February 8, 2019

Time To Wake Up: Carbon Dividends

As-prepared for delivery

Mr./Madam President, judging by the deafening silence of Senate Republicans, you would think that there was no conservative support in this country for even the most measured response to climate change.  However, many prominent Republicans are clamoring for climate action—just not here in Mammon Hall.

See, for example, this January 16 op-ed in the Wall Street Journal—not exactly a progressive lefty rag. The opening line: “Global climate change is a serious problem calling for immediate national action.” Yes. Exactly.

The op-ed is signed by 27 winners of the Nobel Prize in Economics, four former Federal Reserve chairs, 12 past chairs of the president’s Council of Economic Advisers, and two former Treasury secretaries.  Many were appointed by Republican presidents.

Let’s look at what this bipartisan group of experts are proposing.

Here’s the first policy recommendation:

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.

I agree.  We must make the price of fossil energy reflect the costs of carbon pollution if we are to reduce emissions as much and as quickly as we need to.  That’s why Senator Schatz and I introduced the American Opportunity Carbon Fee Act to put a price on carbon.

And it’s not just academic economists and policy makers who recognize that putting a price on carbon pollution is the most efficient way to reduce greenhouse gas emissions.  Business executives agree.  Consider this, from Bob Litterman, former head of risk management at Goldman Sachs, writing recently in the New York Times:

[F]or society at large, and the government in particular, the most important and urgent action required is to minimize future warming by creating appropriate global incentives to reduce carbon dioxide emissions from burning fossil fuels. Economists generally agree that rather than regulate behavior, it is more effective to allow individuals to choose their actions, as long as the prices appropriately reflect the costs, including the risks posed by climate change.

To date prices of energy have not reflected the risk of future climate changes. This is a stupid mistake….

Republicans typically support free market solutions, and this is a free market solution. Yet, still, there’s deafening silence from the other side of the aisle.

Here’s the second recommendation from the economists’ op-ed:

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

Again, I agree.

Because the carbon pricing system Senator Schatz and I have proposed is revenue neutral, every penny goes back into the pockets of Americans.

Also, a carbon fee levels the playing field, so that polluters have to compete in the market on even terms with non-polluters. Competition on a level playing field will incentivize innovation in renewable energy, energy efficiency, resilient infrastructure, and low-carbon manufacturing and transportation. 

This is not a novel concept.  Nobel Prize-winning economist Richard Nordhaus showed, as far back as 1992, “that a low tax on carbon, set to rise slowly, over time, could be enough to keep emissions at reasonable levels, saving us from climate change at little, if any cost,” according to the New Yorker.  “The tax would promote innovations in new forms of power generation and, eventually, a widespread adoption of clean-energy technologies.”

The latest Republican claim is that innovation is the solution to climate change.  Fine, but you’re not going to get adequate innovation on the tilted playing field the fossil fuel industry protects.  Carbon pricing uses market forces to reduce the demand for carbon, while also driving innovation.

What else do the economists recommend?

[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.

Again – agreed. A border carbon adjustment system means that products from countries without a carbon price are subject to a harmonizing tariff, so that they don’t have an unfair advantage over domestic products.  This protects American manufacturers, and in turn American jobs, and motivates other countries to help solve this global problem.  That’s why the Whitehouse-Schatz bill includes such a border adjustment system.

The economists continue:

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.

Revenue neutrality is essential, so that consumers are not penalized by the polluting ways of Big Carbon.  The Whitehouse-Schatz plan returns all monies to the American people.  Carbon pricing is not a tax increase.  Lower- and middle-income households get more money back than they may pay in higher prices.

More than two dozen Nobel Prize winners signed this Wall Street Journal op-ed.

Their economic expertise is unimpeachable.  We have at least one Nobel laureate from almost every year since the late nineties.  There are only a few missing names, and many of those have endorsed carbon pricing in other venues.

Well, you might say, they’re academics, out of touch with the political realities. OK, how about these signers, all appointed to chair the Council of Economic Advisers to the President?

Note that this is a bipartisan list; it includes advisers to four Republican presidents and two Democratic presidents.  When this group of people can agree on an economic policy, you had better believe that it’s not some fringe idea – and these experts all say that carbon pricing is a practical solution to a very pressing problem.

And here is yet another bipartisan list of signers on the op-ed: Fed chairs and Treasury secretaries.  So, we have top-level economic appointees from five different Republican presidents, all saying that “global climate change is a serious problem calling for immediate national action,” and all saying that setting a carbon price is the best action to take.

But what about this president, you might ask?  What does President Trump think about action on climate change?

Well, back in 2009, he and his children were signatories on another letter, this one in the New York Times.  The letter urged then-President Obama to pursue “meaningful and effective measures to control climate change.”  It goes on: “If we fail to act now, it is scientifically irrefutable that there will be catastrophic and irreversible consequences for humanity and our planet.”  Not much ambiguity there.

A decade has passed since that letter, and much has changed. Now President Trump mocks global warming, and the GOP in Congress has fled from taking any serious action on climate change—even on policies that are as mainstream and widely supported as carbon pricing.

What happened?

Well, a year after Trump signed this letter, the Supreme Court’s disastrous Citizens United decision allowed unlimited money from polluters to flood our politics, and that changed everything.  The fossil fuel industry has used that new power remorselessly to stymie action in Congress.  Our inaction, unfortunately, puts everyone at risk, as we are already seeing the harmful effects of climate change in every state in the union—red and blue.

After receiving the Nobel Prize in October, Richard Nordhaus lamented, “It’s hard to be optimistic . . . . We’re actually going backward in the United States, with the disastrous policies of the Trump administration.”

These economists, of all political backgrounds, know it.  The American people know it.  It’s time to take action. It’s time to wake up.

I yield the floor.