A bipartisan coalition of former Federal Reserve chairs, top economic advisers to recent presidents of both parties, and Nobel Prize-winning economists have endorsed a federal carbon tax, one that would distribute all of the revenue to American households, to combat climate change.
“A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary,” the economists said in a joint statement shared with the Washington Examiner. “By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.”
The more than 40 signatories to the statement include the top economic advisers to Presidents Gerald Ford, Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, and Barack Obama.
Former Federal Reserve chairmen Alan Greenspan and Ben Bernanke, first appointed by Republicans, and Paul Volcker and Janet Yellen, first appointed by Democrats, also signed the statement.
“This statement represents a major tipping point in U.S. climate policy,” Yellen said. “It shows broad agreement among economists and experienced policymakers that carbon dividends is the most cost-effective, equitable and politically-viable climate solution.”
The statement was organized by the Climate Leadership Council, a group supporting a federal carbon tax led by two former Republican secretaries of state, James Baker III and George Shultz.
The so-called carbon-tax-and-dividend model preferred by the group, and the signatories to the new statement, would distribute all of the revenue from the tax as a rebate to American households, protecting them from higher energy costs.
American families would receive equal lump-sum rebates in an amount that, for most families, would be larger than the increase in energy prices.
The model has the backing of U.S. energy companies, including ConocoPhillips and Exxon. Each recently donated money to Americans for Carbon Dividends, an advocacy organization backing the concept.
A carbon-tax-and-dividend is more politically palatable to some Republicans, because it is revenue-neutral. It does not spend the proceeds of the tax on other things, such as government-funded clean energy investments, or offsets of other taxes.
“There has long been consensus among economists that a carbon tax is the most cost-effective climate solution,” said Larry Summers, a former Treasury secretary under President Bill Clinton and co-signatory to the new statement. “What’s new is economic consensus on what to do with the money, and the answer is to give it straight back in equal amounts to every American.”
The carbon tax endorsed by the group of economists and former government officials would increase every year until emissions reductions goals are met.
It would scrap government regulations on carbon emissions, which would be duplicative with the tax.
It also creates a border carbon adjustment, forcing exporting countries to pay a fee on carbon-emitting products coming into the U.S., to avoid harming the competitiveness of American industries.
Supportive Republicans view the approach as a market-based solution, one that would encourage energy producers to switch to cleaner nonfossil fuel alternatives if doing so costs less than paying the tax.
“Putting a price on carbon and rebating the revenues is the single best approach to dealing with global climate change,” said Gregory Mankiw, former chairman of the Council of Economic Advisers in the George W. Bush administration and co-signatory. “It takes the problem seriously without having to resort to heavy-handed regulation.”
A coalition of House members recently introduced the first bipartisan carbon tax legislation in nearly a decade, with a plan that is broadly similar to the Climate Leadership Council proposal.
Sen. Chris Coons, D-Del., and former Sen. Jeff Flake unveiled a nearly identical bill last month.
But despite modest momentum, Congress is unlikely to pass carbon pricing legislation anytime soon because of strong resistance from conservatives who view any form of carbon pricing as a tax increase, as well as an emerging preference among progressives for government mandates.
