The Benefit of Increasing Federal Gas Taxes

It is difficult to imagine a situation where anyone on Capitol Hill would think to propose an increase in taxation, yet it seems that many think now is the right time to encourage lawmakers to consider just such a change. Here's why:

Highest average US gas price: $4.114, on 07/14/2008
Current average US gas price: $1.847, on 01/24/2009

In just 6 months, we have seen a 55% drop in prices at the pump. An additional $0.50 in taxation on top of existing prices would be a marginal increase relative to where prices were through most of 2007 and 2008.

Before going any further, I admit that any increase in gas prices, whether market-driven or imposed, is problematic. The cost of goods will increase, as we saw during 2007 and 2008, as a result of higher transportation costs. Those who bought SUVs and can't afford a smaller car could be forced to make difficult decisions about how to budget their money. With increasing joblessness, people who are now unemployed might face inhibited mobility. In many American cities, there may be insufficient public transport infrastructure to provide mobility to those who could no longer afford to drive their cars. Higher gas prices might also affect small businesses already struggling in the current economic climate.

There are, however, many potential benefits to increasing the federal gas tax. An incremental and continuing increase was suggested by the National Surface Transportation Policy and Revenue Study Commission. Evident from the title of the commission, highway infrastructure maintenance was their primary funding concern. In 2007, there was a $105 billion shortfall in funding for such maintenance and that gap is projected to increase each year. Revenue from an increased tax could be used to decrease that deficit.

Despite the obvious importance of highway infrastructure maintenance, I would propose using some of the money raised to expand public transport networks. This will help provide alternatives to those who might be unable to afford gas if prices are increased. It will also reduce the need to expand existing highways, by providing transportation options with smaller carbon footprints.

The increased cost of fuel will also encourage car owners who can afford to continue driving to choose smaller new cars. In the period from January 2007 to November 2008, car sales exceeded truck sales, reversing a trend dating back to 1998. During that period, gas prices reached record highs. As soon as gas prices decreased toward the end of 2008, light truck sales surpassed passenger cars once again. President Obama has identified this pattern of energy cost amnesia as 'shock to trance'. An increase in gas taxes now may help moderate that behavior by encouraging car buyers to always consider buying smaller cars and make all drivers contemplate carefully what driving they must do and what they can avoid to reduce fuel consumption.

Perhaps now is the time to make this change. It is politically risky but will also provide much needed federal income to support mass transit and highway infrastructure while reducing transportation-related GHG emissions. Everyone will feel the pinch but we may be well served by the change.

thoughts on bush’s climate change goals and speech

So after seven years in the White House, President Bush has finally proposed a plan to mitigate climate change and curb our greenhouse gas emissions. See here. Unfortunately, the President’s approach and justifications leave much to be desired, and seem more like leaving the problem to future administrations, and leaving us with the impression that his Administration made a (positive) difference.

One of the most startling/puzzling/frustrating things about the speech is that it makes the U.S. out to be the leader on climate change, when in fact we are the laggard. Bush’s speech has an air to it that the rest of the world hasn’t been addressing climate change correctly, and that our way is the solution. This is pretty ridiculous considering that we have failed to regulate CO₂ emissions, join the Kyoto Protocol or any other number of actions the rest of the world has undertaken.

It should be noted that the Kyoto Protocol isn’t perfect, and I partly agree with Bush’s assessment that it does not address India and China, but waiting for over a decade to impose regulations (well, even admit that CO₂ is a problem) is irresponsible.
What’s most disappointing in the speech is the President’s view of the authority and regulations that are in place and how they should be applied to climate change. Take his stance on the Clean Air Act for example:

As we approach this challenge, we face a growing problem here at home. Some courts are taking laws written more than 30 years ago — to primarily address local and regional environmental effects — and applying them to global climate change. The Clean Air Act, the Endangered Species Act, and the National Environmental Policy Act were never meant to regulate global climate.

It’s a shame that laws designed to protect the environment can’t be applied to a problem that affects the environment (sarcasm).

For example, under a Supreme Court decision last year, the Clean Air Act could be applied to regulate greenhouse gas emissions from vehicles. This would automatically trigger regulation under the Clean Air Act of greenhouse gases all across our economy — leading to what Energy and Commerce Committee Chairman John Dingell last week called, “a glorious mess.”

Keep in mind that Representative Dingell is from Michigan’s 15th district, which is the heart of American auto manufacturing (Detroit, Dearborn etc…). Of course he would oppose any regulation on GHG emissions on vehicles.

It’s interesting to hear Bush talk about limiting the role of government in terms of the environment, when everything else his Administration has done has increased the role of government in our lives. Not quite the conservative platform.

But for good measure, we get a little scare tactic of the cost of the environment vs. our economy. Surely we don’t want to raise taxes or curb economic growth (which seems to be the only way we measure economic success, for some reason).

The wrong way is to raise taxes, duplicate mandates, or demand sudden and drastic emissions cuts that have no chance of being realized and every chance of hurting our economy. The right way is to set realistic goals for reducing emissions consistent with advances in technology, while increasing our energy security and ensuring our economy can continue to prosper and grow.

The idea is not to cripple the U.S. economy (we’re doing a great job at that through other practices), but to set the rules of the road so industry can adapt their businesses. No power generator wants to install emission capture equipment without knowing exactly what their competitors have to do. Government must step in and set CO₂ limits.

But to keep all of this in perspective, Bush’s plan might be a pretty realistic assessment of what the U.S. will have to do to reduce emissions. This is not necessarily a good thing, because I think it implies/reinforces the idea that the U.S. is lazy. While setting goals of capping emissions by 2025 seems far off, it might be the only practical solution, or at least the most reasonable.
David Victor, head of Stanford’s program on energy and sustainable and development spearheads this idea:

That is a pessimistic assessment, but it may be realistic. Look, for example, at the E.U. where, after getting all the credit for the unification of Germany and for the shift to gas in the U.K. (all of which lowered emissions), total E.U. emissions are now, once again, inching back up. I am sure that the Bush goal is achievable; a more aggressive goal is probably also achievable, but at higher cost. My sense is that a more aggressive goal would be worth that cost; I don’t know if the American people are yet prepared to pay for it.

Maybe it’s a case of better late than never, but it’s insulting to hear President Bush urging action on climate change when the rest of the world has been waiting on us to act. As with other real problems, this Administration is leaving this up to the next one to deal with.

China World's Top Carbon Polluter

I wanted to point out this article on the BBC about China. The article says that in a report due out next month, China is officially the top GHG emitter.

I think everyone knew this was coming, or thought it already did, but it is interesting to see researchers come out and say it finally (this time from the Unviersity of California - doesn't say which city). Their data only went until 2004, but they predicted the data forward to the current day. They actually estimate that China surpassed the US in 2006 or 2007.

The article doesn't say too much, but I think the report will be pretty interesting when it comes out.