The Gas Tax - low hanging fruit for climate change action

This weekend the NYT has a duet of opinion pieces about climate change, the Saturday Editorial page and Friedman’s Op-Ed, both on the subject of the gasoline tax. Given the recent drop in gas prices levels, and the collective inefficiency of vehicles in the US, an increase in the gasoline tax seems the single most effective step we can take now towards reducing our emissions.

On BMG a few weeks ago, a fellow cape codder (PP) mentioned that he’s not sure he believes in climate change. That took a little bite out of my faith in humanity, or more realistically, made me start thinking seriously about scientists’ continuing difficulty in getting the message across. So since a picture is worth a thousand words: from the 2007 IPCC report:


Here's a figure about the rise in atmospheric CO2 concentrations and projections under different CO2 reduction scenarios (from Pacala et al 2004):


When I give talks to school classrooms, I do a little class participation exercise that goes like this: atmospheric CO2 was ~280 ppm (parts-per-million) prior to the industrial revolution a few centuries ago. It is now ~384 ppm. What do they think it should be for a sustainable level? They usually give me numbers in the 250-300 range. Then I show this figure, and point out that we’re running higher than the black line, business-as-usual (worst case scenario). Given the inertia of trying to move away from fossil fuels, CO2 is likely to double pre-industrial levels to 450-500ppm within their lifetimes with significant efforts. If we continue to do nothing it could very well reach as high as 700 ppm. This exercise seems to work well to get the message across.

Back to the NYT Op-Eds: There’s been a lot of dumping lately on the big three US automakers for not producing fuel efficient cars. But that’s revisionist history, over the last few decades Americans have been wanting those bigger SUVs creating the demand. We, the American consumers, are the other dancing partner in our gluttonous use of fossil fuels for transportation. The big three have been happy to oblige – SUVs have a big profit margin. Plus even Toyota has been in the big vehicle game. Sure they developed the Prius and some great hybrid technology, but they hedged their bets with the popular Tundra truck. There is simply no other policy action that would be as effective in reducing US fossil fuel emissions in the near future as increasing the gasoline tax. And it should be revenue neutral, using those funds to reduce income taxes to build popular support. From the NYT Editorial:

Americans did not buy enormous gas guzzlers just because Detroit marketed them relentlessly. They bought them because they wanted big cars — and because gas was cheap. If gas stays cheap, Americans would be less inclined to squeeze their families into a lithe fuel-efficient alternative.
Furthermore, even if the government managed to convert General Motors, Chrysler and Ford to the cause of energy efficiency, cheap gas could open the door for a competitor — Toyota, perhaps? — to take over the lucrative market for gas-chuggers, leaving Detroit’s automakers eating dust once again.
Americans have flirted with fuel-efficient cars before only to jilt them when gas prices fell. In the late 1970s, for instance, they spurned light trucks as gas prices doubled. But as gas prices declined between 1981 and 2005, the market share of sport-utility vehicles, pickups, vans and the like jumped from 16 percent to 61 percent of vehicle sales in the United States.

Personally I find it hard not to feel like a broken record on this subject of carbon taxes, but as a scientist I think its easy to forget that the public isn't looking at the data every day, and they're also thinking about many other important issues. Here's a great cartoon by Justin Bilicki (via the Union of Concerned Scientists ) capturing this sentiment.



And a nice quote to sum it up from Ray at NPR's Car Talk:

I'm sick of people whining about a lousy 50-cent-a-gallon tax on gasoline! I think its time has come, and I call on all non-wussy politicians to stand with me, because our country needs us.

An increase in the Gasoline Tax is just one of the tools in the toolbox. It gets the biggest bang for effort in reducing climate change impact right now. This is just the beginning though: We're going to need many such tools to get this problem under control.

Now is the time for a Massachusetts Automobile Carbon Tax

Today’s Op-Ed column by NYT’s Friedman has an emphasis on coupling a carbon tax with the financial and now potential Detroit bailout plans. There finally is a bipartisan national sentiment that reducing our imported fossil fuel consumption is a necessary component of any plan for our Nation’s future.

With the recent decrease in fuel prices, now is the time to step up to the plate and create a plan for increasing taxes on fossils fuels. As we know, Massachusetts can play a leadership role for the nation with regards to policy on a variety of important matters (Health Care, Gay Marriage, hopefully clean energy production). This is an ideal time for our Massachusetts legislators to show their vision again. We know Obama’s campaign is committed to working on the climate change and national security issues and their direct relationship to imported fossil fuels. Massachusetts can lead the way, showing it is possible, and giving political capital to the ideas of reducing fossil fuel consumption through economic incentives.

This could start with something as simple as raising the gasoline tax in Massachusetts. Currently we are taxing at 41.9 cents per gallon, lower than most states (see map), and much lower than other progressive states such as California (67.1 cents), New York (60.9 cents), and even Detroit’s own Michigan (59.4). Friedman champions the idea of “neutral-revenue” carbon taxes, where all revenue gained is returned as income tax rebates/offsets. This is the key to carbon and gasoline taxes: make them politically palatable by making it clear that all of the increased revenue will return to the taxpayers:

Many people will tell Mr. Obama that taxing carbon or gasoline now is a “nonstarter.” Wrong. It is the only starter. It is the game-changer. If you want to know where postponing it has gotten us, visit Detroit. No carbon tax or increased gasoline tax meant that every time the price of gasoline went down to $1 or $2 a gallon, consumers went back to buying gas guzzlers. And Detroit just fed their addictions — so it never committed to a real energy-efficiency retooling of its fleet. R.I.P.
If Mr. Obama is going to oversee a successful infrastructure stimulus, then it has to include not only a tax on carbon — make it revenue-neutral and rebate it all by reducing payroll taxes — but also new standards that gradually require utilities and home builders in states that receive money to build dramatically more energy-efficient power plants, commercial buildings and homes. This, too, would create whole new industries.

More on the revenue-neutral idea: Nationally, carbon tax rebate checks could be sent out like stimulus checks (although this is perhaps a little too contrived for our new President). Alternatively, simply announce very publicly that the income tax percentage rate will be dropped by 0.4% this year (for example). This could be done in Massachusetts now. Raise the gas tax 25 cents this year (for example), and another 25 cents every year for four years (to start). This creates an immediate long-term incentive for consumers to continue buying efficient cars the next time the need one, phasing it in with a time-scale similar to the long life cycles of automobiles. With gas prices having dropped below $2 in Massachusetts, now is the time to create take action: citizens have certainly noticed the amazingly high prices of $4 a gallon, so 25 cents on $2 gasoline doesn’t seem unreasonable, especially if it offsets income taxes. The offsetting the income taxes part is important: those who buy efficient vehicles or drive less will save more because the reduction in income taxes is uniform – hence those using less than the average will be rewarded. It’s just like that economists’ saying: tax what you don’t want (fossil fuel consumption) not what you want (income!).

Legislators should resist the urge to use this as a revenue builder. Keep it separate from our current state gasoline tax, so this revenue-neutral part is obvious. The political capital is here now for this. If it’s done right (through the revenue-neutral idea), it will have bipartisan support. Our Govenor Deval Patrick commented on this on his live-blogging last summer:

Danny wrote about the gas tax. I am not hostile to the gas tax, but it's not my first choice. But I think we owe the public every attempt and strategy to get savings and efficiencies out of the systems before we go out asking for broad-based tax increases. I also question whether the gas tax will produce the level of new revenues that have been projected, when we are at the same time pursuing strategies to reduce emissions and gain fuel efficiencies.

He’s clearly sensitive to the political difficulties of “broad-based tax increases”. But this is where the need for the revenue-neutral idea should be paired with it. As Friedman, and those writing at the carbontax.org group, and others have pointed out, there has to be some economic (dis)incentives in order to decrease emissions. Compared to outlawing inefficient cars (talk about political difficulties), carbon and gasoline taxes are the most agile policy tool.

Footnotes: Diesel and heating oil are another interrelated problem. You don’t want everyone to switch to Diesel (if it is not taxed), so automobile diesel should be included. But you don’t want individual homeowners to suffer with higher heating bills unless it is coupled with a program for increased home insulation and heating efficiencies. Automobile diesel could be taxed similarly to gasoline, but home diesel distributors/sales would not be included in the short-term (first few years), until a coordinated home fuel efficiency program is implemented.