Bill Text

Since all states have unique energy consumption patterns, demographics, and political climates, the details of this model legislation may need to be adopted to suit your state’s needs. However, any carbon tax shifting proposal should:

• Ensure that those who pollute, either directly or indirectly, pay the burden of the tax;
• Encourage investment in energy-efficient technology and renewable energy sources;
• Encourage conservation;
• Recycle revenues generated from the tax to reduce or eliminate existing inefficient tax burdens such as income and payroll taxes; and
• Ensure that the penalties for non-compliance are substantial enough so as to serve as a deterrent.

To determine the levels of taxation that might be appropriate for your state, review the carbon taxing model created by the Center for a Sustainable Economy.

The Economic Efficiency and Pollution Reduction Act

A BILL TO REDUCE HARMFUL EMISSIONS AND IMPROVE ECONOMIC EFFICIENCY BY REPLACING REVENUE GENERATED BY EXISTING PAYROLL AND INCOME TAXES WITH AN ASSESSMENT ON ENVIRONMENTAL EMISSIONS

Summary: This bill would levy a tax of $50/ton on the carbon content of all fossil fuels or alternate/appropriate amount.

Be it enacted by the Legislature of the state of <insert state>:

Section 1. Short Title.

This Act shall be known and may be cited as the “Pollution Reduction Act.”

Section 2. Intent.

This bill requires that an assessment of the equivalent of $X per ton of carbon content be levied on the use of applicable carbon-based fuels for personal or commercial consumption and for combustion in the generating facility of an electric utility. The bill phases in the assessment equally over a five-year period and gives the <insert public service agency/commission> authority to set the exact assessment rate for each applicable carbon-based fuel in accordance with this Act. The bill utilizes the revenue generated from contributions paid by individuals to provide an income tax credit for individual taxpayers. The bill utilizes the revenue generated from contributions paid by businesses to provide a payroll tax credit for individual businesses. Excess and unclaimed tax credits will be deposited in the Renewable Energy and Energy Efficiency Investment Fund.

Section 3. Definitions.

The words and terms defined in this Act have the meanings ascribed to them in this and other sections.

(A) “Commission” refers to the Public Service Commission or other appropriate energy governing body within the state.

(B) “Coal” means bituminous coal, sub bituminous coal, lignite, and coke.

(C) “Liquid fuels” means gasoline, liquefied petroleum gas, aviation gasoline, fuel oil and kerosene, diesel fuel, and methanol from non-plant sources.

(D) “Natural gas” means a naturally occurring mixture of hydrocarbons and non-hydrocarbon gases found in porous geologic formations beneath the earth’s surface, the principle constituent of which is methane.

(E) “Applicable carbon-based fuels” means coal, natural gas, liquid fuels, wood, and wood waste.

(F) “Individual” means any person who uses, or purchases for the purpose of use, applicable carbon-based fuels.

(G) “Businesses” means any individual, partnership, corporation, limited liability company, association, governmental unit or agency, or other public or private organization that uses, or purchases for the purpose of use, applicable carbon-based fuels.

Section 4. Assessment.

(A) The use of applicable carbon-based fuels and the purchase of out-of-state electricity to provide for in-state electricity consumption are subject to an environmental emissions assessment under this section.

(1) Ethanol, methanol from plant materials, agricultural crops, crop residues, and biomass are not subject to the assessment under this section.

(B) The environmental emissions assessment applies to the carbon content of the fuel prior to burning. Calculation of the amount of carbon must be based on the estimated carbon content of the fuel according to fuel type or subtype. The <commission/agency> shall set the estimates of carbon content to be used in the calculation based on the best available science. The final assessment rate at the end of the five-year period will be $X per ton of carbon content of the fuel.

(1) Beginning 90 days after enactment of this Act, an interim assessment will be made pending the certification of final assessment rates from the <commission/agency>. The interim rates will be:

(a) Gasoline: X cents/gallon

(b) Fuel oil (including diesel fuel and kerosene): X cents/gallon

(c) Natural gas: X cents/thousand cubic feet

(d) Coal having a heating value over 11,500 BTU per pound: $X/ton

(e) Coal having a heating value under 11,500 BTU per pound: $X/ton (less than above)

(f) Coal-fired electricity generated out of state for use in-state: X cents per kwh

(g) Gas-fired electricity generated out of state for use in-state: X cents per kwh (less than above)

(2) For electricity generated out of state for use in-state, the final assessment rate shall be based on the total mix of fuels used in the generating facilities of the electricity producer and shall be levied on the in-state utility which purchases said electricity.

(3) If a utility shares a generating facility, the utility’s share of the fuel used must be calculated in proportion to the utility’s share of ownership or use of the facility.

(4) An assessment of X cents/kwh shall be levied on all nuclear generated electricity produced in-state or sold from out-of-state producers to in-state consumers.

(C) The <commission/agency> shall set the assessment rates for primary carbon-based fuels as follows:

(1) For the first full calendar year, the assessment rates are $1/5X per ton of carbon content of the fuel;

(2) For the second full calendar year, the assessment rates are $2/5X per ton of carbon content of the fuel;

(3) For the third full calendar year, the assessment rates are $3/5X per ton of carbon content of the fuel;

(4) For the fourth full calendar year, the assessment rates are $4/5X per ton of carbon content of the fuel;

(5) For the fifth full calendar year, the assessment rates are $X per ton of carbon content of the fuel; and

(6) For all subsequent years, the assessment rates for the fifth full calendar year shall be indexed to inflation (energy price index?).

(D) The assessments collected under this section must be credited to the general fund.

Section 5. Assessment Procedure.

(A) A person or business required to pay an assessment under this Act must make a declaration of estimated assessment due for the calendar year if it can reasonably be expected to be in excess of $1,000. The amount of estimated assessment with respect to which a declaration is required must be paid in four equal installments on or before the 15th day of March, June, September and December.

(B) The <commission/agency> is hereby granted the authority to make all rules, regulations, and procedures necessary for the full and speedy implementation and enforcement of this Act.

(1) Penalties for non-compliance with any provision of this Act, or related regulations, should be sufficient to deter non-compliance.

Section 6. Use of Revenues.

(A) Revenue from the environmental emissions assessments must be used as provided by this section. By August 1 of each year the <commission/agency> shall estimate the amount of revenues to be collected in the next calendar year from the assessment. In addition, the <commission/agency> shall estimate the respective portions of the tax that are remitted or directly paid:

(1) By individuals and households; and

(2) By businesses.

(B) The revenues must be divided in proportion to the shares determined under subsection (A) of this section.

(1) Revenues remitted or directly paid by individuals, less administrative costs, must be used for a refundable income tax credit as provided in Section 7 of this Act.

(2) Revenues remitted or directly paid by businesses, less administrative costs, must be used for a refundable payroll tax rebate as provided in Section 8 of this Act.

Section 7. Income Tax Credit.

(A) An individual is allowed a credit against the tax imposed by this Act equal to the allowable dollar amount, determined under subsection (B), for each of the following:

(1) The taxpayer;

(2) The taxpayer’s spouse for a credit claimed on a joint return; and

(3) Each qualified dependent of the taxpayer.

(B)

(1) By August 31st of each year, the <commission/agency> shall estimate the total number of filers, spouses and qualified dependents in the next tax year.

(2) The allowable amount for taxable years beginning in the next calendar year equals the amount of revenues estimated by the <commission/agency> under Section 6 (A) that are remitted or paid directly by individuals or households, divided by the total number of filers, spouses and qualified dependents estimated under paragraph (1) of this subsection.

(C) If the claimant is eligible to receive a credit that is larger than the claimant’s tax liability, or if a claimant fails to claim the credit, the excess and unclaimed revenues shall be deposited in the Renewable Energy and Energy Efficiency Investment Fund.

(D) No credit may be paid to an individual claimed as a dependent on the federal tax return of another individual.

(E) For the purposes of this section, the following terms have the meanings given:

(1) “Dependent” means a dependent as defined in section 152 of the Internal Revenue Code.

(2) “Qualified dependent” means a dependent who has attained the age of 16 by the close of the taxable year.

Section 8. Payroll Tax Credit.

(A) Employers who make payments of Federal Insurance Contribution Act taxes under section 3111 of the Internal Revenue Code shall be eligible for a credit under this section.

(B) The credit is determined for each employer as follows:

[Need equitable credit formula that rewards investment in labor intensive industry, does not hurt other industry too badly, but does give them incentive to make investments in renewables or energy efficiency improvements.]

(C) If the employer is eligible to receive a credit that is larger than the employer’s tax liability under section 3111 of the Internal Revenue Code, or if an employer fails to claim the credit, the excess and unclaimed revenues shall be deposited in a Renewable Energy and Energy Efficiency Investment Fund.

Section 9. Renewable Energy and Energy Efficiency Investment Fund.

(A) The Renewable Energy and Energy Efficiency Investment Fund is hereby created under the administration of the <commission/agency>.

(B) For the purposes of this section, the following terms have the meanings given:

(1) “Fund” means the Renewable Energy and Energy Efficiency Investment Fund established under subsection (A) of this section.

(C) All excess and unclaimed credits resulting from the environmental emissions assessment on both individuals and businesses shall be deposited in the Fund as soon as they are available.

(D) The <commission/agency> shall utilize the monies in the fund to:

(1) Provide grants up to $X dollars for energy intensive businesses to invest in energy-efficient technologies or business space improvements that are in accordance with the spirit of this act, as determined by the <commission/agency>;

(2) Provide grants of up to $X dollars (less than above) for individuals or households to invest in energy-efficient technologies or home improvements that are in accordance with the spirit of this act, as determined by the <commission/agency>;

(3) Provide grants of up to $X dollars for businesses or individuals to make capital investments in renewable energy technologies that are in accordance with the spirit of this act, as determined by the <commission/agency>;

(4) Educate businesses and individuals about the potential cost savings associated with investments in energy-efficient technologies and home or office space improvements; and

(5) Devise a long-term energy strategy that ensures that renewable energy sources, energy-efficient technology, and pollution reduction figure prominently in <insert state> future energy planning.

Section 10. Regulations.

The Commission shall adopt such regulations as are necessary to carry out the purposes of this Act.

Section 11. Agreements.

In carrying out the provisions of this Act and, in order to establish protection efforts across jurisdictions, the commission may enter into agreements that are consistent with this Act with federal agencies, other state agencies, political subdivisions of the state, or other states.

Section 12. Savings Clause.

If any provision of this Act is found to be in invalid by a court of competent jurisdiction, such invalidity shall not affect the validity of the remaining provisions of this Act.

Section 13. Effective Date.

Notwithstanding other provisions of <insert state> law, the provisions in this Act shall take effect 90 days after enactment.