10/11/2007 by Charles Komanoff
After being roundly ignored, or worse, by the mainstream environmental groups, Rep. John Dingell’s carbon-tax proposal finally gained a ringing defense last weekend in the Financial Times (U.K.), reprinted below.
While we don’t share Clive Crook’s disdain for CAFE standards — he overplays the "rebound effect," for one thing — we appreciate his clear expression of the need for carbon taxes.
Incidentally, according to ACEEE, the enviro-backed Markey-Platts CAFE bill would save an estimated 2.1-2.8 million barrels of oil a day by 2025, reducing CO2 emissions by roughly a third of a billion metric tons a year. By our estimates (see spreadsheet), Dingell’s hybrid carbon tax would save 4.5 million barrels of petroleum and over 1.5 billion tonnes of CO2 — nearly double the oil and almost five times the carbon — if the 5-year ramp-up in Dingell’s proposed bill is extended to 2025.
Still, regulatory mandates and market-correcting price incentives are complementary, not mutually exclusive. How much more must the climate spin out of control before the environmental community figures that out?
Posturing will not save the planet
By Clive Crook
[Published in the Financial Times (registration required), Oct. 7 2007]
The website of the Sierra Club, the environmental group, says that "the biggest single step" America can take to reduce global warming and save consumers tens of billions of dollars is to adopt a stricter corporate average fuel economy (Cafe) standard. Legislation that would force carmakers to sell more fuel-efficient cars is being debated again on Capitol Hill. A lot of people think the Sierra Club is right.
Last week Thomas Friedman, the trope-injected megapundit of The New York Times, assailed the country’s big three carmakers for resisting. He especially deplored their allies, Toyota – green Toyota, for shame – and the congressional delegation from Michigan, led by John Dingell. In opposing a strict new rule, they are helping Detroit to "commit suicide". America’s car industry got into trouble in the first place only because of its reluctance to be made to innovate, Mr Friedman explains. Washington offers to compel it to make the cars people want (and hence become more profitable) and the idiotic manufacturers, cheered on by Toyota and Mr Dingell, object. This is not pork-barrel politics, Mr Friedman says, but "empty-barrel politics". Empty barrel, you see, as in a barrel of oil.
Far from being the biggest single step the US can take on this issue, tighter Cafe standards might be the smallest single step – apart that is, from doing nothing, and doing nothing at least has the virtue of being cheap. The endless posturing and counter-
posturing over Cafe is Washington displacement activity in its purest form – something to entertain the voters while failing to confront the actual problem. Support for a stricter Cafe rule is not a sign of being serious about climate change but just the opposite.
Greenhouse-gas emissions from cars and light trucks account for about 20 per cent of the US total and Cafe rules affect only new vehicles. The initial effect of the rules is therefore on the margin of a margin. Yes, the impact would increase over time, but over time other things will change as well. If you make driving cheaper, people will drive more. Some of these savings will be spent on more cars or bigger cars or on sport utility vehicles. New cars get dearer relative to old cars because the regulation adds to costs, so people hang on to older, less efficient cars longer.
All these self-nullifying effects were seen in response to the existing Cafe standard. In the end, a tighter rule would make America burn less gasoline and emit less carbon dioxide than otherwise – but not that much less.
Mr Friedman would put this in terms you can understand. It is not small beer but low-carb beer, in a bigger glass, with a whisky chaser.
Cafe is a kind of tax, of course – but a tax that is hidden. This is both its greatest political attraction and the clearest proof of its supporters’ unseriousness. Put this mandate on the car companies, its advocates say, and they must deal with it: everybody else is better off. The companies themselves would gain, for heaven’s sake, if only they had the wit to see it.
But if this is true, then the tight new standard is surely too loose. Why not tighten it more, and forget about phasing it in? Instant innovation for free. Before you know it the carmakers will be paying pensions again and we shall be getting 500 miles to the gallon. Why not run the whole economy this way?
It is bad that the underlying cost of Cafe is hidden, but worse that its effects are misdirected. The climate does not care whether greenhouse gases come from Hummers or Priuses, or from cooling your house or heating your swimming pool. We can set
stringent fuel-economy rules for all energy-consuming activities, or we can recognise that the problem is carbon emissions, whether they come from tailpipes or power plants, and tax those instead. Make all carbon-based energy dearer and innovation on a wide front will follow, as it must if this problem is to be seriously addressed. If people want SUVs, fine – so long as they pay the full costs of driving them and economise efficiently on other forms of carbon-releasing energy too.
If Americans chose to, of course, they could buy fuel-efficient cars already – no innovation required. While nobody was looking, engineers in Europe and Japan were cunningly designing smaller cars. Yes, you just make them smaller! And drivers there
snap them up because they have to pay two or three times as much for gasoline as Americans. Makes you think.
Switching to a lower-carbon economy has a cost. A high tax on gasoline makes it explicit, and is therefore dismissed as politically impossible. But the idea that the Cafe approach is costless, or that its costs will fall entirely on companies that had it
coming anyway, is infantile. Given a choice between the ambitious and the fatuous, is it not better to press for the first?
And is the carbon-tax approach really so unrealistic?
Its chances are not improved by calling for inferior alternatives. A lot depends on who speaks up for the idea. Mr Dingell, so criticised by Mr Friedman and others on this issue, is trying to drum up support for a gas tax, a carbon tax and a cap on mortgage-interest tax relief for energy-guzzling houses. He has put draft legislation out for comment. Sure, Michigan’s Mr Dingell is in the pocket of America’s car companies. That does not mean he is wrong.
Note: Thanks to Tom Stokes of the Climate Crisis Coalition for posting the FT piece and supplying our headline.
