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Statement backing Stanford professor’s carbon tax proposal garners record-setting support from economists

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A record-setting 3,333 economists, including 32 at Stanford, have signed a statement supporting a carbon tax proposal co-authored by Stanford Professor Emeritus and former Secretary of State George Shultz, the nonprofit Climate Leadership Council announced on Monday. The proposal would levy a tax on the production and use of carbon emissions that increases over time but remains revenue neutral; collected money would be returned to U.S. citizens in equal payments, so the government would spend none of it.

But the bipartisan plan faces criticism across the country. At Stanford, groups including the Stanford Democrats and Stanford College Republicans (SCR) have withheld support, each for their own reasons.

Carbon Dividends Plan

Introduced by the Climate Leadership Council in Feb. 2017, the Carbon Dividends Plan calls for revenues from “a gradually increasing tax on carbon dioxide emissions” to be received monthly by U.S. citizens in the form of dividend checks, direct deposits or contributions to their individual retirement accounts, providing “carbon dividends for all Americans.”

“[The plan] could be administered by the Social Security Administration, a good bureaucracy that takes in money and spends it,” Shultz told The Daily. “That would make it a progressive tax.”

The Carbon Dividends Plan is markedly different than past efforts to put a tax on carbon because returning revenues to the people nullifies the potential for debate on where tax revenues should be spent, said Alex Posner, a senior at Yale University and the president of the nonprofit Students for Carbon Dividends (S4CD) coalition. S4CD, which consists of student groups across the political spectrum, marks the first instance of College Republican groups publicly supporting a national climate solution, he noted.

“It’s hard to set people’s hearts aflutter calling for a new tax on either side of the aisle,” Posner said.

Posner co-founded S4CD as a separate 501(c)(3) in Feb. 2018 after interning with the Climate Leadership Council in summer 2017. While S4CD promotes the Carbon Dividends Plan, it operates independently of the Council, amassing the grassroots support that motivates political decision-making, Posner said.

“We often call our elected officials our elected leaders, but they’re actually our elected followers,” he added.

Emphasizing the connection between policymakers and grassroots organizations, Posner noted that S4CD garnered endorsements from both Shultz and Carbon Dividends Plan co-author James Baker in the student organization’s first day of existence.

“Not many student organizations get two former secretaries of state endorsing them on day one,” Posner said. “We were very excited about that.”

Shultz served as the 60th Secretary of State from 1982-1989, under then-president Ronald Reagan. Baker succeeded Shultz, serving as Secretary of State under George H. W. Bush from 1989-1992. Though both are Republicans, Shultz noted the support of Democratic economists such as Larry Summers, with whom Shultz co-wrote a Washington Post opinions piece advocating for the Carbon Dividends Plan.

“Students are getting active and interested in [the plan], both Republicans and Democrats,” Shultz said. “And that’s the thing about it … It’s a nonpartisan approach.”

“When I was Secretary of State, that’s the way we we tried to get things done,” he added.

Posner said he hopes for legislation to come out of the Carbon Dividends Plan by the end of the next U.S. general election cycle. Still, the plan’s future is uncertain, as conservative and liberal organizations alike continue withholding support. Both the Stanford Democrats and the Stanford College Republicans (SCR), for example, declined to join S4CD when Posner reached out last spring.

“We didn’t join because many of us objected to the proposal as hastily planned and unrealistic,” SCR wrote in a statement to The Daily. “We sincerely doubt the veracity of the ‘dividend’ promise; the federal government rarely turns down a potential source of revenue, and we believe that the federal government would just pocket the proceeds rather than returning them as a dividend, resulting in an unacceptable tax increase.”

Meanwhile, the Stanford Democrats are concerned with the Carbon Dividends plan because its fourth pillar states that regulations such as the Clean Power Plan would be unnecessary and rolled back after the new tax is implemented, wrote club president Gabe Rosen ’19 in an email to The Daily. Rosen signed a letter sent to Posner by then-College Democrats of America Environmental Caucus Chair Siddharth Bector in Feb. 2018, expressing the concerns of the Stanford Democrats and other College Democrat chapters across the country that have signed the letter.

In response to such criticisms, Shultz said the Carbon Dividends Plan is “an alternative to a regulatory approach.”

“Instead of the government telling you ‘do this; don’t do that,’ put a price out there and let people respond,” Shultz said. “They’re going to have to do things that will reduce their carbon tax, and they’ll figure out ingenious ways to do it. Let the market work. The market works.”

Despite this, it is unclear to what extent economists behind the statement believe other environmental regulations should be rolled back. Economics professor Pascaline Dupas, who signed the Economists’ Statement on Carbon Dividends, wrote in an email to The Daily that she does not believe implementation of the Carbon Dividends Plan would justify comprehensive rollbacks.

“The statement could be interpreted as saying that the tax could be sufficient, i.e. one could give up all other regulatory interventions,” she wrote. “I did not interpret it like that when I signed it, and I would not want people to use the statement as ammunition against regulation in the future.”

A plan with ‘Stanford’s DNA’

Posner said it “takes time to explain the thinking and the context” of the Carbon Dividends Plan, but added that he believes the plan is the most politically viable climate change policy around. Further, he noted that the Shultz connection and support of other Stanford faculty means “Stanford’s DNA and leadership is all over this proposal.”

“The statement advocated for a sensible set of policies at a crucial time for our world,” wrote signee and Graduate School of Business (GSB) professor Saumitra Jha Ph.D. ’06 in an email to The Daily. “If we persist in status quo trends, it is appalling to think of the world we will leave to our children and grandchildren, let alone the generations that come after.”

Economics professor Matthew Jackson Ph.D. ’88, another signee, referred to climate change as a “world political problem” that “we can do an enormous amount about” in an email to The Daily. He noted that his signing of the Economists’ Statement on Carbon Dividends was not necessarily an indication that he agrees with all aspects of the Carbon Dividends Plan.

“One can always quibble with the details of how such a tax would be administered and what would be done with the revenue, and the statement had to be somewhat lean in order to get thousands of signatures, but the broad issues are very clear and pressing — which is why it got a consensus,” Jackson wrote.

Economics professor Monika Piazzesi Ph.D. ’00, another signee, wrote in an email of her own that “economists have always agreed that carbon taxes are the best way to deal with such negative externalities, because they direct economic activity away from emissions.”

However, Piazzesi added, economists disagree on how to use the revenue those taxes produce.

Statement signee and economics professor Paul Milgrom M.S. ’78 Ph.D. ’79 wrote to The Daily that “it is obvious to every serious scholar that global warming is a huge threat that needs to be addressed,” but added that “dumb regulations could increase resistance to any solution by making the cost much higher than it needs to be.”

“A carbon tax is a smart way to regulate because it provides an incentive for those who find it cheap to reduce emissions to do that,” he wrote. “A smart tax that is based on emissions goals and adjusts as needed to inspire reduced emissions could make it pretty inexpensive to achieve this monumentally important policy goal.”

“I’m glad to see such broad agreement articulated across the [economics] profession,” Jha wrote. “I hope it makes a difference.”

‘The alternative is gridlock’

Though no Stanford student organizations joined S4CD in spring 2018, Posner said he is reaching out to the campus community again this year in an attempt to gather support from any interested student groups.

While there are concerns on both sides of the aisle, Posner maintains that the Carbon Dividends Plan’s bipartisan support is promising. He hopes the plan is implemented sooner rather than later because “the alternative is gridlock.”

“It’s always easy to quibble with the specifics, but the idea was not to let the perfect be the enemy of the good,” Dupas wrote. “Climate change is real, and we cannot and shouldn’t let more time pass before very serious action is taken to fight it.”

 

Contact Holden Foreman at hs4man21 ‘at’ stanford.edu.

Holden Foreman '21 is The Daily's Executive Editor. He hails from the city of St. Louis, Missouri and is studying electrical engineering, computer science and economics. Contact him at hs4man21 'at' stanford.edu.