It is shaping up as a [image-nocss] critical but controversial piece in the efforts by Graham (pictured), Sen. Joe Lieberman (I-Conn.) and Sen. John Kerry (D-Mass.) to write a climate bill that moderate Republicans could support. Along those lines, the bill will also include an expansion of offshore oil drilling and major new incentives for nuclear power plant construction.
Graham's proposal has drawn initially favorable reaction from some integrated oil and gas companies and may attract the support of the U.S. Chamber of Commerce, the senator's spokesperson Kevin Bishop told Fox. Companies that long-opposed higher gasoline taxes have warmed to one this time as an alternative to what they fear could be higher carbon taxes tied to their refinery operations, according to the report.
Officially, the stated White House policy is the administration would "review" Graham's proposal, spokesperson Ben LaBolt told the news outlet. But sources told Fox that the White House will oppose Graham's gasoline tax gambit because senior advisers believe it has three flaws: it will shield the oil and gas industry from paying to lower green house gas emissions; it will force higher prices on consumers still struggling during the recession; and it will not change driving behavior enough to significantly reduce emissions.
Graham is trying to build Republican support for a climate change and alternative energy bill. To do that, said the report, he is looking for what Bishop called "sector specific" revenue sources as an alternative to across-the-board taxes on carbon-based pollution under a so-called "cap-and-trade" system.
"This is still a work in progress," Bishop said of Graham's gasoline tax. "We are in negotiations and nothing has been agreed to."
The concept, Bishop said, is to use a higher gasoline tax to help vehicle emissions, which he said account for one-third of all greenhouse gases. The White House, administration sources told Fox, already believes it has accomplished that with new, stricter fuel efficiency and tailpipe emissions standards.
While most on Capitol Hill regard Graham's proposal a gasoline tax, that not how it's being legislatively marketed. Graham instead calls his idea a "linked fee." It links the price of the higher gasoline tax to the average cost of emission permits the federal government would give to electric utilities and power plants. The emission permits would allow companies to buy the right to pollute or trade the credits they earn for reducing pollution to other plants or utilities that release more greenhouse gases.
Under Graham's plan, the gasoline tax would rise alongside the price of the permits purchased by factories and utilities. Similarly, the gasoline tax would fall as the price of those permits decline. It is a complicated formula that Bishop concedes has yet to be fully drafted and yet to win any significant Republican support.
A higher gasoline tax would direct pollution-reduction costs to consumers, not industry, Fox said. Administration sources say that' i the principle reason the White House opposes Graham's idea.
And historically, gasoline taxes have almost always been used to finance the federal Highway Trust Fund (with two exceptions: President George H.W. Bush devoted half of a 5-cent increase in taxes to deficit reduction in 1990 and President Bill Clinton applied a 4.3-cent increase in gasoline taxes to deficit reduction. The Clinton tax was transferred to the Highway Trust Fund in 1997).
Also, said the report, the trust fund finances road, highway and other transportation construction and repairs. But Graham's so-called "linked fee" would finance federally backed projects to subsidize alternative energy sources, reduce green house gas emissions and improve energy conservation. To do that, lawmakers would have to agree to raise gasoline taxes without any benefit to the Highway Trust Fund.
Bishop called this an issue of significant concern to senators and conceded for the linked-fee to work within the trust fund the fund itself would have to be defined and its mission significantly changed. "We are looking at a fundamentally different approach to the [House] bill," Bishop said. "But it's not easy."
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