Former US Federal Reserve leaders and high-profile economists rally around carbon tax proposal

An all-star roster of US policymakers and advisers has signed on to a new statement in support of a carbon tax.

Former Chairman of the Federal Reserve Alan Greenspan. Picture: AFP

An all-star roster of former Federal Reserve leaders and White House economic advisers are signing on to a new statement in support of a carbon tax on businesses that sends the revenue to US citizens.

Former Fed chair Alan Greenspan and former Council of Economic Advisers chief Austan Goolsbee are among dozens of economists now backing a set of principles pushed by a group called the Climate Leadership Council. They join other peers including former Fed chairs Ben Bernanke and Janet Yellen who have already backed the group.

In all, 45 economists signed the new statement, which is being published on the opinion page of Thursday’s Wall Street Journal.

The plan advocates replacing many environmental regulations with a simplified tax on businesses that release carbon into the atmosphere, an incentive for them to use cleaner energy. While economists have long supported carbon taxes as a climate-change solution, the new statement shows broad support for a political sweetener: sharing the proceeds with American consumers.

The proposal would tax businesses such as oil and coal companies responsible for the carbon dioxide that burns off into the atmosphere. The council proposes an initial levy of $40 per ton of emissions, and the economists say it should increase every year until the country meets its goals of emissions reductions.

Proponents say the tax would generate roughly $US200 billion a year to start and send an estimated $US2,000 to a family of four, with the money intended to offset the impact of higher energy costs likely passed down to consumers.

Carbon taxes have failed to get much political support so far, but some Republicans and corporations have recently broken from intense opposition to addressing climate change.

A handful of Republicans who were in Congress in 2018, including Florida Rep. Carlos Curbelo and Arizona Sen. Jeff Flake, sponsored carbon-tax bills. Exxon Mobil Corp., once a powerful sceptic of global warming, recently committed to spend $US1 million lobbying for the Climate Leadership Council’s idea.

The movement has come as the effects of climate change became more immediate and the threats became more severe. US scientists said 2018 joined the three prior years as the hottest on record and, unchecked, global warming could cause hundreds of billions of dollars a year in economic losses by the century’s end. The United Nations warned in two reports last year that the world is running out of time and behind on the commitments needed to avoid irreversible and catastrophic impacts from climate change.

“This statement represents a major tipping point in US climate policy, “ Ms Yellen said in a statement. “It shows broad agreement among economists and experienced policy makers that carbon dividends are the most cost-effective, equitable and politically viable climate solution.”

Ms Yellen joined the bipartisan group last year, one of the Democrats alongside Republican founders James Baker III and George Shultz, both former US secretaries of state. Mr. Greenspan headlines a group of Republicans showing support for the group’s proposal for the first time, a group that also includes Michael Boskin and Harvey Rosen, Council of Economic Advisers chairmen for presidents George H.W. Bush and George W. Bush respectively.

Dow Jones