WATCHING WASHINGTON TAXING CARBONS

Key White House and congressional officials have been attempting to negotiate a grand compromise to reduce the federal budget deficit and thus avoid draconian Gramm-Rudman cuts across the board in federal spending.

But the trouble is it's an election year, and neither Democrats nor Republicans appear to be giving any ground.

If they do cut a deal, it apparently will contain higher energy taxes. And there's a good chance it might give the oil industry tax incentives for U.S. exploration.

Democrats have proposed to raise $49 billion during 5 years from higher energy taxes, mostly on gasoline. Republicans would raise $7 billion. The wide range between those goals could make a compromise difficult.

A FOSSIL FUELS TAX?

Whether or not those taxes materialize, another tax issue is shaping up for future congresses: whether the U.S. should tax fossil fuels as a response to global warming.

The Congressional Budget Office recently issued a study that concludes carbon taxes would be effective in reducing carbon dioxide emissions.

CBO said, "Rapidly imposing large charges would be hazardous for the economy, but the costs could be held to a loss of 1-2%/year of gross national product during the first decade by phasing in the charges and taking offsetting actions to mitigate contractionary effects.

"Over the longer term, carbon charges of $100/ton could hold the level of GNP at least 1% lower than without the charges. To prevent growth in carbon dioxide emissions after 2000 would require even higher charges."

CBO stressed that taxes on oil, gas, and coal should be international because unilateral action by the U.S. would only delay the doubling of global carbon dioxide concentrations by a few years.

But it said multilateral adoption of charges rising to $300/ton by 2100 might delay the doubling of concentrations into the 22nd century.

CBO admitted the benefits and costs of carbon taxes are uncertain now but said, "if governments wait until all uncertainties are eliminated, they may sacrifice an important opportunity to deal with the problem."

Sen. Tim Wirth (D-Colo.) opened the door to the carbon dioxide question in a bill the Senate has passed. The House probably will not it. Its thrust is to promote energy efficiency and R&D on clean energy technologies.

It also would require future national energy plans to include a strategy to achieve specific targets and timetables for carbon dioxide emission reductions.

The Bush administration opposes that, warning, "Any legislated targets or timetables would be ill advised, given the large uncertainties regarding the scale, timing, and impacts of climate change, and the serious economic consequences of such actions."

WHAT ENVIRONMENTALISTS WANT

Environmental groups have made it clear they will press for legislation that reduces U.S. carbon dioxide emissions 20% by 2000.

The National Resources Defense Council said, "Failure to begin now to move toward substantial reductions in carbon dioxide emissions will not only contribute to increasing the environmental threat faced by the world but will also increase the economic threat to the U.S. when environmentally needed international emissions limits are eventually established."