Obama Considering Carbon Tax to Tackle Deficit

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obamaBarack Obama may consider introducing a tax on carbon emissions to help cut the U.S. budget deficit after winning a second term as president, according to HSBC Holdings Plc.

A tax starting at $20 a metric ton of carbon dioxide equivalent and rising at about 6 percent a year could raise $154 billion by 2021, Nick Robins, an analyst at the bank in London, said today in an e-mailed research note, citing Congressional Research Service estimates. “Applied to the Congressional Budget Office’s 2012 baseline, this would halve the fiscal deficit by 2022,” Robins said.

Hurricane Sandy sparked discussion on climate protection in the election after presidential candidates focused on other debates, HSBC said. A continued Republican majority in the U.S. House of Representatives means Obama’s scope for action will be limited, Robins said. Cap-and-trade legislation stalled in the U.S. Senate after narrowly passing the house in 2009.

North American discharges fell 1.3 percent last year amid slowing economic growth. In China, the world’s biggest emitter, greenhouse gases from fuel use rose more than 9 percent in 2011, according to BP Plc (BP/) statistics published on June 13.

“Cap-and-trade has been demonized” and Obama probably won’t seek to install such a program in his second term, Richard Sandor, founder of the world’s biggest carbon trading exchange in Europe, said today at the presentation in London of his book titled Good Derivatives.

New carbon trading programs in California, China and Brazil may encourage U.S. lawmakers to introduce greenhouse gas trading by about 2020, Sandor said.

‘Moral Authority’

“We’ve lost our moral authority in the U.S.,” he said. “You haven’t here in Europe.”

Prices in the European Union carbon market, the world’s biggest by traded volume, dropped to a four-year low in April on surging supply and flagging demand.

Obama and the U.S. Congress should consider a carbon tax to help meet the government’s looming need for revenue, according to the Center for Climate and Energy Solutions in Arlington, Virginia.

The tax would not necessarily add to the economy’s total tax burden, according to Elliot Diringer, executive vice president of the research group. Such a tax may free up space for reductions in company taxes that dissuade employment, for example, Diringer said in an interview from Arlington.

“We have lots of need for new revenue to address our challenges,” which include priorities for conservatives such as extending tax cuts, avoiding deep defense cuts, reducing the corporate tax rate, reforming tax territoriality, and deficit reduction, the group said today in an e-mailed statement.

“While Sandy’s lessons are still fresh, the president should be clear about the urgency of cutting carbon emissions and strengthening critical infrastructure to protect Americans against the rising costs of climate change,” the group said yesterday in a separate statement.

Source: BLOOMBERG

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2 COMMENTS

  1. I think he should put a tax on everytime a basketball bounces in any game – either he’ll pay the tax or he’ll stop playing basketball and lead the nation

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