Economists’ Statement on Carbon Dividends

Global climate change is a serious problem calling for immediate national action. Guided by sound economic principles, we are united in the following policy recommendations.

I. A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.

II. A carbon tax should increase every year until emissions reductions goals are met and are revenue neutral to avoid debates over the size of government. A consistently rising carbon price will encourage technological innovation and large-scale infrastructure development. It will also accelerate the diffusion of carbon-efficient goods and services.

III. A sufficiently robust and gradually rising carbon tax will replace the need for various carbon regulations that are less efficient. Substituting a price signal for cumbersome regulations will promote economic growth and provide the regulatory certainty companies need for long-term investment in clean-energy alternatives.

IV. To prevent carbon leakage and to protect U.S. competitiveness, a border carbon adjustment system should be established. This system would enhance the competitiveness of American firms that are more energy-efficient than their global competitors. It would also create an incentive for other nations to adopt similar carbon pricing.

V. To maximize the fairness and political viability of a rising carbon tax, all the revenue should be returned directly to U.S. citizens through equal lump-sum rebates. The majority of American families, including the most vulnerable, will benefit financially by receiving more in “carbon dividends” than they pay in increased energy prices.

ORIGINAL CO-SIGNATORIES
(As appeared in THE WALL STREET JOURNAL – Thursday, January 17, 2019)

George Akerlof, Nobel Laureate Economist

Robert Aumann, Nobel Laureate Economist

Martin Baily, Former Chair, CEA

Ben Bernanke, Former Chair, Fed. Reserve, Former Chair, CEA

Michael Boskin, Former Chair, CEA

Angus Deaton, Nobel Laureate Economist

Peter Diamond, Nobel Laureate Economist

Robert Engle, Nobel Laureate Economist

Eugene Fama, Nobel Laureate Economist

Martin Feldstein, Former Chair, CEA

Jason Furman, Former Chair, CEA

Austan Goolsbee, Former Chair, CEA

Alan Greenspan, Former Chair, Fed. Reserve, Former Chair, CEA

Lars Peter Hansen, Nobel Laureate Economist

Oliver Hart, Nobel Laureate Economist

Bengt Holmström, Nobel Laureate Economist

Glenn Hubbard, Former Chair, CEA

Daniel Kahneman, Nobel Laureate Economist

Alan Krueger, Former Chair, CEA

Finn Kydland, Nobel Laureate Economist

Edward Lazear, Former Chair, CEA

Robert Lucas, Nobel Laureate Economist

N. Gregory Mankiw, Former Chair, CEA

Eric Maskin, Nobel Laureate Economist

Daniel McFadden, Nobel Laureate Economist

Robert Merton, Nobel Laureate Economist

Roger Myerson, Nobel Laureate Economist

Edmund Phelps. Nobel Laureate Economist

Christina Romer, Former Chair, CEA

Harvey Rosen, Former Chair, CEA

Alvin Roth, Nobel Laureate Economist

Thomas Sargent, Nobel Laureate Economist

Myron Scholes, Nobel Laureate Economist

Amartya Sen, Nobel Laureate Economist

William Sharpe, Nobel Laureate Economist

Robert Shiller, Nobel Laureate Economist

George Shultz, Former Treasury Secretary

Christopher Sims, Nobel Laureate Economist

Robert Solow, Nobel Laureate Economist

Michael Spence, Nobel Laureate Economist

Lawrence Summers, Former Treasury Secretary

Richard Thaler, Nobel Laureate Economist

Laura Tyson, Former Chair, CEA

Paul Volcker, Former Chair, Federal Reserve

Janet Yellen, Former Chair, Fed. Reserve Former Chair, CEA