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Report on Business Washington group backed by major energy firms forecasts U.S. carbon plan to take shape in 2019

Centralia Big Hanaford coal-fired power plant, which is scheduled to start shutting down in the next few years, near Centralia, Wash., Oct. 14, 2018.

EVAN MCGLINN/The New York Times News Service

A Washington-based group backed by major energy companies expects a bipartisan carbon tax and dividend plan to be introduced in the U.S. Senate next year, despite opposition from President Donald Trump to aggressive action on climate change.

The Climate Leadership Council – which includes founding members Exxon Mobil Corp., utility giant Exelon Corp. and General Motors Co., among other corporations – is proposing a national carbon tax in which all revenue would be refunded to U.S. householders in quarterly cheques, an approach similar to the levy the federal Liberal government plans to impose in four provinces that do not have their own carbon pricing systems.

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Council chairman Ted Halstead said he is confident a bill based on the plan will be introduced in the Republican-controlled Senate with bipartisan support, although he acknowledged in an interview in Ottawa on Thursday that its passage is unlikely until after the 2020 presidential election. The ultimate aim, he said, is to have equivalent carbon taxes in all major economies with trade penalties on those countries that lag behind.

“The dividend solution is the answer,” he said. “It makes [a carbon tax] both popular and populist.”

Mr. Halstead met with Prime Minister Justin Trudeau to discuss the political challenges and opportunities involved in proposing a carbon tax with rebates. In the earlier interview with The Globe and Mail, he said Canada is now a global climate leader as a result of the federal carbon tax and rebate program. With a federal election less than a year away, Conservative premiers and opposition leaders across the country are battling the Liberals over the carbon levy, saying it will hurt consumers and the economy without contributing to a global climate solution.

The council argues its carbon tax and dividend approach would benefit the U.S. economy while resulting in dramatic reductions of greenhouse gas (GHG) emissions.

“Corporate America wants a climate solution, and the plan they are converging around would be more ambitious" than the targets adopted by former president Barack Obama at the Paris climate agreement in 2015, Mr. Halstead said.

Prospects for a national carbon plan in the short term in the U.S. are poor. Democrats gained control of the House of Representatives in this week’s midterm elections, but with the loss of a score of moderate Republicans from the bipartisan Climate Solution Caucus. The Republican Party extended its control of the Senate, while voters in Washington State rejected a ballot initiative that would have established a carbon tax, although revenue from the proposed tax was earmarked for greenhouse gas-reducing policies rather than rebates to citizens.

The Climate Leadership Council is a think tank that includes individuals and 17 founding corporate members. Exxon is also providing $1-million and Exelon $2-million for a parallel advocacy organization – Americans for Carbon Dividends – that is lobbying for legislation based on the council’s plan. That group is headed by former senators John Breaux, a Democrat, and Trent Lott, a Republican.

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It is proposing a carbon tax starting at US$43 a tonne in 2021 and rising each year, with all money collected – whether from consumers or business – rebated to households. The plan also calls for government to roll back many existing climate change regulations. It would include a liability shield from climate-change-related lawsuits for major corporations, which are facing an increasing barrage of actions from municipalities and others over growing costs from severe weather. Exxon is facing a number of legal actions, including a lawsuit filed last month by New York’s Attorney-General alleging it misled investors over its response to climate change.

The council’s approach would feature a border levy to ensure that countries with lower carbon taxes do not have a competitive advantage on manufactured goods imported into the country or against U.S. exports in global markets. The Trudeau government has come under fire from Conservative Party critics for effectively imposing the carbon levy on only a small portion of emissions for major corporations that face tough global competition.

Based on a $5-per-tonne increase each year, the council’s proposed carbon tax plus a few remaining regulations would cut GHG emissions by 32 per cent below 2005 levels by 2025, and 60 per cent by 2050, according to modelling done for the council. Mr. Obama’s Paris target was a 28-per-cent reduction by 2025, while under Mr. Trump, the United States is on track to cut GHGs by 14 per cent from the 2005 level by 2025, Mr. Halstead said.

Some U.S. environmental groups have criticized the council’s proposals, saying a tax alone would too little, too late, to get the required emission reductions.

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