If you’re going to fly a kite, why not fly one the size of a jumbo jet?
The potential return of Janet Yellen to a frontline public role as US treasury secretary could prove to be the most significant public appointment of the 21st century.
Rather calmly, Yellen has been working behind the scenes to develop something extraordinary given the current context of identity politics and ‘no platform’ faux outrage. Most surprising is that it’s an implementable solution to a contentious topic bedevilling the whole world.
The object of her focus is developing a broad political consensus on a huge component of a vast theme. That theme is climate change. That component is very specific: carbon taxes. There are other places and articles where you can go to read about the details of these developments. And at its very heart, this must be about details.
Yet the lack of details in the past is exactly why climate change advocates have been unable to ‘cut through’ to the public more effectively. It’s all very well agreeing with a concept in principle. But you have to carry the vast majority of the public. You don’t need to be a professional psychologist to know that is not going to be achieved with the current blunt tools of broadly punitive taxation and crass talk of climate change ‘denial’.
As I see it, the basis of Yellen’s successful initiative will be a simple but vital change in emphasis: more ‘carrot’ and less ‘stick’.
If President-Elect Biden delivers on promises to rapidly re-engage with international institutions and a Yellen appointment is ratified, I expect equally rapid legislation on carbon taxation to follow.
The key to these taxation proposals is the recognition of direct rebates to users. The consequences will be felt all the way down the carbon value chain, and both corporate and individual behaviours will inevitably be directed towards previously undreamed-of positive changes.
The international environment for adopting this style of new carbon taxes is perfect. Any post-Covid recovery will require new economic approaches and certainly greater reliance on government fiscal responses over central bank solutions. I think it was Winston Churchill who observed that ‘for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle’.
Once the Yellen carbon tax approach is adopted in the US, there can be a tsunami of realisation and implementation internationally.
The pandemic is showing us that it is possible for global institutions to act in concert to solve global problems other than financial crises. So far, whilst we are all still in the midst of the pandemic, this process has been faltering at best. But the global joint venture on Covid might actually be the first steps towards a global bull market which benefits all of us: climate altruism.
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