A huge number of economists agree we need a policy to fight climate change — but lawmakers aren't getting on board

  • Top American economists from both sides of the aisle see a carbon tax as the most cost-effective way to address climate change.
  • In a letter out this week, forty-five of them said climate change was “a serious problem calling for immediate national action.”
  • But lawmakers remain bitterly partisan on climate action, especially carbon taxes.

What do eight recent Republican White House economic advisers have in common with their Democratic counterparts?

They think the US needs to tax carbon in order to address climate change.

From Janet Yellen to Gregory Mankiw, top economists from both sides of the aisle signed a letter published in the Wall Street Journal this week calling for a national tax on carbon emissions, which play a central role in global warming. They said climate change was “a serious problem calling for immediate national action.”

Co-signatories of the Climate Leadership Council letter included:

  • Nearly every Council of Economic Advisers chair since the 1970s, more than half of which served Republican administrations
  • Four former Federal Reserve chairs, split between parties
  • Two former Treasury secretaries on opposite sides of the political spectrum
  • More than two dozen Nobel Laureate economists

“As the number and stature suggest, you won’t find much disagreement among economists,” Christopher Knittel, an energy economist at the Massachusetts Institute of Technology, said of carbon taxes. “In fact, the only real disagreement is among policymakers.”

The policy outlined in the letter would increase the cost of products and services that use carbon, which the economists called “the most cost-effective lever” to reduce emissions at the scale and speed they said was necessary.

While that would mean higher fuel and electricity prices, those funds would be redirected to Americans in the form of dividends. It is estimated that a $US40 per ton carbon tax would amount to a $US2,000 per family rebate, Yellen told the Washington Post.

But for all of the consensus among economists, a carbon tax is still one of the most politically polarising issues around. Lawmakers have failed to pass such a policy even at state levels, despite decades of research showing climate change poses catastrophic risks to the planet.

“It is misleading for CLC to say their carbon tax plan has political viability when that is not the case at all,” said Thomas Pyle, a Trump campaign advisor and president of the Institute for Energy Research, a think tank that supports fossil fuels.

He pointed to Washington state’s recent rejection of a carbon tax proposal, though it contrasted with national plans in not being revenue neutral. The state ballot initiative also faced a more than $US31 million campaign led by oil industry donors who argued it would hurt the economy.

“Without that industry onslaught, the carbon tax referendum there would probably have passed,” Sen. Sheldon Whitehouse said in December.

Richard Schmalensee, a member of the Council of Economic Advisers under President George H.W. Bush, said depolarizing carbon taxes would start with congressional acceptance of scientific findings. Many Republicans in office have downplayed the threat of global warming, also rejecting the widespread consensus that humans contribute to it.

“Among lawmakers the division is not on that proposition but, rather, on whether climate change is actually a serious problem,” Schmalensee said. “In other countries the center-right wants to do less than the center-left, but outright denial of hard science seems, sadly, to be a U.S.-only phenomenon. I can remember when it was Republicans in DC who insisted on following the science.”

Recent polls suggest the number of Republicans who believe climate change exists could be on the rise. But GOP lawmakers have continued to take tones similar to President Donald Trump, who during his presidency has shrugged off a series of landmark reports on global warming.

“President Trump is sui generis in many ways, so it is hard to predict his behaviour,” said Gregory Mankiw, chair of the Council of Economic Advisers under President George W. Bush and a co-signatory of the letter. “But I think the broader political class will over time recognise the importance of the issue, and once they do, they will see the carbon tax and dividend plan as the best response to a pressing problem.”

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