Today, Rep. Jim McDermott (D-Wash.) introduced the “Managed Carbon Price Act of 2012″ (MCP), a bill imposing a tax on carbon dioxide-equivalent  greenhouse gas (GHG) emissions from producers of coal, oil, and natural gas, refineries, and other covered sources. The MCP has roughly the same long-term goal as the Waxman-Markey cap-and-trade bill, the Copenhagen climate treaty, and California Assembly Bill 32 — an 80% emissions reduction below 2005 levels by 2050.

Under the MCP, covered sources would have to purchase (non-tradeable) permits equal to the quantity of CO2-equivalent GHGs they emit. The Secretary of Treasury, in consulatation with the Secy. of Energy and Administrator of EPA, would “manage” permit prices to ensure that both the long-term and interim reduction targets are met. Permit prices would have to stay within a maximum and minimum “price collar.” Seventy-five percent of the proceeds would be returned to citizens as “dividends,” and 25% would be applied to deficit reduction. A fact sheet, section-by-section analysis, and side-by-side comparison with last year’s version of the bill provide more detail.

A few quick observations. First, the overwhelming majority of Republican members of Congress have signed the Taxpayer Protection Pledge – a promise to the citizens of their State or district not to support any tax increase that is not offset by an equal reduction in other taxes. Because 25% of the proceeds raised by the ‘managed’ carbon tax would be applied to deficit reduction, the MCP is not ‘revenue-neutral.’ Pledge takers cannot vote for the MCP without breaking their promises to their constituents. Even if some GOP lawmakers agree with the bill’s climate policy objectives, few will dare to support it.

Second, as I discuss this week on National Journal’s energy blog, there are only two defensible reasons for economic liberty/limited government advocates to consider a carbon tax proposal such as the MCP. One is if we’re stuck with a choice between carbon taxes and cap-and-trade. Back in 2007-2010, some clever people argued that we had to support carbon taxes because “you can’t beat something with nothing.” They were wrong. We beat cap-and-trade by exposing it as a tax. Why on Earth should we support carbon taxes now, when cap-and-trade is dead?

Some limited government advocates may be intrigued by the possibility of a grand bargain in which a national carbon tax replaces all federal and State anti-carbon regulatory programs. Those include not only the EPA’s greenhouse gas regulations but also the Renewable Fuel Standard, sub-rosa carbon regulations like the Utility MACT Rule (which effectively bans the construction of new coal power plants), California’s EPA-awarded power to meddle in fuel-economy regulation, California’s cap-and-trade program and low-carbon fuel standard, the Northeast States’ regional greenhouse gas regulatory compact (RGGI), and State renewable portfolio standards (RPS).

That the EPA, California, and major environmental organizations would agree to such a bargain is unthinkable. They have spent 40 years fighting for the regulatory mandates they currently administer or influence, not for carbon taxes. The only deal they might accept is one in which they get carbon taxes and carve-outs for regulatory sacred cows.

Perhaps reflecting this reality, McDermott’s fact sheet, section-by-section, and side-by-side contain no hint or suggestion that carbon taxes would replace or preempt other greenhouse gas reduction policies. The MCP is about as DOA as any bill could be.

Concerning the “Price Carbon Campaign/Lame Duck Initiative” meeting of center-right and ‘progressive’ pols, wonks, and activists yesterday at the American Enterprise Institute (AEI), herewith a few additional thoughts.

Today’s Greenwire quotes AEI economic policy director Kevin Hassett saying that AEI was just playing host and the meeting was just information sharing. Well, okay, let’s assume he experienced it that way, but what about the ‘progressives’ who set the agenda? They must really be into sharing, because this was their fifth meeting. Whatever the AEI folks thought the event was about, the agenda clearly outlines a strategy meeting to develop the PR/legislative campaign to promote and enact carbon taxes.

During the cap-and-trade debate in the last Congress, there was something of a consensus among economists that EPA regulation of greenhouse gases (GHGs) is the worst option, a ‘comprehensive legislative solution’ (i.e. cap-and-trade) has less economic risk, and a carbon tax is the most efficient option. But the ‘progressives’ in the “Price Carbon Campaign” are pushing for carbon taxes on top of EPA regulation.

Because the meeting was non-public and hush-hush, we may never know who said what. Here are some points the ‘conservative’ economists  should have made:

(1) With unemployment still above 8%, the last thing the U.S. economy needs is a massive new tax on energy. (2) The EPA’s UMACT Rule and GHG Standard Rule each effectively bans the construction of new coal-fired power plants. (3) The GHG Standard Rule is a slippery slope that sooner or later will constrain gas-fired generation. (4) Adding carbon taxes to the GHG Rule could snuff out the shale gas revolution, especially if lifecycle analysis demonstrates that natural gas is actually as carbon intensive as coal or more so. (5) The UMACT/GHG Standard/Carbon Tax Combo could play havoc with electricity prices and reliability almost as much as Al Gore’s goofy plan to ‘repower America‘ with ‘zero carbon’ energy sources in 10 years.

In short, the only defensible reason for ‘conservative’ economists to discuss carbon taxes is as a TOTAL replacement for ALL EPA greenhouse gas regulations. But that ‘progressives’ would agree to any such swap is unimaginable. So what really is there to talk about?

Another pre-condition for any ‘conservative’ worthy of the name is that the carbon tax be ‘revenue neutral.’ That is, whatever revenues the carbon tax generates should be offset by reductions in other taxes. But how likely is it that ‘progressives’ would agree to apply Grover Norquist’s no-net-increase Taxpayer Protection Pledge to their beloved carbon tax? Again, unless ‘conservatives’ are willing to sell out, there’s no point in forming a left-right coalition on carbon taxes.

Finally, whatever policy objectives the ‘conservative’ participants might have had in mind, the timing of the AEI-hosted pow-wow was all wrong. Any GOP expression of interest in carbon taxes at this time can only muddy the election-year battle lines between what may loosely be called the pro-tax/anti-energy party and anti-tax/pro-energy party. It is also entirely unclear at this point what kinds of concessions might have to be made in 2013 to rein in the EPA. For example, a clean sweep in the November elections might make the GOP strong enough to limit the regulatory fallout from Massachusetts v. EPA without endorsing carbon taxes.

Everybody and his brother are reporting yesterday’s cloture vote on Sen. Tom Coburn’s amendment to repeal the ethanol tax credit as a widespread rejection by GOP lawmakers of the Taxpayer Protection Pledge, conceived and administered by Americans for Tax Reform (ATR). This is spin.

Many in Washington would like nothing better than for Republicans to disown their chief product differentiator, their promise in writing not to raise taxes. That may happen. Raising taxes is what politicians do, especially those who claim we have a deficit problem rather than an overspending problem. But repudiating the Pledge is not what went down in the Senate on Tuesday.

Here’s how one commentator, Howard Gleckman of the Urban Institute, described the vote:

In a small but important way, 34 GOP senators proved to themselves–if to no one else–that they can vote to “raise taxes.”  Most had signed the infamous pledge demanded by the self-styled protector of the faith, Grover Norquist, that they would never ever vote to raise taxes on anyone in any circumstances. Now, they have.

Actually, no, they have not, as I’ll explain below. But first, let’s be clear about one thing — even a false accusation of breaking the Taxpayer Protection Pledge can be damaging to GOP lawmakers. Consider this story by Ben Geman in yesterday’s edition of The Hill:

Mass. Dems bash Sen. Scott Brown on ethanol vote
 
Massachusetts Democrats are attacking Sen. Scott Brown (R-Mass.) for his vote Tuesday in favor of repealing a major ethanol industry tax break, alleging the vote broke with Brown’s signed pledge to a major conservative group not to raise taxes.

Brown — who faces reelection in the typically blue Bay State next year — voted with 33 other Republicans and six Democrats for Sen. Tom Coburn’s (R-Okla.) amendment, which fell well short of the 60 votes needed.

“During his campaign for U.S. Senate, Scott Brown told voters what he thought they wanted to hear and now that he’s in Washington, he’s breaking promises right and left,” said Massachusetts Democratic Party spokesman Kevin Franck in a statement.

Brown, ahead of his upset 2010 Senate win, touted his signing of the group Americans for Tax Reform’s (ATR) “Taxpayer Protection Pledge,” which states that he would opposes tax hikes and “any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.”

There are several errors here. To begin with, the Pledge that Brown and 33 other GOP Senators and all but six GOP House Members have signed is not to ATR but to the people of their respective states or districts. ATR administers the Pledge and monitors fidelity to it, but the Pledge is a promise from the lawmaker to his constituents.

More importantly, those claiming that Brown and other GOP Senators broke the Pledge are mistaken for two separate reasons.

First, yesterday’s vote was procedural — a vote on a cloture motion. It was a vote on whether to end debate and have a vote on Sen. Coburn’s amendment to kill the ethanol tax credit. It was not a vote for or against repeal of the tax credit. It does not count one way or the other under the Taxpayer Protection Pledge.

Second, even if the Coburn amendment had come to a vote, Sen. Brown could have voted for it without violating the Pledge.

Here’s why. Candidates who take the Pledge promise to oppose (1) increases in marginal tax rates and (2) repeal or reduction of tax deductions or credits “unless matched dollar for dollar by further reducing tax rates.” Had the Coburn amendment come up for a vote, Sen. Jim DeMint was prepared to offer an amendment killing both ethanol’s main policy privilege — the Soviet-style production quota euphemistically called the “Renewable Fuel Standard” — and the death tax. Repeal of the the death tax would overwhelm the tax increase from repeal of the ethanol tax credit.

Thus, by voting for the DeMint amendment, Brown and the other GOP Senators could have voted for the Coburn amendment and still kept their promise to oppose any net increase in taxes.