Comments on: The Gas Tax and the Un-Tax http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/ Pricing carbon efficiently and equitably Fri, 29 Aug 2008 03:22:00 +0000 http://wordpress.org/?v=2.2.1 By: Russell Westfall http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-22000 Russell Westfall Thu, 08 May 2008 22:33:00 +0000 http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-22000 The simplest, most effective (top down) way of lowering emissions <strong>and</strong> gas prices would be to lower speed limits - 5 mph across the entire spectrum. The simplest, most effective (top down) way of lowering emissions and gas prices would be to lower speed limits - 5 mph across the entire spectrum.

]]> By: John Burton http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21933 John Burton Wed, 07 May 2008 13:34:33 +0000 http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21933 A "gas tax" is a NO NO to voters. A "revenue neutral carbon tax" is better. Proceeds somehow to be available to low income people.   A "gas tax" is a NO NO to voters. A "revenue neutral carbon tax" is better. Proceeds somehow to be available to low income people.
 

]]> By: James Handley http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21851 James Handley Mon, 05 May 2008 13:09:16 +0000 http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21851 Will, Yes, spread the word!   Pls. write to magazines & newspapers; call TV & radio shows.  Cite the info. you've gleaned here and elsewhere.   Virtually all economists agree on need to use price signals to avert climate disaster; the public and politicians aren't there (yet).   Revenue-neutrality (e.g., tax with a dividend) will make an "un-tax" palatable and even popular.  British Columbia is boldly leading the way. Fuel demand IS "elastic" (but as you note, it's sluggish).  A doubling of price is estimated to reduce fossil fuel demand by roughly 40%.  Long term elasticity is much higher, as substitutes and more efficient products are developed and become available. Rational expectations theory (an important tool of economists and traders) says <strong>EXPECTED price affects behavior much more than present price</strong>.  Thus, a gradually-increasing carbon tax would have a far greater effect than a one-time tax increase.  We'd install super-efficient insulation, lighting and windows NOW if fossil fuel prices were sure to rise 6% every year from now on.  Similarly, we'd start building wind and concentrated solar farms NOW (and cancel orders for coal-fired monsters).   Will,
Yes, spread the word!   Pls. write to magazines & newspapers; call TV & radio shows.  Cite the info. you’ve gleaned here and elsewhere.   Virtually all economists agree on need to use price signals to avert climate disaster; the public and politicians aren’t there (yet).   Revenue-neutrality (e.g., tax with a dividend) will make an "un-tax" palatable and even popular.  British Columbia is boldly leading the way.
Fuel demand IS "elastic" (but as you note, it’s sluggish).  A doubling of price is estimated to reduce fossil fuel demand by roughly 40%.  Long term elasticity is much higher, as substitutes and more efficient products are developed and become available.
Rational expectations theory (an important tool of economists and traders) says EXPECTED price affects behavior much more than present price.  Thus, a gradually-increasing carbon tax would have a far greater effect than a one-time tax increase.  We’d install super-efficient insulation, lighting and windows NOW if fossil fuel prices were sure to rise 6% every year from now on.  Similarly, we’d start building wind and concentrated solar farms NOW (and cancel orders for coal-fired monsters).  

]]> By: Will Candler http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21833 Will Candler Mon, 05 May 2008 02:39:27 +0000 http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21833 The only problem with this blog is that we are preaching to the converted.  However, it may serve some purpose to rehears the arguments to be used with the unconverted.     1.  For all practical purposes the supply curve for gasoline is vertical.  The oil companies have ample incentive to produce all they can. (Except perhaps for political power demonstrations in the context of adverse legislation).     2.  If the short-term supply function is vertical, then the price is determined by where it intersects the demand curve.      3.  The price being fixed, it matters little whether 5% is tax and 95% goes to the oil companies, or if 40% is tax and 60% goes to the oil companies. Or even (McCain/Hillary) 0% is tax and 100% goes to the oil companies. Of course it makes a big difference to oil industry profits, public revenues, and oil industry pressure on politicians, but very little difference to the price of gasoline.       4.  Far from the run-up (by no means exhausted) being an argument for a tax-holiday, it is an argument for a tax increase:  Wouldn’t you rather pay $2 to the government (as a tax) and $2 to the oil company than $4 to the oil company? <em>The inconvenient truth is that the oil companies do not have enough gasoline to drive the price back down to $2 per gallon.  </em> <em>  </em> 5. If the price of gasoline is going to be $8 in 2010, wouldn’t we be doing everybody a favor by raising the price to $8 a gallon now?  This would save 2 years of investment in low mpg vehicles, and housing far from public transport.   The only problem with this blog is that we are preaching to the converted.  However, it may serve some purpose to rehears the arguments to be used with the unconverted.
 

 
1.  For all practical purposes the supply curve for gasoline is vertical.  The oil companies have ample incentive to produce all they can. (Except perhaps for political power demonstrations in the context of adverse legislation).
 

 
2.  If the short-term supply function is vertical, then the price is determined by where it intersects the demand curve. 
 

 
3.  The price being fixed, it matters little whether 5% is tax and 95% goes to the oil companies, or if 40% is tax and 60% goes to the oil companies. Or even (McCain/Hillary) 0% is tax and 100% goes to the oil companies. Of course it makes a big difference to oil industry profits, public revenues, and oil industry pressure on politicians, but very little difference to the price of gasoline.  
 

 
4.  Far from the run-up (by no means exhausted) being an argument for a tax-holiday, it is an argument for a tax increase:  Wouldn’t you rather pay $2 to the government (as a tax) and $2 to the oil company than $4 to the oil company? The inconvenient truth is that the oil companies do not have enough gasoline to drive the price back down to $2 per gallon.
 

 
5. If the price of gasoline is going to be $8 in 2010, wouldn’t we be doing everybody a favor by raising the price to $8 a gallon now?  This would save 2 years of investment in low mpg vehicles, and housing far from public transport.
 

]]> By: Carbon Tax Center » An Inconvenient Tax - May 2008 http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21827 Carbon Tax Center » An Inconvenient Tax - May 2008 Sun, 04 May 2008 22:41:53 +0000 http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21827 [...] to the “Headlines” column on our home page almost every day. Take a look at the excellent guest post by James Handley, an extraordinary volunteer at CTC, addressing the gas tax holiday issue. It was [...] […] to the “Headlines” column on our home page almost every day. Take a look at the excellent guest post by James Handley, an extraordinary volunteer at CTC, addressing the gas tax holiday issue. It was […]

]]> By: Wonk Room » What The Gas Tax Holiday Has To Do With Global Warming http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21792 Wonk Room » What The Gas Tax Holiday Has To Do With Global Warming Sat, 03 May 2008 17:10:28 +0000 http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21792 [...] James Handley at the Carbon Tax Center describes the problem in especially vivid terms: Now the specter of catastrophic global warming is snapping into sharp focus like a jack-knifed tractor trailer blocking all lanes as we careen along at 75 mph. Sirens are wailing and lights are flashing thanks in large part to the Nobel-winning work of the Intergovernmental Panel on Climate Change and Dr. James Hansen’s NASA-Goddard Climate team, un-muzzled despite Bush Administration threats. And yet, U.S. energy policy is still “pedal to the metal” on the global warming accelerator — with McCain and Clinton urging us to “step on it” with a gas tax break. The exact opposite of what economists say is the essential step: pricing carbon emissions. [...] […] James Handley at the Carbon Tax Center describes the problem in especially vivid terms: Now the specter of catastrophic global warming is snapping into sharp focus like a jack-knifed tractor trailer blocking all lanes as we careen along at 75 mph. Sirens are wailing and lights are flashing thanks in large part to the Nobel-winning work of the Intergovernmental Panel on Climate Change and Dr. James Hansen’s NASA-Goddard Climate team, un-muzzled despite Bush Administration threats. And yet, U.S. energy policy is still “pedal to the metal” on the global warming accelerator — with McCain and Clinton urging us to “step on it” with a gas tax break. The exact opposite of what economists say is the essential step: pricing carbon emissions. […]

]]> By: David Collins http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21766 David Collins Fri, 02 May 2008 23:33:04 +0000 http://www.carbontax.org/blogarchives/2008/05/01/the-gas-tax-and-the-un-tax/#comment-21766 Very few commentators point out (or even understand) that eliminating the 18.4¢ a gallon gasoline tax will not reduce the gasoline price by any 18.4¢ a gallon; supply constraints and demand will bring the price to close to where it would be otherwise (economists, please help: the "elasticity" this retired engineer is familiar with is Hooke's Law, as oversimplified in δL = σ/E). The tax holiday is even dumber than Obama says, and too few folks are pointing this out. Encouraging to Obama supporters, but scary if somebody else gets elected to the White House. Very few commentators point out (or even understand) that eliminating the 18.4¢ a gallon gasoline tax will not reduce the gasoline price by any 18.4¢ a gallon; supply constraints and demand will bring the price to close to where it would be otherwise (economists, please help: the "elasticity" this retired engineer is familiar with is Hooke’s Law, as oversimplified in δL = σ/E). The tax holiday is even dumber than Obama says, and too few folks are pointing this out. Encouraging to Obama supporters, but scary if somebody else gets elected to the White House.

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