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UPDATE: US Senate confirms Janet Yellen as Treasury Secretary

26 January 2021 Lisa Street

The US Senate confirmed former Federal Reserve Chair Janet Yellen as the country's first female Secretary of the Treasury less than a week after she voiced her support for carbon pricing.

The mostly bipartisan 84-15 vote for Yellen came less than a week after she said carbon pricing could serve as a solution for reducing greenhouse gas (GHG) emissions during a Senate Finance Committee confirmation hearing.

The Finance Committee approved President Joe Biden's nomination of Yellen to be the 78th US Treasury Secretary in a 26-0 vote on 21 January.

"We cannot solve the climate crisis without effective carbon pricing," Yellen said in response to a question about her views on an economy-wide price on carbon as an efficient mechanism to decrease emissions.

"The President supports an enforcement mechanism that requires polluters to bear the full cost of the carbon pollution they are emitting. I am deeply engaged on this issue and, if confirmed, will continually discuss my views and thinking with the President and our entire team," she added.

Yellen also affirmed support for sharing revenue raised through carbon pricing with American families to address the impact of moving toward a clean energy economy on lower-income households.

Yellen would be the first Treasury Secretary who was also Chair of the Federal Reserve, Vice Chair of the Federal Reserve, and Chair of the President's Council of Economic Advisors.

Carbon tax bills

Three carbon tax bills with targeted revenue distributions were introduced in the US Congress in July 2019 but did not advance beyond the referred committees.

The Climate Action Rebate Act of 2019 (CAR Act), introduced by Democratic Senators Chris Coons of Delaware and Dianne Feinstein of California, proposed a $15/mt carbon tax in the upstream sector, which would double annually, to reduce emissions to 55% of 2017 levels by 2030 and by 100% by 2050. That carbon tax increase would halt once emissions were reduced to 10% of 2017 levels. The bill provided a tax refund for carbon capture and sequestration operations and included a distribution of 70% of the carbon tax revenue to low- and middle-income earners.

The Stemming Warming and Augmenting Pay Act, introduced in the House of Representatives by former Representative Francis Rooney (Republican-Florida), proposed a $30/mt carbon tax on the upstream sector that would increase 5% a year to reduce emissions by 42% by 2030. The bill would split tax revenues three ways, with 70% used to reduce the payroll tax, 10% distributed to Social Security recipients and 20% to climate programs and assisting low-income earners.

The Raise Wages, Cut Carbon Act of 2019, introduced in the House by former Representative Daniel Lipinski (Democrat-Illinois), proposed a $40/mt carbon tax in the upstream sector, which would increase 2.5% each year until emissions were reduced to 20% of 2005 levels.

Meanwhile, two regional emission trading systems under cap-and-trade programs targeting GHG reductions are in place for California and for East Coast states in the Regional Greenhouse Gas Initiative (RGGI). In these markets, carbon allowances are sold by regulators in a primary auction and can be traded in a secondary market. The carbon allowances are later surrendered to the individual states' compliance entities governing each program to meet cap-and-trade regulations.

Prices for California carbon allowances, eligible for compliance with the state's cap-and-trade program, were assessed by OPIS on 21 January at $17.77/mt for vintage 2021 delivering in January. Separately, OPIS assessed carbon prices for RGGI allowances 21 January at $8.485/mt for 2020-2021 vintages delivering in January.

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