Senators propose long-shot carbon tax bill for big polluters

Senator Barbara Boxer (D-CA) waves onstage while addressing the second session of the Democratic National Convention in Charlotte, North Carolina September 5, 2012.

WASHINGTON (Reuters) - Two of the most liberal senators on Thursday proposed a bill to tax carbon emissions, raising up to $1.2 trillion in revenue over 10 years that would largely be returned consumers.

Independent Bernie Sanders of Vermont and Barbara Boxer, a Democrat from California, attempted to seize on the momentum from Tuesday's State of the Union speech when President Barack Obama expressed support for efforts to battle climate change.

"We have the opportunity right now, with the president's commitment in the State of the Union to make major progress," Sanders said at a press conference Thursday.

The bill would set a goal to slash heat-trapping greenhouse gas emissions by 80 percent below 2005 levels by 2020 - in line with the Obama administration's long-term emission reduction target.

It would set a $20 tax for each ton of carbon dioxide equivalent a polluter would emit beyond a set limit, which would rise 5.6 percent annually over a 10-year period.

Boxer, chairwoman of the Senate environment and public works panel, had drafted several bills in the past to make polluters pay for their carbon emissions. Earlier versions focused on setting up carbon cap-and-trade systems rather than imposing taxes.

Boxer said she planned to bring the bill to her committee for a vote in the spring with the aim of bringing it to the Senate floor for debate in the summer. It is expected to face stiff competition, especially from House Republicans, who as a rule are wary of measures that could increase energy prices.

The tax would target upstream emissions from 2,869 of the country's largest emitters, such as coal mines, oil refineries and natural gas processing points, or 85 percent of the economy. But it does not target power plants, which would continue to be regulated by the Environmental Protection Agency.

The tax would also apply to foreign companies who export their fuels to the United States if their home countries do not have equivalent carbon measures.

Unlike other carbon tax proposals, the Sanders-Boxer measure would return 60 percent of collected revenues to consumers instead of filling government coffers. In doing so it would take a cue from a program in Alaska that provides a monthly dividend payment to residents from oil revenues.

Other money generated by the tax would be used to invest in energy efficiency and cleaner technologies, such as weatherizing U.S. homes, tripling the current energy research at the U.S. Department of Energy and seeding a fund that would encourage public-private partnerships to develop renewable energy.

(Reporting By Valerie Volcovici; Editing by Kenneth Barry)