Something unusual and unexpected happened to me last week: I got an email from Janet Yellen, the previous chair of the Federal Reserve. At first I thought it might have been spam, but it was legitimate.
As it turns out, Yellen wrote to me because she is spearheading an effort by a number of famous economists to get as many American economists as possible to endorse a petition asking Congress to adopt a so-called “carbon tax.”
The purpose of a carbon tax is to reduce the carbon dioxide-producing emissions caused by the use of carbon-based fossil fuels on the alleged grounds that failing to do so will lead to dangerous climate change. By steadily raising the tax on fossil fuels, the use of such fuels will become increasingly costly. Rising prices will lead to reduced demand and consumption of fossil fuels as consumers switch to “renewable” sources of energy to escape the carbon tax.
It should be added that Yellen and others advocate a carbon tax as the economically least disruptive way of weaning our society from fossil fuel consumption.
I will not sign this petition. My primary reasons for not doing so are threefold.
1) We economists have no professional standing or qualifications to take a collective position on the issue of climate change. I refuse to surrender my right of conscience and blindly join the herd.
Yellen and her pro-carbon tax colleagues should know that the science of climate change has no more power to predict the future accurately than does the science of economics. Indeed, as economists, they should recognize that climate scientists confront the same barriers to predicting the future that economists do—namely, that there are far too many variables, only some of which are known, and that the relationships between these variables are imperfectly understood.
The IPCC, which has been using the average temperature of 30-year periods as a reference point for measuring climate, is now calculating its average temperature for 30 years in a different, and indeed, preposterous way. The current climate period of 30 years is defined as having the average temperature of the most recent 15 years and the coming 15 years. In other words, half of the data points don’t even exist. The IPCC formula is to assume that the next 15 years will continue on the trend of the last 15 years—an unwarranted assumption given the volatile history of temperature fluctuations.
2) The second reason I won’t support pleas for a carbon tax is that—apart from the folly of diverting even more money to the mismanagement of Congress—a new tax on energy would suppress economic growth. After eight years of anemic growth during the Obama years, the economy, thanks to President Donald Trump’s tax and regulatory relief, recovered to 3 percent growth, but a major new tax burden on the economy will push growth back down to subpar rates.
Forcing Americans to pay artificially higher prices for energy (which is the precise purpose of a carbon tax) will leave less money to purchase other goods and services. This reduces standards of living and is especially burdensome to poorer Americans; therefore, I cannot endorse such a course of action.
Imposing a growth-choking tax would be hugely unfair to Americans vis-á-vis China. I have seen estimates that just the increase of CO2 emissions in China over the next few decades will exceed all U.S. emissions today. In other words, even if all CO2 emissions in the U.S. were eliminated, total global emissions will rise.
Therefore, if you believe the hyped doom-and-gloom scenario, the world is doomed regardless of what we Americans do. But if the hype isn’t true (hint: it isn’t) then the world will look like this: Environmentally, the world will continue to get greener like it has over recent decades as plants thrive in a CO2-enriched atmosphere; economically, an America that cripples economic growth by making energy less affordable through a carbon tax will languish economically while China—avoiding the error of making energy more expensive—will race ahead. This isn’t what Americans need or want.
Ask me to sign a petition asking Congress to reduce spending instead of raise taxes, and I’ll sign it.
3) The Yellen proposal also includes calls for a tariff designed to raise prices of imports produced using fossil fuels. What a stark contrast from 1930 when the economics profession rallied in opposition to the proposed Smoot-Hawley tariffs—tariffs that were signed into law by Herbert Hoover and immediately plunged the country into a recession that ultimately became the Great Depression.