Seems like more and more people—even conservativeeconomists—are going on record in support of higher gas taxes.
From an economists’ point of view, it’s a bit of a no brainer. Like just about any addiction, our gasoline habit carries lots of “externalities”—ie., costs that fall on everyone, rather than just the person who uses the gas. (Think climate change, oil spills, air pollution, security vulnerabilities, international military entanglements, economic risk from oil price shocks, etc.)
If we consumers had to pay those costs every time we filled our tanks, then we’d tend to use gas a little more sparingly—and we’d create fewer externalities as a result. Plus, the taxes could provide a source of revenue to deal with the problems created by energy consumption—say, a source of revenue for energy efficiency, to ramp down our contribution to climate change
But that begs the question—just how high should the taxes be?
There’s no easy answer to that question, since there are so many uncertainties involved. Estimates of various military costs of petroleum vary by as much as a factor of six, for example (see this pdf for a summary). But taking a limited look at just the climate impacts of gasoline consumption, I’d say that a tax of, oh, about 25 cents (US) per gallon is a reasonable place to start.
That works out to roughly a penny per mile.
Applied to both gas and diesel, that tax would raise about $2 billion per year to fight climate change in the Pacific Northwest alone.
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I don’t think that a quarter per gallon is definitive, by any measure. But it seems about right to me.
The European Climate Exchange—which, at this point, is the best-functioning carbon market on the planet—keeps a record of daily closing prices for a metric ton of carbon. Adjusted for US dollar-to-euro exchange rates, it looks to me that cost of a one-metric-ton CO2 offset averaged about $25 since the inception of the market in early 2005. (The market’s been pretty volatile, especially lately, but the prices have mostly been between $20 and $30 US.)
Burning a gallon of gas in a car emits about 19.6 pounds of CO2 directly, plus some additional CO2 in petroleum extraction, refining, and transportation. So when I do the math, the cost of carbon offsets works out to about 25 cents per gallon, give or take.
There are a few points worth mentioning here. First, and obviously, this is just the carbon costs, using recent figures for carbon offset prices. If you add in other externalities, the price ought to be higher. Plus, if the cost of carbon offsets rises—as it may, once the early, easy opportunities for offsets get used up—the cost per mile will go up too.
Second, this represents the cost of the offset—roughly speaking, how much we’d expect to pay to reduce carbon emissions somewhere else in the economy (through, say, improvements in home heating or lighting, or increasing wind power, or subsidizing efficient cars, or somesuch). It doesn’t account for the cost of climate change itself—which, according to recent estimates, may be astronomical. If you had to capture the cost of the global warming’s impacts in a carbon tax, the price would probably be a lot more than a penny a mile.
And lastly, a penny a mile seems pretty darn cheap to me. After all, the price of a gallon of gas has fluctuated by about $1.80 over the past three years. Put in perspective, a 25 cents per gallon gas tax isn’t such a big deal. Not that that makes it any more palatable politically. But a penny a mile seems like a relatively small price to pay, given the stakes.
Clark,I fully agree with you that a penny a mile is cheap. I get nervous when gas prices drop (as they are now) as it seems that this causes most Americans to forget about global warming. Higher gas prices forces them to confront the issue daily.My only concern with your proposal is the appropriation of funds. Here in Washington, this money may get diverted to the “crisis” of the moment. I would hope that the money would only be used for a “source of revenue for energy efficiency, to ramp down our contribution to climate change”.
An increase of 25 cents/gal. seems way too low to have a significant impact on auto use, which ought to be the goal of new gasoline taxes. Buster
Assuming the number of 25 cents per gallon to offset the produced carbon, and given (in another Sightline article attributed below)residents of Seattle, Portland, Spokane, Eugene and Salem waste about 82 million gallons of gasoline because of congestion, it appears that it would cost (at least) 20 million dollars a year to offset just 5 *cities* worth of Congestion-caused CO2. What would the national (let alone Global) cost be? Seems to me congestion has to be a significantly more important issue on the the list of immediately actionable emission-reducing efforts.Congestion article: http://www.sightline.org/daily_score/archive/2007/09/20/congestion/?searchterm=emissions%20due%20to%20traffic