A way through the impasse in U.S. climate change legislation: a GHG tax that possesses political and administrative feasibility and conforms to international law.

Author:Lowe, Sean

Discussions in Congress about what is generally known as Climate Change have morphed into a "third rail" of politics--where engaging such a topic can seem like an admission that massive inter-governmental cooperation and drastic cutbacks in energy usage are necessary. Unfortunately, that fear has stifled the conversation about creative solutions--because without a problem, who needs a solution?

This Comment posits a novel, congressional response to Climate Change with three particular aims: political feasibility, administrative feasibility, and conformity with international law. More specifically, this proposal uniquely operates by taxing producers of "carbon-intensive goods," including importers, through two newly-created entities and procedures: the Climate Change Reduction Committee ("CCRC") sets the requisite percentage cutbacks for the relevant categories of producers and the Intergovernmental Panel on Climate Change ("IPCC") exacts penalties on imported goods that fail to comport with the CCRC's mandates. Notably, the nine-member IPCC would reserve five seats for randomly chosen WTO Members while retaining four seats for United States officials. And, voila! The United States has a partial solution to its looming national deficit through a significant new revenue source.

Why not cap and trade? This Comment concludes that the governmental revenue lost, the utter dearth of any persuasive political arguments surrounding it, the additional, inherent regulatory complexities, the high probability of "cap busting," and the likely failure to comport with international law makes a cap and trade regime an inferior alternative.

  1. INTRODUCTION A. The Proposal B. Why not Cap and Trade? II. THIS GHG TAX CONFORMS TO INTERNATIONAL LAW A. GATT Article I B. GATT Article II C. GATT Article III D. GATT Article XI E. GATT Article XX 1. GATT Article XX Paragraph (g) Analysis 2. GATT Article XX Chapeau 3. GATT Article XX Paragraph (b) Analysis F. Agreement on Subsidies and Countervailing Measures (ASCM) G. Technical Barriers on Trade ("TBT") III. Critiques A. The Political Feasibility of a GHG Tax B. Administrative Feasibility of a GHG Tax C. Cap and Trade: A Flawed Alternative to a GHG Tax IV. Conclusion I. INTRODUCTION

    Most political campaign advertisements featuring guns refer to a candidate's position regarding the Second Amendment. Governor Joe Manchin, the freshman senator from West Virginia, found another creative and jarring use for a weapon: literally shooting through the likeness of the "Democrats' now defunct cap-and-trade bill." (1) More significantly, his use of that ad--and more specifically, his opposition to a cap and trade bill--is widely credited with helping him win as a democratic candidate in a year when Democrats lost big nationwide. (2) Most relevantly for the response to climate change, the sentiment encapsulated by that television commercial demonstrated a strong aversion to an energy policy resulting in raised prices--or a hidden tax. Thus the challenge: construct legislation that necessarily raises energy prices, in order to reduce greenhouse gas emissions, while also convincing the democratic polity that higher prices--and the resulting lower taxes through increased government revenues!--are a good thing.

    While political feasibility dominates the discourse surrounding U.S. climate change legislation, upholding international treaty obligations does not receive a level of attention corresponding to its importance for resolving global climate change. This Comment will focus primarily on the latter issue precisely because achieving a significant net reduction in greenhouse gas ("GHG") emissions cannot occur without international support. Acting in spite of international treaties, such as the General Agreement on Tariffs and Trade ("GATT"), ignores potential consequences such as World Trade Organization ("WTO") sanctioned trade retaliation and foments an international reluctance to craft a future multi-national agreement. Moreover, even if the United States could miraculously eliminate all of its GHG emissions through unilateral action, more than 78% (and counting) of current global GHG emissions would continue from other countries? That kind of governmental action also assumes away the problem of international leakage, which this Comment will spotlight as a primary reason for moving within current international legal regimes.

    This Comment will then navigate through the critiques against carbon tax regulation, including an analysis of the political and administrative feasibility of taxing GHG emissions. Administrative feasibility remains a top priority because, unlike other taxation programs, the potential complexities here could present a near-impossible task; this partly explains why this Comment's proposal relies on a simpler approach. Finally, this Comment will examine why a cap and trade system ("cap and trade") remains a flawed alternative.

    This Comment also assumes the veracity of scientific findings concerning climate change, even as the extent to which action is necessary remains hotly contested. (4) While certainly interesting, space limitations require the omission of any substantive discussion revolving around those issues. Instead, this Comment will act on the premise that climate change is happening and that reducing global GHG emissions is an important societal aim.

    1. The Proposal

      The GHG emissions tax recommended would require importers and domestic producers of fossil fuels, aluminum, cement, glass, paper, and steel ("carbon-intensive goods or products") to reduce the amount of GHGs they emit by implementing percentage cutbacks based upon historical emissions from each source. The inclusion of these sectors stems from the fact that they account for about three-fourths of all GHG emissions. (5) Additionally, the political palpability of a smaller regulatory introduction makes the case for governmental expansion, albeit small, an easier sell to the American people. (6) A five-member Climate Change Reduction Committee ("CCRC"), appointed by the President of the United States ("President") and confirmed by the Senate during off-year elections for four years terms, will decide the optimal percentage cutbacks for each industry, which Congress may override with majority passage of a contrary joint resolution. (7) This reduction committee will publish requirements two years in advance, with these recommendations taking legal force one year before required compliance. While most climate change proposals include statutorily-mandated cutbacks, this proposal seeks to establish a proper balance between effective administration and congressional oversight. Additionally, lawmakers will not have to take a stand on specific percentage reductions for any given industry unless it seeks to override the CCRC. There will be more on how that provision might affect political palpability later in this Comment. (8)

      If a particular carbon-intensive producer fails to satisfy these requirements, the federal government will levy a per-ton GHG tax on amounts above the mandated percentage requirement. Sophisticated monitoring equipment, if not already in place, will be required at all production sites of carbon-intensive products. New plants would be subject to GHG emission levels of similarly situated domestic producers. Thus, under this proposal, the United States would collect taxes from producers of carbon-intensive goods that exceeded their GHG emission threshold.

      This Comment suggests at least a few year phase-in period to reach the first set of mandated cut-backs, with incentives for reaching these goals early. One carrot could include a small reduction in corporate income taxes should a corporate entity successfully meet these goals for an individual plant, and a bit larger percentage tax break for a larger company's reduction of GHG emissions corporation-wide. These breaks would phase out upon implementation of the mandatory reductions. (9) In providing these incentives, a company would recognize a financial gain in return for helping conserve the atmosphere faster, while also providing momentum to achieve the ultimate goal: optimal GHG emissions.

      Regarding importers, this proposal establishes the Inter-Governmental Climate Commission ("IGCC") to decide whether other countries' GHG emission regulations serve a similar function to the relevant United States' regulations; or, alternatively, an importer from a WTO member country ("Member(s)") could take similar voluntary and verifiable measures. If an importer could not demonstrate compliance under either of those two provisions to the IGCC, the IGCC would then calculate how much of an equivalent import charge ought to exist in lieu of the required actions. By design, this plan would vest authority in an international commission--if properly established in the judgment of the President. But before that occurs, Members would have the opportunity to serve on five seats of a nine-member IGCC through random selection, in which four seats always belong to the United States. (10) The IGCC would decide not only whether Member importers compiled with the purposes of the regulations, but also the appropriate (11) amount of GHG emissions taxable per imported unit, with a twenty-percent maximum charge. The IGCC would additionally provide importers notice of these decisions with an accompanying rationale, if any. In the event of a disputed ruling, the United States Court of International Trade would have jurisdiction on appeal with the Court of Appeals for the Federal Circuit available for further review.

      Crucially, this proposal seeks to minimize carbon leakage to countries that fail to recognize the need for global conservation of the exhaustible natural resource: air. A recent example demonstrates why leakage would likely unravel any sort of unilateral conservation agenda. Even while coal-fired power plants close in countries like Australia, the United...

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