It’s Time for a Floor Under Gasoline Prices
11/1/2008 by Daniel Rosenblum
Just a couple of months ago, the newspapers were full of stories about people who had cut back on their driving because of high gasoline prices. Ever so briefly it looked like Americans were going to make lasting changes in their driving habits and car-buying choices. People didn’t like high gas prices, but it looked like good news for climate change.
Suddenly the economy collapsed, pump prices plummeted and this week the New York Times reported that As Gas Prices Go Down, Driving Goes Up. Will people start buying Hummers again? Not now, since consumer demand is down across the board. Will gas consumption return to earlier levels? Probably not soon, since gas usage is affected by income as well as price. Since the economic news just keeps getting worse with job losses announced every day, the income effect is likely to hold down gas consumption until we muddle through the recession.
What happens when the economy improves? Will people decide that high gas prices this past summer were just an aberration? Will they return to thinking that gas prices go up and then inevitably go down, so why invest money in more efficient vehicles and change their driving habits?
Should we defer putting a price on carbon until the economy improves? Not surprisingly, given where you’re reading this, the answer is absolutely not! Now is the time to take action so that consumption doesn’t spiral upwards when the economy eventually improves. Now is the time to, at a minimum, put a floor under the price of gasoline and other fossil fuels by beginning to phase in a carbon tax. Now is the time to make sure that an increasingly large portion of the price of gas is collected as carbon taxes to be returned to the American economy, instead of going to oil companies and oil producing countries.
Next week the country will finally be able to turn its attention from the election to governing. Let’s hope the new Administration and Congress take prompt action to address climate change by beginning to phase in a price on carbon as soon as possible.
Photo: DRosenblum
Perhaps a more palatable and acceptable use for the taxes imposed on gasoline is to use a large proportion of those proceeds to advance the development of green technologies to Canadian Entrepreneurs (adds jobs), businesses, giving a tax break to home owners who invest in designated green technologies and to give direct benefits to low and assisted living persons.
It’s been proposed before, but considering the looming economic fallout, this is as good a time as any for implementing long term and sustainable change.
The current Carbon Tax is very outdated and appears only earmarked to bolster the Canadian budgetary bottom line. There does not appear to be any long term investment geared towards the consumers and a larger development base where Canadian consumers and entrepreneurs can participate en-masse.
Comment by Stephen Chua — November 1, 2008 @ 2:57 pm
This is a terrible idea. Putting a floor on gasoline prices will only pad the profits of the oil industry. No gas station owner in his right mind would lower the price below the floor. Now if you meant that now is the time for increased gasoline taxes then say that, not that we should put a floor on gasoline prices.
Comment by David Anderson — November 1, 2008 @ 4:30 pm
Stephen, Thanks for your constructive ideas regarding the possible uses of carbon tax revenues. The Carbon Tax Center has proposed that the vast majority of the revenues be returned to the public, with, perhaps, a very small amount utilized to mitigate the otherwise negative impacts of carbon taxes on low-income energy users. We have little confidence that governments will make the best choices regarding investment in new technologies, having seen the U.S. government waste huge sums of money on synfuels, nuclear power and ethanol. A carbon tax will internalize the societal costs of using fossil fuels, making coal and other fossil fuels more expensive and, at the same time, increasing the competitiveness of energy efficiency and a variety of green technologies.
Your note focused on Canada, so I should point out that: 1) my post was primarily directed to the U.S.; 2) British Columbia’s carbon tax is revenue-neutral and revenues are in no way earmarked to bolster BC’s bottom line; and 3) the Green Shift proposed by Stéphane Dion, that went down to defeat along with Dion, was generally revenue-neutral and would not have bolstered the Canadian budgetary bottom line.
Finally, you raise the issue of whether what you refer to as the "looming economic fallout" should be a consideration in how carbon tax revenues are spent. It’s an important issue and I’ve been giving some thought to whether some portion of the revenues would be better spent as part of a stimulus package rather than simply disbursed as dividends or tax reductions. More on that in a later post.
David, You might want to read my post again. I said, "Now is the time to, at a minimum, put a floor under the price of gasoline and other fossil fuels by beginning to phase in a carbon tax. Now is the time to make sure that an increasingly large portion of the price of gas is collected as carbon taxes to be returned to the American economy, instead of going to oil companies and oil producing countries."
Comment by Daniel Rosenblum — November 1, 2008 @ 6:19 pm
Well I think that your choice of terms "floor on the price" is mighty confusing. A price floor to me means a government set price which limits how low a price can be charged for a product. I fail to see how a set carbon tax will create a price floor.
Comment by David Anderson — November 2, 2008 @ 1:21 am
People, please wake up and see that the carbon tax is nothing more than a way for the global elite to tax our exitence. This is how the world banks will force all people of the world to pay for globalization and loss of national soverienty. We are not the enemy, they are. This is another ploy to shakle all people with more economic slavery to the world government. The technology has existed for sometime to exist in a green world. The powers that be, the people who would recieve the money from this tax, have made no move the make any change previously. There is no reason for anyone to think that this will change.
Comment by Todd — November 5, 2008 @ 5:31 pm
[…] This highlights the need for a price floor for gas. Now is the time to take action so that consumption doesn’t spiral upwards when the economy eventually improves. […]
Pingback by As Gas Prices Go Down, Driving Goes Up » scruffydan.com/blog — November 14, 2008 @ 7:58 am
[…] a variable consumption tax that would create a floor of $4 or $5 in 2008 dollars, an idea we’ve previously supported, and a variable tariff on imported oil that would have the same effect and also […]
Pingback by Carbon Tax Center » It Might Be Time? — December 27, 2008 @ 5:25 pm