Captured: Regulating to 1.5C through Tax, Section 45Q and Escaping from Regressive Pitfalls

Abstract

In rejoining the Paris Agreement, the United States should be working to limit global temperature increases as a result of climate change caused by atmospheric greenhouse gas emissions to 1.5 degrees Celsius above pre-industrial temperatures. We are not currently on track to achieve this goal, requiring further consideration of the ways we regulate greenhouse gas emitting activities. Among other regulatory tools, the United States regulates greenhouse gas emitting activities through tax. The utility of regulating through tax in the context of climate change is two-fold. First, as others have noted, tax is particularly well-suited to make GHG emitting activities comparatively more expensive in a way that can force taxpayers to bear externalized social costs of GHG emitting activities resulting in climate change. Second, tax is able to address climate change as a problem that will disproportionately impact low-income and marginalized groups. The tax code does not currently adequately fulfill either of these regulatory purposes. In part, this may be because of the view shared by many that there is a conflict between regulating to limit GHG emissions through a carbon tax and regulating to advance progressive policy. This article uses the non-refundable credit for carbon capture, utilization and sequestration in section 45Q of the Internal Revenue Code and an implicit regressive carbon tax on the public created by failing to curb climate change to advocate for an end to arguments pitting a carbon tax or improved Pigouvian subsidies (such as a revised section 45Q as discussed herein) against progressive goals. It’s time to move past a perpetuation of current policy—which is a poor tool for curbing GHG emissions and which is entrenching regressive results of climate change--and to try implementing policy that is intentionally designed to both actualize green goals and progressive results.