‘The Most Equitable Climate Solution:’ Janet Yellen and 3 Other Ex-Fed Chairs Back a Carbon Tax Plan

The Climate Leadership Council (CLC), a Republican-heavy coalition of energy industry companies, environmental groups, and economists, has won the support of former Fed chairs Janet Yellen, Ben Bernanke, Alan Greenspan and Paul Volcker, 27 Nobel laureates, and 15 former chairs of the Council of Economic Advisers for its carbon tax and dividend plan.

Policymakers have debated many flavors of carbon taxes and variations such as cap-and-trade. CLC’s plan, announced in 2017 but with deep roots in proposals batted around Washington for years, consists of setting a $40 tax on each ton of carbon dioxide emitted and paying the resulting funds back to citizens and legal residents in the form of a dividend. The tax would rise over time, to put pressure on producers and consumers to reduce their carbon emissions. It would include a related tariff on trade, to prevent trade partners from benefiting from laxer rules. Finally, it would prevent states and the federal government from suing carbon emitters for the historic emissions that are largely responsible for climate change, and calls for the end of many Obama-era carbon dioxide regulations including the Clean Power Plan now tied up in legal limbo.

The plan’s original language targeted the Environmental Protection Agency’s ability to regulate emissions, which set off criticism, including from energy historian and consultant and Ellen Wald, a fellow of the Atlantic Council, of which is a CLC founding member: “Some environmental regulations are important; they help the U.S. keep air breathable and water clean in an industrialized world. If other environmental regulations are unduly onerous…then the answer is to eliminate or improve them.”

Environmental reporter John H. Cushman Jr. of InsideClimate News also analyzed the plan when it appeared, and noted that the combination of the tax with the requirement to weaken the EPA and prevent state or federal carbon-emissions lawsuits was akin to saying: “Here’s a silver bullet. Now surrender your firearms.”

Major energy companies have thrown some support behind similar initiatives in the name of reducing their legal liabilities before. The U.S. Supreme Court declined to shield Exxon Mobil from suits brought by the states of Massachusetts and New York that allege the company lied to shareholders for decades about the risks of climate change. As a result, the company will have to reveal decades’ worth of documents that may open it up to massive legal liability.

Still, a dividend may be enough of a sweetener to taxpayers and legislators to make them forget those legal cases. Former Federal Reserve chair Janet Yellen said in a statement that the plan, “shows broad agreement among economists and experienced policymakers that carbon dividends are the most cost-effective, equitable and politically viable climate solution.”

The statement from the economists says increased prices due to the carbon tax will be more efficient than regulations, and they would provide regulatory certainty by promoting investment in low-carbon technology. It does not address the issue of legal liability for past emissions.

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