Former fed leaders, top economists rally around carbon tax

January 17, 2019

Forty-five economists, including former Federal Reserve chairman Alan Greenspan, signed a statement supporting a carbon tax. "Global climate change is a serious problem calling for immediate national action," the statement reads, followed by a set of recommendations around the carbon tax, which "offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. 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 statement details that the carbon tax should increase every year until emissions targets are met; "replace the need for various carbon regulations that are less efficient"; be border adjustable in order to incentivize other nations to act; and return revenues to Americans through a dividend system such as the one envisioned by former Secretaries of State James A. Baker and George Shultz.

It is estimated a $40/ton carbon tax would generate $200 billion to start, enough for approximately $2000 in dividends for a family of four.

"Among economists, this is not controversial," said Greg Mankiw, who chaired the Council of Economic Advisers under President George W. Bush and signed the statement. "I actually think a carbon tax together with rebates is, in some sense, the most conservative way to deal with climate change."

Former Arizona Sen. Jeff Flake, who dropped a carbon tax bill right before his retirement, had this to say:

List of signers:

George Akerlof, Robert Aumann, Angus Deaton, Peter Diamond, Robert Engle, Eugene Fama, Lars Peter Hansen, Oliver Hart, Bengt Holmström, Daniel Kahneman, Finn Kydland, Robert Lucas, Eric Maskin, Daniel McFadden, Robert Merton, Roger Myerson, Edmund Phelps, Alvin Roth, Thomas Sargent, Myron Scholes, Amartya Sen, William Sharpe, Robert Shiller, Christopher Sims, Robert Solow, Michael Spence and Richard Thaler are recipients of the Nobel Memorial Prize in Economic Sciences.

Paul Volcker is a former Federal Reserve chairman.

Martin Baily, Michael Boskin, Martin Feldstein, Jason Furman, Austan Goolsbee, Glenn Hubbard, Alan Krueger, Edward Lazear, N. Gregory Mankiw, Christina Romer, Harvey Rosen and Laura Tyson are former chairmen of the president's Council of Economic Advisers.

Ben Bernanke, Alan Greenspan and Janet Yellen have chaired both the Fed and the Council of Economic Advisers.

George Shultz and Lawrence Summers are former Treasury secretaries.