The Deutch Energy Tax

Article By: WUWT

At the suggestion of a commenter on my last post, I’m taking a look at a very destructive and pointless piece of proposed legislation. This is the “Energy Innovation and Carbon Dividend Act“, which is subtitled “The Market-Based Climate Solution”. It’s proposed by Reps. Deutch (D), Rooney (R), Delaney (D), Fitzpatrick (R), and Crist (D).

The text of the proposed legislation is here, and the Press Release is here. 

Their plan, from above:

Purpose of This Policy

• To encourage market-driven innovation in clean energy technologies.

• To create efficient markets, encourage competition, and promote our national interests.

• To create a healthier, more stable, more prosperous nation for future generations.

Projected Benefits

• Creates 2.1 million net new jobs by the 10th year.

• Deploys private capital and American innovation to advance clean energy technologies.

• Reduces U.S. carbon emissions by 33% in 10 years, targets 90% reduction by 2050 (vs. 2015).

• Improves health, prevents 13,000 pollution-related U.S. deaths annually.

Major Policy Components

Carbon Fee – A gradually-rising upstream fee on the carbon content of fuels.

● Purpose: Creates market-driven demand for cleaner energy technologies. Corrects market distortions by reflecting externalities of pollution costs

● Details: Assessed once, upstream. Starts at $15 per metric ton of CO2e, increases $10 each year. Exemption for agricultural fuels and non-emissive uses. Rebate for CCS.

● HFCs: Fee also assessed at 10% of GWP of fluorinated gases.

Carbon Dividend – Rebates 100% of net revenues to the American people.

● Purpose: Protects consumers and the economy. Maintains revenue neutrality. Rebate offsets cost increases for most Americans.

● Details: Equal share to adults with SSN or TIN, half share to minors. Administered by Treasury. Admin costs not to exceed 2%. 1-month advance payment.

Gotta love NewSpeak. They say that the dividend “protects consumers” … but since it is “protecting” them from the tax that the authors of the proposed law are imposing, I fear that’s less than comforting …

Let me start by giving this tax its actual name. It is not a “carbon tax” or a “carbon fee” as the legislation claims. Nor is it a carbon dioxide tax. It is a tax on energy.

Curiously, the size of their energy tax is finely tuned. It actually varies directly with the energy content of the various fuels like gasoline, diesel, coal, and jet fuel. This is because for the hydrocarbons that we call “fossil fuels”, the energy content is in part proportional to the carbon content. The energy is released when the carbon is burned and turned into carbon dioxide. More energy from the carbon = more carbon dioxide.

It gets more curious. Their energy tax is based, not on carbon dioxide emissions, but on a measurement called “CO2 equivalents”. From the text of the law:

‘‘(b) CARBON DIOXIDE EQUIVALENT OR CO2-E.—

The term ‘carbon dioxide equivalent’ or ‘CO2-e’ means the number of metric tons of carbon dioxide emissions with the same global warming potential as one metric ton of another greenhouse gas.

So CO2 has a “global warming potential” (GWP) of one because it’s the standard of measure. Methane has a GWP of thirty, meaning they count one molecule of methane as equivalent to thirty CO2 molecules. And one molecule of nitrous oxide is said to be equivalent to 275 CO2 molecules … and this despite the fact that the atmosphere contains nitrogen and oxygen. The result of this is that ANY open-air flame will produce various compounds of nitrogen and oxygen, including nitrous oxide … and they plan to tax nitrous oxide at a rate 275 times the tax on CO2??? Oh, man, given that for the tax rate nitrous oxide the tax rate will be 275 times that on CO2, nitrous oxide emissions will be another center of insane arguments about what is and isn’t taxable. (For those interested, there’s more EPA info on the global warming potential in the endnotes.)

It gets worse …

So they plan to tax CO2e by an amount starting at $15/tonne (metric ton) and increasing by $10/tonne per year. How will the collection of this tax be achieved? In good bureaucratic fashion, it will be done in the most arcane, complicated, vague, and contentious manner imaginable. They will start with:

‘‘(1) the identification of an effective point in the production, distribution, or use of a covered fuel or fluorinated greenhouse gas for collecting such carbon fee or fluorinated greenhouse gas fee, in such a manner so as to minimize administrative burden and maximize the extent to which full fuel cycle greenhouse gas emissions from covered fuels or fluorinated greenhouse gases have the carbon fee or fluorinated greenhouse gas fee levied upon them,

I’ve underlined the “full fuel cycle greenhouse gas emissions” part. This is not just the greenhouse gases (GHGs) in the fuel. That would be far too simple to calculate. This is the sum of the actual CO2e of the GHGs in the substance, plus in their words, “that fuel’s upstream greenhouse gas emissions.” This means all greenhouse gases emitted by activities going back through the refining, the transportation, and all the way to the “wellhead” or the mine. In their words:

(t) UPSTREAM GREENHOUSE GAS EMISSIONS.— The term ‘upstream greenhouse gas emissions’ means the quantity of greenhouse gases, expressed in metric tons of CO2-e, emitted to the atmosphere resulting from, non exclusively, the extraction, processing, transportation, financing, or other preparation of a covered [fossil] fuel for use.

Note the escape clause “non exclusively”, which means that they can add other things to the “upstream” emissions.

Of course this will lead to further endless arguments about things like whether corporate air travel to inspect pipelines or the cooking gases consumed by the worker’s kitchens or methane leakage from your competitors wells should be included as an “upstream” emission of GHGs or not … this is just more employment for tax accountants and lawyers, and more cost to the economy.

For an absurd example of their madness, they specifically say that you have to include the greenhouse gases emitted by obtaining financing … say what? Greenhouse gas emissions from financing? Here’s a notorious financial CO2 emitter … or perhaps just a source of excess methane mixed with hot air …

Read more here