Four former chairs of the Federal Reserve have joined with leading economists from both major political parties to issue an unprecedented call for a carbon tax in the US. The Federal Reserve System (also known as the Federal Reserve or simply the Fed) is the central banking system..
Four former chairs of the Federal Reserve have joined with leading economists from both major political parties to issue an unprecedented call for a carbon tax in the US.
Background
The Federal Reserve System (also known as the Federal Reserve or simply the Fed) is the central banking system of the United States of America. The Chair of the Board of Governors of the Federal Reserve System is the head of the Federal Reserve, which is the central banking system of the United States. The position is known colloquially as “Chair of the Fed” or “Fed Chair”. The chair is the “active executive officer” of the Board of Governors of the Federal Reserve System.
The chair is nominated by the President of the United States from among the members of the Board of Governors, and serves a term of four years after being confirmed by the United States Senate. The current Chairman is Jerome Powell, who was sworn in on February 5, 2018.
A carbon tax is a tax levied on the carbon content of fuels. It is a form of carbon pricing. Carbon is present in every hydrocarbon fuel (coal, petroleum, and natural gas) and converted to carbon dioxide and other products when combusted. In contrast, non-combustion energy sources—wind, sunlight, geothermal, hydropower, and nuclear—do not convert hydrocarbons to carbon dioxide – which is a heat-trapping “greenhouse” gas which represents a negative externality on the climate system.
Analysis
Former Federal Reserve Chairpersons Janet Yellen, Ben Bernanke, Alan Greenspan and Paul Volcker have proposed an emissions tax that would be used to pay lump-sum cash rebates to US citizens. The statement signed by 27 Nobel laureates and 15 former chairs of the Council of Economic Advisers described the mechanism as a “cost-effective lever to reduce carbon emissions” that would correct “a well-known market failure”.
“It shows broad agreement among economists and experienced policymakers that carbon dividends are the most cost-effective, equitable and politically viable climate solution,” said Ms. Yellen, calling the plan a “major tipping point in US climate policy”.
The idea of a carbon tax, which charges emitters a fee per tonne of carbon emissions, has faced strong political headwinds recently. Last November, voters in Washington state rejected a carbon tax ballot initiative. However, economists are increasingly united in their calls for a tax to help cut emissions, at a time when global carbon dioxide emissions have been on the rise and the physical effects of climate change are increasingly visible. “The climate looks to be a considerably greater imperative than it did a few years ago, so getting this done is really urgent,” said Larry Summers, a former Treasury secretary, who also signed the statement.
“The gravity of the climate change problem concentrates minds and leads people to put aside differences,” said Mr. Summers. “People who agree on little seem to agree on this. And that’s striking.” The signatories acknowledged that getting a carbon tax into law in the US would be challenging under the current government.
The proposal from economists suggests refunding the proceeds of the emissions tax to citizens through rebates, which would represent a net gain for the poorest 70 per cent of households in the US, according to a 2017 analysis from the US Treasury. The proposal also supports the idea of a carbon border tax, which would impose fees on imported goods from countries that do not have a carbon tax.
Assessment
Our assessment is that a carbon tax is the most straightforward way to address carbon emissions. We believe that it is a free market response to climate change as it holds active polluters accountable to their emissions and imposes a proportion tax on them.
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