GOP support needed for carbon tax to fly: Treasury aide

WASHINGTON Tue Nov 13, 2012 7:05pm EST

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WASHINGTON (Reuters) - The ball is now in the court of Republicans if the Obama administration is to consider including a carbon tax as part of fiscal reform efforts, a U.S. Treasury official said on Tuesday.

Gilbert Metcalf, deputy assistant secretary for environment and energy, said the White House has no specific plans in the works to introduce a charge on carbon dioxide emissions from the burning fossil fuels.

The idea of charging industries a fee for each ton of carbon dioxide emitted as a way to lower the deficit or cut tax rates has attracted renewed attention since President Barack Obama's re-election.

Metcalf said the White House would be open to the idea, which could also curb emissions of greenhouse gases blamed for climate change, should there be a bipartisan solution.

"We will need to address the fiscal concerns. We will need a bipartisan approach on all issues," Metcalf said in a speech at a carbon tax event co-hosted by the American Enterprise Institute, a conservative think tank.

"If this is going to be an issue that is part of the discussions there is going to have to be some interest shown by Republicans."

In his second term, Obama faces the challenges of lowering the deficit, fostering growth in oil and gas production and making good on his promise to act on climate change.

A carbon tax could raise significant revenue for the debt-ridden federal government and please those who blame climate change for weather events like Superstorm Sandy. Many Republicans, however, reject anything resembling a new tax on industries using or producing fossil fuels.

Also co-hosting Tuesday's event, devoted to the economics of a carbon tax, was the Brookings Institution and the International Monetary Fund. Experts at both ends of the political spectrum weighed various proposals.

A number of academics and policymakers have recently advocated a revenue-neutral carbon "tax swap".

Supporters, including former Republican Congressman Bob Inglis, have touted it as a way to reduce carbon emissions while raising much-needed revenue.

Metcalf said if Republicans would view a carbon tax as a viable piece of the fiscal reform discussion, the administration would support it as "part of the mix".

"We have consistently been a supporter of market-based approaches (to greenhouse gas emissions)," he said, referring to the administration's support for cap and trade - a system that requires emitters to buy and trade permits for each ton of carbon they pump out.

A bill that would have established a mandatory cap-and-trade system for the United States passed in the House in 2009 but died after facing a divided Senate the following year.

NEW OPPORTUNITY?

After Obama's latest win and Democratic pickups in Congress, some analysts expect less of the vocal opposition from Republicans on hot-button issues seen over the past two years.

William Gale, chair of the Economic Studies Program at Brookings, told reporters the tone in Congress is different, and may signal a chance for progress.

"It feels like they (Republicans) are more willing to compromise now. I believe the real stuff will happen behind closed doors. Public statements are mostly posturing," he said.

Brookings on Tuesday released a proposal saying that applying a $20 fee for each ton of carbon dioxide emitted could raise an average of $150 billion per year over a decade to be used to cut taxes or pay down the deficit.

At the same time, the conservative Institute for Energy Research issued its own report, opposing a revenue-neutral carbon tax swap concept as not technically or practically feasible.

"The promises of 'revenue neutrality' are quite hollow," the report said, adding that "the regressive nature of a carbon tax will make it very difficult politically to dedicate its revenues to income or other tax reductions."

(Reporting By Valerie Volcovici; editing by Ros Krasny and Andrew Hay)

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