federal deficit, reducing the tax liability for individuals and businesses, protecting jobs of energy-intensive trade exposed industries, and investing in other activities to reduce greenhouse gas emissions.]
Treatment of Existing State Programs Not specified. [To be supplied.]
Other The bill would create a $5 billion Sustainable Technologies Finance program under EPA to provide financial assistance (i.e. loans, credits, loan guarantees) for eligible projects (e.g., renewables, energy efficiency, and advanced transportation projects) that reduce greenhouse gas emissions.

The bill would strengthen EPA's authority to regulate hydraulic fracturing, including requiring gas operators to disclose chemicals used in the fracking process. EPA would also be authorized to assess civil penalties for violations of those regulations up to $10,000 per day but capped at $125,000.
Does not affect the application of any other provision of law to a covered entity.
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