Professor Shanske Comments on State Carbon Taxes for Tax Notes
Professor Darien Shanske commented for Tax Notes on the potential for states to pursue their own greenhouse gas reduction policies in the wake of the Trump administration’s withdrawal from the Paris climate agreement. Twelve states and Puerto Rico have joined the U.S. Climate Alliance and are exploring various methods of reducing emissions, including carbon tax policies that some fear would place them at a competitive disadvantage with other states.
Professor Shanske said that states could partially shield their industries through a border adjustment that would apply to goods from states with lesser carbon prices, but such actions could violate the dormant commerce clause. However, a surcharge based on the carbon dioxide produced to manufacture a product that was proportionate to the cost of the tax or other pricing mechanism imposed on instate emitters wouldn’t represent an unconstitutional geographic discrimination and would likely be constitutional, he said. Additionally, “a multistate emissions compact could pass muster” depending on how it’s formed, he said.
Darien Shanske is a Professor of Law at UC Davis. His academic interests include taxation, particularly state and local taxation, local government law, public finance, and political theory, particularly jurisprudence.