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A statement signed by 45 leading economists including former Federal Reserve Chairmen Ben Bernanke, Alan Greenspan, Janet Yellen, and Paul Volcker recommends a carbon tax as the best solution to climate change.
The recommendations
- “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 carbon tax should increase each year until emissions goals are met.
- A carbon tax should replace regulations. A gradually increasing tax will give companies the confidence to invest in low carbon alternatives.
- To protect U.S. competitiveness there should be a border adjustment.
- All revenue should be returned to citizens through a dividend to help offset the higher price of energy.
Similar carbon tax plans
The letter refers to the Climate Leadership Council for more information. The Climate Leadership Councils founding statement has the same points, but the statement to the Wall Street Journal has one additional point explaining emissions are a market failure.
There’s a similar bill in Congress called The Energy Innovation and Carbon Dividend Act (S. 3791 / H.R. 7173). The bill is endorsed by the Citizens’ Climate Lobby.
Other economists have endorsed similar carbon pricing plans. William Nordhaus received the Nobel Prize “for integrating climate change into long-run macroeconomic analysis” in 2018. Read The Climate Casino: Risk, Uncertainty, and Economics for a Warming World for detailed reasons for a carbon tax.
Public Opinion
I read through the comments below the economists’ statements and let’s just say they weren’t all in favor. That’s discouraging, but the thing is, it’s also a relatively new idea for most people. New ideas are historically met with resistance. A woman’s right to vote, gay marriage, and even recycling.
There’s a general marketing rule that says we need to see something seven times before we buy it. That just might be the case with a carbon tax. It might not be met with open arms by the general public today, but the more we all discuss it, the more people just might get on board.
If you’re interested in reading more about carbon pricing check out How Carbon Pricing Could Simplify Everything