This may be the time for bi-partisan support that would involve a carbon tax with redistribution. “It’s not politically impossible,” says Former Federal Reserve Chair Janet Yellen
Former Federal Reserve Chair Janet Yellen said bipartisan concern over climate change could see the United States adopt a tax on carbon emissions, with the proceeds shared with households, if Democrat Joe Biden is elected president in November.
Yellen, who served as Fed chair from 2014-2018, said the combination of social injustices exposed by the coronavirus pandemic and Black Lives Matter protests, and wildfires in California, could boost support for the proposal.
“There really is a new kind of recognition that you’ve got a society where capitalism is beginning to run amok and needs to be readjusted in order to make sure that what we’re doing is sustainable and the benefits of growth are widely shared in ways they haven’t been,” Yellen told Reuters in an interview on Wednesday.
“What I see is a growing recognition on both sides of the aisle that climate change is a very serious concern and that action needs to occur,” she said.
Biden’s campaign declined to comment. In August, Yellen appeared by video at the first joint economic briefing attended by both Biden and his running mate, Senator Kamala Harris, Biden’s campaign said at the time. A campaign official added that Yellen is not an adviser to the campaign but an expert briefing the candidates.
Yellen spoke to Reuters ahead of the launch on Thursday of a report from a working group she co-chaired with former Bank of England Governor Mark Carney setting out steps governments, regulators, businesses and investors can take to accelerate a shift to a low-carbon future.
Among the recommendations, compiled by the G30 network of former central bankers, academics, policy-makers and financiers, was a gradually increasing price on carbon to help economies make the transition to net zero emissions.
Yellen has been working with a group of Republicans, Democrats and companies known as the Climate Leadership Council on a proposal to tax climate-warming carbon emissions to encourage companies to shift away from fossil fuels.
The plan aims to halve carbon emissions by 2035 from 2005 levels with a tax starting at $40 per ton. While that would make products like gasoline more expensive, the plan would return dividends to families of about $2,000 in the first year.
Some oil companies and moderate Republicans, including former Secretary of State James Baker, back the Climate Leadership Council, which unveiled its proposals in February.
“There’s no question that if President Trump loses and the Biden administration comes into place then climate change will be a very high priority,” Yellen said.
“I do see Republican support, and not only Democrat support, for an approach that would involve a carbon tax with redistribution. It’s not politically impossible,” she said.
“There is a lot of focus on what do we need to do to change the direction to address long-standing problems, whether they’re of racial justice, or the distribution of income, or climate,” Yellen said. “That is a kind of awakening that I think has been taking place and I find that hopeful.”
There is no mention of the carbon tax and redistribution proposal in the Democratic National Committee Platform for the Nov. 3 polls. Biden’s climate change strategy favours direct federal investment in clean energy and measures including targets for electrifying transport and weatherizing buildings.
Nevertheless, Biden’s climate strategy document, launched in July, does mention that some cities, such as Boulder, Colorado, are using energy taxes to reduce emissions.
Biden has also publicly supported applying a “carbon adjustment fee” on imports from countries that fail to cut emissions under the 2015 Paris climate agreement to ensure U.S. companies are not unfairly undercut by competitors.
In an online news conference to launch the G30 report on Thursday, Yellen said countries that introduced carbon adjustment fees could form “carbon customs unions” compliant with World Trade Organization rules.
“Our thinking is that countries with carbon pricing would form essentially clubs, or carbon customs unions, within which there would be frictionless trade,” Yellen said.