‘Severe blow’ for carbon taxes?

Australia’s recent vote to repeal its tax on carbon dioxide emissions is a setback to establishing a similar charge in the U.S., both sides in the debate agree.

Australia started taxing carbon in 2012, one of about 40 jurisdictions to do so, before reversing course last week and becoming the first country to repeal the penalty.

{mosads}In the United States, environmentalists and their allies in Congress have pushed for a tax on carbon for years, most recently with a bill backed by Rep. Henry Waxman (D-Calif.), Sen. Sheldon Whitehouse (D-R.I.) and others.

The idea has faced stiff opposition from Republicans and business interests who decry its costs and question if carbon dioxide from human activity causes climate change.

Both sides, though, say that Australia’s reversal will make it harder to pass such a measure here.

“I think it’s further evidence of a lack of confidence, even rejection of the alarmist threats that are being made about the environment,” said Sen. Jeff Sessions (R-Ala.), an opponent of carbon taxes. “It’s a very severe blow.”

Sen. David Vitter (R-La.) said the vote shows not only an opposition to carbon taxes, but a general distaste for other government policies that seek to curb carbon emissions. He said the decision should force carbon-tax supporters to be more cautious.

“As Congress and the administration begin to consider a variety of efforts that amount to little more than a thinly-veiled carbon tax, we must first recognize the potential consequences of a carbon tax scheme … before resorting to such drastic measures,” Vitter said in a statement.

Carbon tax proponents agree that Australia’s vote was a setback for their movement. But they’re still optimistic that they can learn lessons from Australia that would make the tax more successful in the U.S.

“I thought it was a good law, and it’s disappointing that they decided that rather than being a leader, they’d be a laggard, rather than deal with climate change,” Waxman said.

“This can be made to work, and ultimately we’ll be there, despite what I would describe mostly as a political hiccup,” said Rep. Earl Blumenauer (D-Ore.), another sponsor of Waxman’s bill.

Charles Komanoff, director of the Carbon Tax Center, said a combination of revenue questions and politics doomed Australia’s carbon tax, and both problems can serve as lessons.

“How you treat the revenue is really crucial, so that the tax is not a deadweight loss economically and politically,” he said.

Komanoff said unlike Australia, any carbon tax ought to be revenue neutral — offset either by lowering other taxes or by paying the dividends back to consumers.

Julia Gillard, who was prime minister when the tax was enacted, also only endorsed it reluctantly, because she was in a coalition government with the Green Party.

“She didn’t campaign for a carbon tax, she was kind of arm-twisted into it when she had to form a coalition with the Greens,” Komanoff said.

Carbon-tax advocates say that shows the importance of building political goodwill among leaders.

They also vow to continue trying to establish the tax in the U.S.

“There’s a right way and a wrong way to do it,” said Steve Balk, spokesman for the Citizens Climate Lobby.

“If you get the policy right and you generate the political will at the grassroots level among constituents … it can happen,” he said.