July 23, 2018

Legislative Analysis: The MARKET CHOICE Act



The MARKET CHOICE Act (MCA) was introduced by Rep. Carlos Curbelo (R-FL) on July 23, 2018. The legislation would eliminate the federal excise tax on gasoline and diesel fuel (the “gas tax”), in favor of a tax on GHG emissions, i.e., a carbon tax, levied on fossil fuels and certain industrial facilities and products.

The MCA’s goals are 1) to fund infrastructure by taxing GHG pollution; 2) spur significant reductions in GHG emissions; 3) and to offer a market alternative to the expansion of federal GHG regulations.

Read a legislative analysis from the Niskanen Center here.

Executive Summary

The MARKET CHOICE Act (MCA) proposes a tax swap to fund maintenance and new investment for roads, bridges, airports, and other infrastructure. The bill would abolish the federal excise tax on gasoline and diesel fuel while levying a tax on greenhouse gas (GHG) emissions from fossil fuels and certain large industrial facilities and products. The GHG tax would start at $24 per ton of CO2-equivalent emissions and increase at a real rate of 2 percent per year. It would cover about 85 percent of U.S. GHG emissions. Modeling estimates indicate such a swap would reduce taxed GHG emissions by about 30 percent against 2005 baseline levels and raise nearly $1 trillion in the first 10 years.

Seventy percent of revenue from the tax swap goes toward the Highway Trust Fund, with the remainder going toward climate adaptation, energy research and development, and measures to mitigate the impacts of the tax. For consumers, the burden of the GHG tax at the pump will be partially offset by the elimination of the fuel excise tax. Additionally, the MCA amends the Clean Air Act to impose a 12-year rolling moratorium on EPA regulation of GHG emissions from stationary sources as long as emissions are below specific targets for 2020-2030. If the targets are missed, the MCA requires automatic increases in the carbon price to give the market approach another chance before regulatory authority returns.