Janet Yellen, President-elect Joe Biden’s choice to serve as Treasury secretary, is committed to tackling climate change and believes that a carbon price is critical to the success of that mission.
“As an early backer of the Kyoto Protocol,” noted Dino Grandoni of The Washington Post, “Yellen saw climate change as a risk to the financial system back in the late 1990s, when she was a top economic adviser to President Bill Clinton.”
She is a founding member of the bipartisan Climate Leadership Council, whose top priority is passage of a carbon fee, with all proceeds returned to citizens as “dividends.” The council’s leaders include GOP icons such as James Baker and George Shultz, both former secretaries of the Treasury, and among CLC’s corporate members are Ford, ExxonMobil, and Procter & Gamble. As part of her work with CLC, Yellen led a bipartisan group of economists to sign a letter endorsing a carbon tax. So far, 3,589 economists have signed it.
She co-chaired the Group of 30 Working Group on Climate Change and Finance, which released a report in October urging governments, regulators and financial companies to make moves that would sharply curb carbon emissions. “Carbon prices should gradually increase over time to incentivize firms and speed the shift to net zero,” she said when the report was released.
The Group of 30 is an independent global body composed of economic and financial leaders from the public and private sectors and academia. It aims to deepen understanding of global economic and financial issues.
Of course, amongst lawmakers, “tax” is a dirty word, and there are plenty of skeptics about the political prospects of a levy on carbon dioxide. Nevertheless, Yellen, in an October interview with Reuters, was “upbeat about its political chances,” Howard Gleckman wrote in a Forbes column. “I do see Republican support, and not only Democrat support, for an approach that would involve a carbon tax with redistribution.”
One reason for optimism is Yellen herself. “Those who have known Yellen for years say that alongside her expertise, her greatest skill is her ability to build consensus,” wrote The Washington Post’s Heather Long. On top of that, “she garnered a reputation for being the most prepared in the room.”
But, as The Post’s Grandoni observed, Yellen wrote in a paper published last month with Mark Carney, former head of the Bank of England, that “carbon prices alone are not enough.” Grandoni pointed out that, if confirmed as treasury secretary, she would also chair the Financial Stability Oversight Council. In that role, Yellen could be persuasive in getting banks and other businesses to assess and mitigate the risk that rising temperatures pose to their bottom lines.
Yet another opportunity for Yellen to help advance a broad climate agenda derives from her influence in tax policy. During the campaign, Biden promised to end subsidies for oil, gas and coal companies. Yellen would be able to reassess those tax breaks and weigh in on incentives for wind and solar power projects.
Though some in the climate action community consider Yellen’s views too moderate, environmental economist Matthew Kahn of Johns Hopkins University told E&E News’ Avery Ellfeldt that Yellen could be "more effective" on climate change than her more progressive peers. "There are ways to change our tax code to be pro-environment, and pro-economic growth, and pro-labor and pro-capital accumulation," he said, which could create a "self-fulfilling prophecy" as businesses invest in a greener economy.