First introduced by Republican Carlos Curbelo of Florida in July 2018 during the 115thCongress, the Modernizing America with Rebuilding to Kick-Start the Economy of the Twenty-first Century with a Historic Infrastructure-Centered Expansion (MARKET CHOICE) Act was reintroduced in the 116thCongress on September 26, 2019 by a bipartisan group of lawmakers led by Representative Brian Fitzpatrick (R, PA-01). The MARKET CHOICE Act aims to curb carbon emissions by imposing a tax on the greenhouse gas (GHG) potential of crude oil, natural gas, coal, and products derived from those fuels, at the point of production or import. Proceeds would primarily be used to fund the National Highway Trust Fund, with additional spending on coastline adaptation, research and development for emissions-reductions technologies, and rebates for low-income communities.
The carbon tax would initially be set at $24 per ton of CO2equivalent GHG emissions in 2019, and increase by 2%, adjusted for inflation, each year after that. Fossil fuels extracted for uses other than combustion are not taxed. The revenue from the carbon tax would be placed in a trust fund and used for a variety of infrastructure and decarbonization uses. Three quarters of the collected revenues would be placed in a “Rebuilding Infrastructure and Solutions for the Environment” (RISE) trust fund, and to be allocated as follows:
- 70 percent to the Federal Highway Trust Fund;
- 2.5 percent to the Airport and Airway Trust Fund;
- 1.5 percent to the Weatherization Assistance for Low-Income Personsprogram that provides low-income households financial and technical assistance to increase the energy efficiency, health, and safety of residential buildings;
- 3 percent to assist displaced workers in the energy sector by providing funding for retraining, early retirement, relocation expenses, and health benefits;
- 10 percent for state grants to provide rebates to low-income households to defray increased energy costs resulting from the tax; and
- 5 percent for coastal adaption infrastructure programs established by the Coastal Zone Management Act of 1972.
The remaining funds will be directed towards the development of carbon storage, direct air capture, and battery technologies and reforestation efforts.
The bill would repeal the federal motor vehicle and aviation fuel excise tax, which currently funds federal highway constriction. Notably, in a political trade-off, the bill would place a moratorium on finalizing and enforcing most regulations that use Clean Air Act authority to curb GHG emissions. (Regulation of GHG emissions from crude oil and natural gas production and transmission would be exempted.) The bill would not, however, affect the EPA’s ability to use the Clean Air Act to regulate other adverse effects of fuel combustion.
The bill also includes an environmental integrity mechanism (EIM) which sets a limit for annual GHG emissions, and adjusts the tax rate if that limit is exceeded. Specifically, the bill sets a yearly emission limit starting at approximately 5 billion metric tons of CO2equivalent per year, and decreasing each year. If the total US emissions are greater than that limit at the end of each year, the bill provides that the carbon price would automatically increase by an additional $2 per metric ton. Furthermore, it grants the EPA the authority to lift the Clean Air Act GHG regulation moratorium in 2024, 2029, or 2033 if the agency determines that cumulative emissions by those years exceed the limit.
In an attempt to level the playing field between US manufacturers and those in countries without a carbon tax scheme, and prevent carbon leakage, the bill also includes a border tax adjustment applied to goods imported into and exported from the US. The bill calls for the Treasury Department to determine and establish the regulations and rates to levy a carbon tax on imported goods, and provide a rebate to exports.
According to an analysis by the Resources for the Future (RFF), a nonprofit environmental research group based in Washington D.C., the MARKET CHOICE Act would bring in $110 billion a year in revenue starting in 2020, growing to $128.3 billion a year by 2032, while achieving economy-wide emissions reductions of 27% below 2005 levels by 2025. An analysis by the Columbia Center on Global Energy Policy (CGEP) in partnership with the Rhodium Group similarly found that the proposal would achieve economy-wide emissions reductions of 27%-32% below 2005 levels by 2030. Of the emissions reductions predicted, two-thirds would come from the power sector. Without the MCA, per another analysis by the Rhodium Group, the US is currently on track to reduce emissions by only 12-19% below 2005 levels by 2025, which would fall short of the commitments the US made under the Paris Accord of 26%-28% GHG emission reductions below 2005 levels by 2025.
The CGEP report predicts only a modest economic impact, estimating that the MCA would reduce US GDP by just 0.1%-0.2% total over the next ten years. While CGEP did find that yearly energy costs would increase by around $275 per household under the MCA, the bill would take care of the impact on low-income households from the above-mentioned funding to states for rebates to low-income households.
While economists are widely in agreement that a carbon fee and dividend is the most cost-effective way to reduce GHG emissions and meet mid-century decarbonization targets, the carbon tax mechanism of the MCA, and the regulatory trade-off it offers to get there, have garnered the bill opposition on both the right and the left. In the 116thCongress, 24 Republican Congress cosponsored a sense of congress that established that “a carbon tax would be detrimental to the US economy.” Environmental organizations, for their part, have criticized the MCA for removing additional regulatory tools to reduce GHG emissions. The National Resource Defense Council (NRDC) stated that it would not support the bill, because, it argues, the carbon price in the bill is too low to achieve 80% GHG reductions by 2050. The NRDC also opposes banning additional carbon pollution standards, arguing that “we must keep all our climate-fighting tools on the table and should not preempt or limit current authorities.”
In addition to the MARKET CHOICE Act, three (barely) bipartisan carbon taxes have recently been introduced in the House: the Energy Innovation and Carbon Dividend Act, the Stemming Warming and Augmenting Pay Act (SWAP Act), and the Raise Wages, Cut Carbon Act. However, those three Acts are supported only by a single Republican, Representative Francis Rooney (R-FL, 19), who has recently announced his retirement from the House. Democrats in the House and the Senate have also introduced another carbon tax bill, the Climate Action Rebate Act. Each proposal differs slightly with respect to the starting tax, year-on-year tax increase, and revenue distribution it envisions. The MCA is unique among these in that it uses the carbon tax revenue for highway funding, rather than distributing it more widely in the form of rebates or payroll tax reductions, in an attempt to take advantage of the bipartisan appeal of infrastructure investment. Among this crowded field of carbon tax bills, and in the face of Republican opposition to carbon pricing in general, this bill is unlikely to gain traction.