Pay at the Pump: Carbon Tax Gaining Popularity in U.S. and Europe

(MoneyWatch)  Political deadlock and distraction are good friends to advocates for a greenhouse gas emissions tax. Whereas a year ago a cap-and-trade system looked all but certain in the United States, and perhaps even for the whole world, the tide is increasingly turning in favor of a tax.

Just not necessarily a "straightforward" tax, as it's usually characterized. Over the weekend, the Washington Post reported that the trio of Sens. Kerry, Lieberman and Graham -- a Democrat, independent and Republican, respectively -- are working on a complex climate bill plan of which a carbon tax is just part:

Power plants would face an overall cap on emissions that would become more stringent over time; motor fuel may be subject to a carbon tax whose proceeds could help electrify the U.S. transportation sector; and industrial facilities would be exempted from a cap on emissions for several years before it is phased in. The legislation would also expand domestic oil and gas drilling offshore and would provide federal assistance for constructing nuclear power plants and carbon sequestration and storage projects at coal-fired utilities.

There's no telling what will happen to this plan, as every new week brings a flood of commentaries asserting that there is or isn't enough support in Congress for a climate bill. Whatever happens, will likely take a few months.

The movement toward a tax isn't limited to Congress. The Financial Times points out separate reports that link the Kerry bill to pressure from big oil. Exxon Mobil was an early proponent for carbon taxation, beginning to argue for it last October. And as I covered a couple weeks back, BP America and ConocoPhillips just very publicly snubbed cap and trade; according to ClimateWire, the two are working with Exxon to push for a tax.

It may be difficult to imagine oil companies asking for a tax on their product, but they may simply consider it the lesser of two evils, especially if they can influence where the tax falls. Back in May of last year, I was among the first to point out that the cap and trade plan amounted to a tax on American refiners, without hurting foreign importers. A real carbon tax would spread the pain more evenly.

Even more surprising than big oil's support is a move toward carbon taxes in Europe. American ideas of how to develop a cap and trade system built on lessons learned from the European Union's own trading system, which has been in operation since 2005.

Being the first major region to get cap and trade running has always been a point of pride for European politicians. Yet now the European Commission appears to be working on a draft proposal for a carbon tax as well, affecting auto fuel, coal and natural gas.

Since the EU works on a consensus model, it might be tough for the Commission to push through a tax when some members, including the United Kingdom, oppose the idea. But it's not inconceivable that the EU could incorporate carbon taxes. One good reason: it's a way to help justify a border tax on goods from China and other developing countries.

[Photo credit: Telstar Logistics / flickr]