Nearly every Republican and Democratic chair of the Council of Economic Advisers since the 1970s signed the letter, including Alan Greenspan, Ben Bernanke and Janet L. Yellen, who are also former chairs of the Federal Reserve. Numerous Nobel laureates in economics also added their names.
“Among economists, this is not controversial,” said Greg Mankiw, who chaired the Council of Economic Advisers under George W. Bush and signed the letter. “The politics is complicated, the international relations is complicated, but the economics is really simple."
The tax would add to the price of any good or service that uses carbon, especially fossil fuels. It means energy bills, gas and flying would cost more, at least at first. But the economists call for the government to return all the revenue raised from the tax directly to U.S. citizens, with a goal of effectively paying people to help address climate change.
“There is a substantial rebate. It’s estimated that if we were to start with something like a $40 a ton carbon tax that would amount to $2,000 per family, so it is a very substantial rebate,” said Yellen.
By giving every American a “rebate,” it encourages people to cut back on their own carbon usage because someone can make money if, for example, they receive a $2,000 rebate check and only spend $1,800 on carbon-intensive activities.
“The majority of American families, including the most vulnerable, will benefit financially by receiving more in ‘carbon dividends’ than they pay in increased energy prices,” the letter states.
The economists say it’s inevitable that the United States will have to do something about climate change soon, and they say Congress and the president should use a carbon tax since it’s the simple and straightforward solution. It’s not as complex as the “cap and trade” system where companies have to buy credits to account for their carbon production.
How quickly action could come is unclear. House Speaker Nancy Pelosi (D-Calif.) would like climate change to be a top issue, but President Trump and Republicans have repealed, scaled back or undercut many Obama administration initiatives aimed at mitigating climate change. While some Republicans agree with the broad scientific consensus that human activity is contributing to global warming, many have denied or downplayed it.
“There is no appetite on our side to do" a carbon tax, said Matthew Rooney, head of the economic growth initiative at the George W. Bush Institute in Texas. “Maybe if Mar-a-Lago gets washed away, that will change.”
But there’s growing hope among activists that addressing climate change could gain traction in the 2020 election season. Canada passed a carbon tax last year.
“We think this can pass in 2021,” said Ted Halstead, chief executive of the Climate Leadership Council, which helped circulate the letter. “We want to get [a carbon tax and dividend] introduced this year. We think this becomes the consensus, bipartisan solution in the 2020 election cycle.”
Yellen, Mankiw and former treasury secretaries George P. Shultz, a Republican, and Lawrence H. Summers, a Democrat, led the effort to put together the bipartisan letter. They expect many more economists to sign on in the coming weeks. The letter does not specify what level the carbon tax should be set at, a controversial question, but it does call for a “sufficiently robust and gradually rising” tax.
“I actually think a carbon tax together with rebates is, in some sense, the most conservative way to deal with climate change,” Mankiw said. “Everything else means more intrusive government.”