Tax Analysts Blog

Obama’s Climate Change Proposals Lack Major Tax Component

Posted on Jul 1, 2013
On June 25, 2009, President Obama made a major push for Congress to adopt climate change legislation that included a cap-and-trade proposal. In a speech in the Rose Garden, the president defended his plan and reiterated his campaign pledge to cut U.S. emissions. Cap and trade was never seriously considered by the Democratic Senate and climate change was eventually forgotten, drowned out by healthcare reform and the tumbling economy. Four years later to the day, Obama announced another effort to address climate change. But this time, his plan has virtually no tax component and would bypass Congress entirely.

The president’s latest efforts to reduce emissions focus on making coal power plants more environmentally friendly. He will direct the Environmental Protection Agency to create standards for existing plants (during his first term, the agency put in place rules for newly constructed facilities). Obama made it clear that approval of the controversial Keystone pipeline will depend on its effect on carbon emissions. And as usual, he reiterated his opposition to tax breaks for big oil companies – a proposal that he wasn’t able to get through a Democratic Congress in 2009 and 2010 and has zero chance of passing today. Absent from the June speech was any mention of cap and trade or a carbon tax. The Hill pointed out that Obama’s new plan seems to leave Congress out of the picture.

Obama didn’t mention cap and trade by name in his February State of the Union address either, but he did talk about something that sounded very similar. He mentioned a market-based approach worked on by former Sen. Joe Lieberman and Republican Sen. John McCain. That, presumably, was the doomed cap-and-trade bill in the Senate. Even in the State of the Union, however, the president pledged to go around Congress if necessary. Well, apparently it’s become necessary. Instead of legislation, Obama will now use the EPA and executive authority to try to achieve the 17 percent reduction in emissions that he promised during his 2004 presidential campaign.

Cap and trade is a flawed solution to climate change. It has little political support on Capitol Hill. Economists prefer a carbon tax. And The Wall Street Journal has labeled it as potentially the largest tax increase in history. So it isn’t a surprise that Obama’s support for a new bill is lukewarm at best.

But by leaving taxes out of his climate change initiative, Obama is showing that he isn’t really all that serious about the effort. Carbon taxes might hurt an already weak economy and might not be in the United States’ best interest for other reasons. But meaningful change simply can’t -- and shouldn’t -- be accomplished by executive orders and increased regulation. The president needs to learn how to negotiate major initiatives with moderates in his own party and Senate and House Republican leadership. Real change is supposed to happen in the legislature, not the courts or government agencies. And that takes the kind of presidential leadership that Obama has so far failed to show.

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