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Yellen and an all-star, bipartisan coalition pitch carbon tax

Group including economists and former cabinet officials say a carbon tax is a market-based solution to climate change

Janet Yellen testifying before a Senate Banking, Housing and Urban Affairs Committee hearing in 2017
Janet Yellen testifying before a Senate Banking, Housing and Urban Affairs Committee hearing in 2017 (Tom Williams/CQ Roll Call file photo)

Clarified, Feb. 18 | A bipartisan group of economists and former Cabinet officials, including former Federal Reserve Chairwoman Janet Yellen and former Secretary of State James Baker, continued their push for a carbon tax Thursday, which they contend would halve emissions by 2035 and give families more money.

The group, the Climate Leadership Council, whose founders include Exxon Mobil Corp. and BP, suggests a gradually rising carbon tax starting at $40 per ton as an alternative to federal regulations to control climate change.

Yellen said such a plan would replace the need for “cumbersome and less efficient” federal regulations

“Such mandates can be expensive for businesses to implement and can be replaced by a market-friendly solution,” she said. “This plan will spur, not impede growth.”

The plan is not new and has proven politically difficult in Congress. Although Republicans are critical of federal regulations as a way to control carbon emissions, they’re also wary of levying a new tax, which critics say would raise energy costs for consumers. Republicans, led by House Minority Whip Steve Scalise, R-La.,  have introduced a resolution (H.Con.Res.41) condemning a carbon tax as “detrimental” to the U.S. economy.

[Young Republicans push party to act on climate change]

The Climate Leadership Council asserts the plan would not add financial burdens to the public and that money generated from the carbon tax would be returned to Americans, with a family of four receiving an estimated $2,000 a year.

“Because the plan is revenue neutral, it doesn’t require expanded public expenditures and it doesn’t balloon the deficit,” Yellen said.

If implemented in 2021, the plan would cut carbon emissions by half by 2035 from 2005 levels, its authors say.

“Climate change is already undermining the economy, it’s already increasing poverty and it’s hurting the poor the most … so we need some pretty radical changes,” World Resources Institute CEO Andrew Steer said.

The group first unveiled this plan in 2018 and reiterated it last year. This year, it added a component that Chairman and CEO Ted Halstead said would assure environmentalists that a carbon tax can work.

Tracking progress

The “Emissions Assurance Mechanism” would require a periodical review of how much emissions the carbon tax is helping cut. If it’s not meeting the 50 percent reduction goals, the price would go up faster from the initially suggested 5 percent above annual inflation to 7.5 percent above inflation.

 “We think it’s very unlikely that would be necessary,” Halstead told reporters Thursday.

The group is a broad coalition of economists, corporations and former government officials from Republican and Democratic administrations.

The plan has the support of 3,500 economists and companies, including Vistra Energy President and CEO Curt Morgan, who participated in the call Thursday.

Morgan said a carbon tax “levels the playing field” without singling out industries or subsidizing others, and would spur industry-led innovation.

The group also proposes a border carbon adjustment system — which would levy a fee on imports made in foreign factories that emit large amounts of carbon dioxide — as a way to protect the competitiveness of U.S. products. That idea has also been floated by 2020 presidential candidates Sen. Elizabeth Warren, D-Mass., and Sen. Bernie Sanders, I-Vt.

Members of the council have met the bipartisan Senate Climate Solutions Caucus to sell their idea. A carbon tax, however, would be a difficult sale in Congress, where bills such as legislation (S 1128) by Sen. Sheldon Whitehouse, D-R.I., that include such a levy are languishing and Republicans are reluctant to be associated with a new tax.

“I don’t believe that actually works,” Rep. Garret Graves, R-La., told reporters on Wednesday when asked if House Republicans would include a carbon tax in the climate plans they’re releasing. He said putting a price on carbon emissions would put U.S. energy exports at a competitive disadvantage.

Senate Environment and Public Works Chairman John Barrasso, R-Wyo., has also dismissed the idea as “neither winning nor workable.”

“Conservative solutions to address carbon dioxide emissions do exist,” Barrasso wrote in a letter responding to an article written in January by Halstead and former Reagan administration Secretary of State George Shultz advocating a carbon tax. Instead, Barrasso said bipartisan agreement can be found in expanding clean-energy sources including nuclear power, developing carbon-capture-and-sequestration technologies and building smarter infrastructure. “The idea that Americans would get dividend checks from an insatiable federal government for collected carbon taxes is far-fetched.”

The Climate Leadership Council members acknowledge the difficult path a carbon tax would face, and said they don’t expect it to happen in this political cycle.

This article was revised to reflect that the Climate Leadership Council’s carbon tax plan calls for increasing the tax by 7.5 percent above inflation if the initial rate of increase did not meet its carbon-reduction goals.

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