Variable Tax on Gasoline Being Considered

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Three senators plan to release the first draft of their revamped climate bill before lawmakers leave for the congressional recess scheduled for the end of the month. The new draft could include a variable tax on gasoline, to be paid by consumers. The three co-authors of the Senate climate bill hope the proposal will bring a new set of players to the negotiating table. The move would exempt big oil companies from a broader cap on greenhouse gases as a way of winning critical support from industry players and key lawmakers.

Senators Lindsey Graham, John Kerry and Joe Lieberman are floating the idea of levying a carbon tax on each gallon of gasoline, which would be passed along to consumers at the pump. The fee would be linked to the market price of carbon emissions bought and traded by utilities and other industries. Graham says - a linked fee to me makes sense.

Supporters believe consumers will opt to lower their fuel consumption if gas prices increase. Oil companies think the bill is fairer than the cap-and-trade proposal because it puts greater impetus to lower emissions on consumers than on producers, which, they argue, are just responding to market forces. Revenues from the tax would be used to fund programs promoting cleaner transportation options like public transit, bike and pedestrian projects and carpooling.