This could start with something as simple as raising the gasoline tax in Massachusetts. Currently we are taxing at 41.9 cents per gallon (state+federal tax), 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 “revenue-neutral” 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 they 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 broad citizen support. Our Governor 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 (a great source of information), 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.
Here is the link:
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p>http://danielbosley.blogspot.c…
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p>Representative Bosley is actually in a position to have an impact in this area, so I am recommending his blog post on this topic.
So there’s no issue with applying such a tax to diesel.
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p>Frankly, I think there should be a tax on home heating oil, provided, as mak mentions, that the revenue goes to reducing demand for heating oil through support for audits, insulation assistance, etc.
but I would recommend you hold off on the heating oil tax for the first few years… take money from the additional gasoline tax and dump it into assistance for home heating. Let people know that the tax is coming, and give them a few years to prepare by lowering their consumption [or even converting their single family Victorian to a two family, so the same amount of heat is paid for by twice the number of families].
The idea of taxing home heating oil feels like taxing necessities like clothes and food, which we are progressive enough not to tax in MA.
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p>Having said that, it’s time to get everyone, especially those of limited means, thinking about the demand side more than the supply side. But I agree with stomv that you’d want to move slowly on this one.
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p>At my college there was a group called Operation Insulation that went around improving the building envelope of local low income houses. Staffed by a bunch of idealistic but poorly-trained-in-the-manual-arts college students, it had its flaws (I remember breaking someone’s window- which we fixed soon enough), but overall it was a pretty effective program.
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I wonder if this could be built on as a program. I guess NStar does energy audits, that’s a similar sort of thing. But it doesn’t get over the activation energy and cost of making transforming all of the regions houses to being more efficient. Sounds like a great Americorp project.
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p>Also, I’ve been thinking a lot about wood burning stoves lately. I hear there’s been a surge towards that as a heating source, which is good in that it’s using modern (recently fixed) carbon rather than fossil (hopefully sustainably harvested). But it’s bad in that it creates more pollution than oil and natural gas, especially the older wood burning stoves.
In a mobile society cars and the ability to drive them is quite high on any list of necessities, to at very least get to work and back. I’m not convinced it works anyway; it certainly doesn’t for me. I didn’t drive less than I would have when gas was $4.00+ per gallon and I’m not driving extra now that its well under $2.00. What we need to do is insist on better fuel efficiency. From what I understand, Europe and Japan are way ahead of us in MPG standards and American auto companies know how to make much more efficient cars, but were basically bought off by the oil industry. If we must advocate tax increases let’s at least not sound so darn gleeful about it; it just plays to the stereotype of our side. This is one of those issues that tends to make a bubble out of the liberal blogosphere. In the outside world I’m hearing alot of objection to this idea.
Its not (only) that people drive less when gas prices are high. But they also choose to buy more efficient vehicles. For example, dealers can’t sell SUV’s now (hence one of the reasons for the proposed US automaker bailout). But the consumers need to know prices will stay high in order to make long term decisions about what kind of car to buy. Hence the dip in prices now is the perfect time to start the revenue-neutral plan (see above).
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p>Also, it’s not about liberal/conservative anymore, as Jeanette Winterson, a favorite author of mine, wrote:
In your case, neither a higher gas tax nor higher efficiency standards would make a difference until you bought your next vehicle, at which point both would have likely affected your choice. You would have chosen a higher MPG vehicle (due to operating cost due to increased gas tax), or have been forced to buy one with higher MPG (due to CAFE or similar).
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p>Fuel prices (plus tax) affect us over different time scales.
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p>As you indicated, many of us don’t change our habits over short timescales. But they do over longer timescales, as we change jobs, vehicles, homes, all of which affect our transportation fuel use (and, for the last one, home fuel use, which for many of us is greater than our gasoline consumption). Over these timescales, price signals certainly have an affect.
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p>I find it ironic that you are worried about the liberal tax stereotype while ignoring the liberal over-regulate stereotype. The thing about a gas tax is that it’s more economically efficient (especially if revenue-neutral) than CAFE, a regulation that I’ve never been a big fan of (but supported because there haven’t been any other better options actually put forth).
Seems to me a good way way to anticipate higher gasoline prices and blunt their impact when they arrive. An appropriate combination of markets & command-and-control.
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p>Obviously the regulations have to be written correctly & probably not by auto-industry lobbyists.
If you don’t think high fuel prices affected how much people drove, check out this chart.
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p>I put this together at Swivel. I need to go back and make the fuel prices trailing 12 month averages, which is what the vehicle-mile-traveled data is (this is necessary because the data has a strong seasonal component).
(Nearly) everyone can reduce their consumption by 10% starting now.
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p> * Fill up your tires to full air pressure. In the winter, thanks to PV=nRT, they tend to be under inflated. You could lose 3% here, plus wear out your tires faster, plus not have as responsive handling in times of need.
* Clean out your car. All that extra weight takes a slight ding out of your mpg. The general rule is 1% per 100 pounds.
* Anticipate. Look ahead to the next light. If it’s red, start coasting now. If it’s green but there’s a queue of cars and you’re going to have to break before you go, start coasting now. Easy on the brake by coasting will save you 2%, or more with lots of city driving. Easy on the gas can save you another 2% or more.
* No idling. Enough with this “warm up the car” crap — that stuff stopped being important for the engine 30 years ago. Waiting to pick up your kid from school? Turn off the engine. Thanks to computer controlled fuel injectors, it takes almost zero gasoline to start your engine, so if you’ll be idling for about six seconds or more, save by killing the ignition.
* It’s tough this time of year, but really try to not drive the short trips. Walk from work to lunch 3 blocks away. Consider riding a bike to do a short errand from time to time.
* If you’ve got a lawn, consider using a rake instead of a leaf blower, and consider converting some of your green lawn to a vegetable garden or even just a more natural landscaping. Less leaf blowing and less lawn mowing is less gas guzzling.
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p>For mid term gasoline consumption, when it’s time for a new car, make mpg more important than hp.
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p>In the long term, make the full cost of your commute [fuel, time, stress] a bigger part of your consideration about where your next job or your next home is located. Sure, this doesn’t impact everyone but every person who lives closer to work [or is able to switch to public transit] is one fewer car on the road during your daily traffic grind. That helps everyone.
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p>So yes, there is some elasticity to gasoline consumption, even in the short term [10% slack], and certainly over a span of years. The average ownership of an automobile is a mere 7 years [although likely more due to a recession], if we consider it 10 years and imagine that every single car swap (new or used) gets the person an additional 5 mpg, then we’re getting 0.5 mpg more as a fleet every single year. Since we get roughly 25.3 mpg now as a fleet, it would be an improvement of 0.4% every year based on car turnover. The higher the price of gas, the more pressure to get that 5 mpg improvement.
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p>Of course, it’s important to take this money and help people use less gasoline. More public transit. More rules requiring smart growth so people don’t have to drive to the next town to find a dry cleaner. Allow more density near transit hubs so people can more easily choose to live where public transit options exist. More broadband in rural areas so more people can telecommute. Better broadband in urban and suburban areas so high data transfer including quality video becomes possible, helping even more people telecommute. Get more kids getting to school on their own power instead of inside a bus or their parents’ cars. Pass the feebate measure.
It’s only 4 miles, but I nearly lost a couple toes- time to invest in some good insulated shoe covers. The rest of me was fine; I was a little sweaty by the time I got to work. It’s all about (many) layers.
I noticed a significant reduction in overall speed on the highways. There seemed to be fewer Hummers and Suburbans, too. Some of that may be confirmation bias, but I’m confident that not all of it is.
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p>The ability of people to get to work is not dependent on everyone having an SUV, or even on everyone driving a separate car to work. Cheap fuel has encouraged some bad habits, but that’s all they are. We can do things differently.
The robber barons in Detroit (not very wise or strategic thinkers) love making us and selling gas guzzling SUVs. It would be too much to think that they would have helped the nation lower our dependence on oil (e.g. fuel efficient autos).
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p>Now let’s bail these idiots out because they have us over a barrel by threatening to layoff workers. Why spend tax dollars on efficiency or conservation when you can blow it on corporate jet rides and SUVs or other wasteful and unnecessarily large vehicles (unpatriotic and wasteful)?
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p>Bailing out Detroit would help keep the Russian oligarchs and Saudi princes rich and living in opulence. Why in the world would we want to ruin these vultures day?
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p>It is probably too much to think that something so liberally minded could actually make sense and be patriotic!
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I was thinking about the hard time the auto industry is getting some more, relative to the financial industry’s generous bailout. While there’s no doubt the big three have done little to produce real energy efficient cars and deserve blame, the relative difficulty they’re having in getting a bailout almost feels like they’re a scapegoat. It seems to have been largely forgotten that there was a huge amount of demand for those inefficient SUVs and big trucks. SUVs were the vehicles the US car companies made a lot of profit from. Even Toyota made a lot of bigger trucks and some SUVs, and that’s partly why they’ve taken some of a hit this year (as opposed to Honda which is a rockin’). The consumers are certainly to blame as well in this mess, and they were spurred on by the amazingly cheap ~1$ gasoline for much of the past decade. It seems like the criticism of the car industry is a little one sided: almost like a catharsis for consumer guilt.