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 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. 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.This is the first such "statement by economists" that I have ever signed. I believe that both major political parties are on the wrong side of this issue. The Democrats are serious about global warming, but their idea of a Green New Deal will result in government micro-management of nearly the entire economy, millions of patronage jobs, and an unsustainable boost to federal debt. The Republicans are not serious.
Fortunately neither party will be able to keep to their current positions. A carbon tax provides both the opportunity for a political compromise that would actually work. Given the right incentives, organizations will figure out the best path toward carbon neutrality.
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