Legal & Regulatory

Experts Debate Carbon Pricing, Leasing Federal Lands

The Donald Trump administration can look to the energy sector to increase federal revenue and offset the national debt in numerous ways, but there are pros and cons to everything, according to a panel presenting at the Cato Institute February 22.

Carbon pricing has long been the preferred economic means of mitigating carbon emissions. A well-designed carbon pricing scheme would decrease the nation’s emissions while also creating an additional federal revenue stream. What to do with that revenue has been debated, but Republicans in support of such a system have pushed for a revenue-neutral design, sending the revenue generated directly back to consumers.

“I do think that a revenue-neutral price on carbon with preemption for regulation across government, governing anything related to greenhouse gas emissions, is a great policy,” Catrina Rorke, senior fellow and energy policy director at the R Street Institute, said during the Cato event. Regardless, she said, such a policy is unlikely to be adopted under the current political climate.

Such a system was recently pitched by a group of GOP statesmen to the White House. According to the pitch by the Climate Leadership Council—whose membership includes former GOP Treasury Secretaries James Baker, Henry Paulson, and George Shultz, as well as former chairmen of the Council of Economic Advisers, Marty Feldstein and Greg Mankiw—such a plan would send market signals encouraging innovation and investment.

Not everybody on the right agrees. Robert Bradley, CEO and founder of the Institute for Energy Research, believes that a carbon tax in any form is an assault to conservative ideals and the Trump administration should, and will, instead look to energy production on federal lands to increase federal revenue. “Not pricing carbon dioxide is an American first policy because the U.S. is the fossil fuel reserve center of the world,” Bradley said.

“Aggressively leasing oil, gas, [and] minerals on public land, I think there are some very robust estimates of what this could mean over the next decade. Maybe as much as $100 or more billion,” Bradley said, later referencing a 2015 report from the Louisiana State University.  “Even privatizing federal lands where you privatize not only the subsoil and the mineral rights but also the surface could be just a huge revenue source to transition out of the huge deficit.”

Bradley doesn’t expect any movement on this front during this term, but if Trump is elected for a second term, this is an option he believes will be on the table.

Adele Morris, senior fellow and policy director at the Brookings Institution, was not convinced that opening up federal lands to aggressive fossil fuel leasing is economically logical, particularly when it comes to coal. “Coal production in the United States has been down, down, down, years in a row, and projections are no better,” she said.  “We’re seeing the reduction of production of coal from existing mines. It’s hard for me to understand why people are going to bid a lot of money on currently unmined areas—invest a lot of money in preparing those mines for production—when they already have underutilized capacity at existing mines.”

During his campaign, Trump pledged to lift a current moratorium on new coal production on federal lands. The moratorium was announced by the Interior Department in January 2016. The department planned to conduct a Programmatic Environmental Impact Statement (PEIS) review of the coal leasing program, looking to ensure that taxpayers are getting a fair return for the use of the public lands. “I do think that on existing producing lands, we could have better royalty arrangements from those producers,” Morris said.

Abby L. Harvey is a POWER reporter.

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