Yesterday’s Los Angeles Times ran an odd op-ed calling carbon taxes an ineffectual antidote to global warming. Unlike other critiques that brand carbon taxes as politically unpalatable, this one argued that they’re simply not up to the job of cutting carbon emissions:
“Carbon taxes — taxes on energy sources that emit carbon dioxide (CO2) — aren’t a bad idea. But they only work in some situations. Specifically, they do not work in the transportation sector, the source of a whopping 40% of California’s greenhouse gas emissions (and a third of U.S. emissions).”
I’ve known Daniel Sperling, the author of the op-ed, for decades. As the long-time director of the Institute of Transportation Studies at UC-Davis, Dan probably knows as much about automotive engineering as anyone in the world. What’s more, he’s conscientious, tireless and concerned.
So why do I think he’s wrong about carbon taxes? Actually, Dan is part right, but his message is wrong. Let me explain.
It’s been clear for awhile that carbon taxes won’t make a huge dent in carbon emissions from gasoline — relative to their impact on the biggest source of U.S. carbon dioxide: coal-fired electricity generation. There are three reasons:
- Gasoline has less carbon per btu than coal.
- Engines make better use of their btu’s than do power plants.
- Americans are less behaviorally sensitive to higher prices for gas than for electricity.
When we ran the numbers here at the Carbon Tax Center, we found out just how much gasoline would underperform while electricity overachieved under a level carbon tax. Using Colorado as a test case, we estimate that a statewide carbon tax would draw 60% of all of its carbon reductions from the electricity sector (which is responsible for 42-43% of that state’s CO2), but only 10% from gasoline (which accounts for 20% of emissions).
So we agree with Dan on some key facts. But we think he’s let his natural pessimism about price incentives (he’s an engineer, after all) run a bit amok.
For one thing, the low (10% or less) price-sensitivity for gasoline Dan cites (from his own UC-Davis study) is short-run only. The long-run price-elasticity of gasoline demand is invariably much higher since it can reflect long-term investment decisions — by households in buying more efficient vehicles, by automakers in designing and producing them, and by everyone in making location decisions that reduce driving.
Two widely respected transportation economists at UC Irvine, Ken Small and Kurt Van Dender, looked at pretty much the same gasoline data as Dan and observed the same low (under 10%) short-run price-elasticity. Unsurprisingly but importantly, Small and Van Dender found gasoline’s long-run price-elasticity to be much higher, approximately 40%.
Using that figure, and making assumptions similar to Sperling’s about the potential for substituting lower-carbon fuels, we find that a ramped-up carbon tax that increased the price of gas 10 cents a gallon every year for a decade would reduce CO2 emissions from motor vehicles further and faster than the Low-Carbon Fuels Standard Sperling touts in his op-ed.
Again using Colorado as a test case, the same carbon tax would eliminate more than five times as much CO2 in the electricity sector and almost three times as much in “other” sectors (trucking, space heating, aviation, etc.). Indeed, that tax, which in carbon terms tacks on a charge of $37 per ton (or $10 per ton of CO2) each year for 10 years, would lop off almost 40% from that state’s carbon emissions by 2020. And the revenue stream would be enormous — enough to permit the legislature to zero out the widely disliked state Sales Tax and Business Personal Property Tax by the fifth year, even while providing generous per-resident and per-employee rebates, supplementing the federal Earned Income Tax Credit to assist low-income families, and financing targeted investment in energy efficiency and renewable energy.
We’ll grant the point made by Dan (or the Times’ editors) at the top of his piece: Taxes on CO2 emissions alone won’t get us where we need to go. We’ll need judicious and creative incentives and regulations in addition to a carbon tax, and the Low-Carbon Fuel Standard that Dan is helping advance in California fits that bill. But let’s stop the nay-saying over carbon taxes. They’re the powerful tailwind America needs to get our carbon emissions down equitably, efficiently and immediately.
Photo: Tony.Gonzalez’s photostream (Flickr)
Lorna Salzman says
The interchange of ideas on reducing fossil fuels is vitally important and CTC deserves high praise for its ability to take a longer perspective in this debate. My comment, however, is more of a question: how can the public make sure that legislators and other policy makers are getting all sides of the debate rather than just the side that is politically comfortable? In reading newspapers, on-line blogs and reprints, and numerous journals, it now appears that there is near-unanimous agreement on what needs to be done (except for the target date for ultimate CO2 reductions, but that is another story). Substantial agreement exists on: the need to abolish all fossil fuel subsidies and tax breaks; the need to put some price on carbon; the serious drawbacks and hidden risks of carbon trading; the need to provide incentives for industry and states to shift to renewables, and, generally, the need to set standards for construction, appliances, vehicles, materials, etc.
But I do not see, at this point, any of the leading environmental groups, much less any one in congress, with draft legislation that incorporates ANY of these things! All we have seen so far is legislation to mandate higher vehicle standards by 2020, and, finally, some scepticism about the pointless counteproductive subsidies to corn-based ethanol. Coal industry demands for subsidies for converting coal to liquid fuels have not yet been fulfilled and doubts have been raised about it, luckily, but coal state industries and legislators die hard. In any case, these other urgent policies have yet to be incorporated into legislation.
This means that congress and the environmental movement are falling down on the job. In addition, the use of the year 2050 by which we should have reduced CO2 concentrations by 80% is at least thirty years later than the date that all credible scientists and studies say we should have reached that goal. All of this together is frustrating and depressing, especially given the dedication of the Carbon Tax Center and others who share its goals.
Thanks for writing. It’s tempting to say that we need a hundred or a thousand more Lorna Salzmans to keep pressing our points. (After all, it was you who rekindled my dormant interest in carbon taxes in 2003 through your interest and passion.) You’re spot-on that our existing institutions including the environmental movement are falling down on the job, particularly with their inane focus on 2050 — a date so distant as to be meaningless institutionally as well as for climate-safeguarding.
The Carbon Tax Center will continue doing its best to frame, clarify and advance the points you’re making. I hope others will have further suggestions for opening up space within the institutional gridlock.
Ken Small says
I also was unhappy with Dan Sperling�s column, for mostly the same reasons as Charles. One source of response to a carbon tax that Sperling omitted in his discussion is probably the most important of all: manufacturers and consumers together are motivated to change the fuel economy of new cars entering the market. This can happen through technological improvements or through shifts in the models people buy. We have seen examples of both recently, with rapid introduction of new hybrid models and a slowdown of sales of pickups and large SUVs.
Of course, even if the market response is rapid, it changes the average fuel efficiency of the fleet only slowly � which is one reason why the short-run price elasticity is so much smaller than the long-run. But global climate change is a quintessential long-run problem, so it is the size of the ultimate response, not its timing, that matters.
Charles is exactly right that a carbon tax would extract greater percentage savings from electricity than from transportation. To Sperling, this apparently is a weakness. He is a transportation specialist, and he is determined to make big gains in the transportation sector. But actually the imbalanced reductions coming from a carbon tax are just the right approach. The lower price-elasticity in the transportation sector reflects real costs of change. Undertaking some such costs is necessary, and I applaud Sperling and many others for research showing how it can be done. But there is no reason to beat ourselves up more than necessary if there are cheaper ways to achieve the same greenhouse gas reductions � which is exactly the case for coal-fired power generating plants.
I don�t know whether a low-carbon fuels standard is a better approach to greenhouse gas reductions in transportation than other measures available. What I do know is that low-carbon fuels would be strongly encouraged by a carbon tax. So would a lot of other helpful responses, some well understood and others perhaps undreamed of.
Let me mention that the study at UC-Irvine that Charles refers to is co-authored by Kurt Van Dender. Also, lest anyone get the wrong impression, I am active in UC-Irvine�s Institute of Transportation Studies but I am not its director.
David Collins says
Sperlings essay was neither good nor bad; his points are correct as far as they go. I feel Charles is correct on the difference between the short-term and long-term elasticity of gasoline (high-carbon fuel for personal transportation, to be precise). I am no economist, but I still dare to venture that there is a distinct nonlinearity in gasoline elasticity as a function of price (including tax): if the tax is significantly higher, demand would drop far more than a linearly-elastic analysis would have it. Furthermore, everything in this debate seems to follow the premise that there is one problem, global warming, for which there is one solution, a carbon tax. Overuse of personal transportation, in current form, has brought problems like standing garbage brings rats, roaches and rot. There are valid reasons (like national security) for taxing hydrocarbon fuels more than coal fuels. Low-carbon biofuels involve problems (poor folks can go starve so rich folks can drive cars). It may be worth pondering whether the problem is excessive consumption of energy.
here is one: http://www.freepublictransit.org
low-tech – politically viable – immediate results – strong anti-sprawl medicine
David — "Economic theory," that hoary beast, frowns on non-linearities. I would think the burden is on those who believe price-responsiveness is non-linear to come up w/ empirical evidence. CTC would welcome that intellectual contribution. On your other point, we agree completely that transportation fuels, especially gasoline, deserve a higher tax for non-carbon reasons. I’ve done much research and advocacy on this front for a long time. Some of it is on view at http://www.komanoff.net/cars_I/ and http://www.komanoff.net/cars_II/.
Social Scientist: Freepublictransit.org says, "If public transit were free, more people would use it. Fewer auto miles would be driven." Of course, but to what extent? Do you have any data you can share on the extent to which transit ridership has increased when its price was lowered? I’m working on a study of this in NYC and would welcome any hard info. Thanks.
Michael D. Setty says
Much of the discussion I see here and elsewhere ignores the previous history of increasing automotive fuel mileage and declining out-of-pocket auto expenses in the United States.The 1970’s mandate to increase vehicle MPG had the major unintended consequence of significantly reducing the out-of-pocket cost of driving. This, together with a long decline in "real" gasoline costs relative to income, resulted in a huge increase in annual miles driven per capita, along with the hypersprawl of the 1980’s and 1990’s. To achieve even modest actual reductions in greenhouse emissions in passenger transportation, fuel mileage mandates will have to be accompanied by steadily increasing fuel prices that offset any net savings in actual costs for fuel, or miles driven per capita will likely continue their historic increase.
Also in theory, replacement of the current gasoline-powered vehicle fleet with "pluggable hybrids" could reduce gasoline consumption by 70%-80%. Of course, this depends on whether the next generation of battery technology proves workable and economic, and whether the electrical grid and generating capacity is beefed up sufficiently. But this potential new demand on the electrical system is problematic, to say the least. If current trends continue, most of this new electrical demand would be met from increased coal consumption, and overall greenhouse gases could increase as vehicle miles traveled (VMT) continued to soar. ON the other hand, one would think the first priority for installation of new wind and solar capacity would be to reduce EXISTING fossil fuel usage.
While there has been much discussion of electrifying automotive transportation such as pluggable hybrids, electric cars, and so forth, discussion of electrifying the rest of ground transportation seems to have gone missing in action. For example, my preliminary estimates show that investment of less than $100 billion (about 2/3 of one year’s U.S. spending on highways, streets and roads) is needed to electrify railroad mainlines. This would reduce fuel usage by the railroad industry, reducing overall ground transportation fuel usage by up to 1.5% annually (e.g., 3 billion gallons). Indirectly, up to 10% of transportation fuel usage may be saved, mainly due to vastly improved freight railroad performance and new railroad express freight options facilitated by the higher speeds of electrified services (raising average freight railroad speeds from less than 30 mph to 40-60 mph requires electrification to be practical). On the passenger side, another 2-3 billion gallons per year could be saved by a revival of intercity passenger rail service (though additional investments would be needed on the order of $50-$100 billion, not including totally new high speed rail lines).
In terms of urban passenger transportation, the greatest fuel savings and reduced carbon emissions will come from changes in land use, particularly where walking and bicycling are practical options. In the relatively rare U.S. cases where land use currently allows, short pedestrian trips are functionally equivalent to "non-home based" and many "chained" trips recorded by automobile. An example would be NYC subway riders or BART users who walk to the dry cleaners, bank, hardware store, etc., as part of their daily routine. In the auto-dependent suburbs, one DRIVES between these various business functions, dramatically increasing overall VMT.
The implicit assumption of traffic engineers and auto apologists is
"all passenger miles are equal." But much closer to reality is "all
TRIPS, of whatever type, are equal for the particular individual
involved." If it is possible for someone to walk to work for the job
he/she prefers, that walk trip is equivalent to an hour each way to the
same job by automobile. If someone takes transit to work in a mixed use
area and can make a number of short walking trips for various reasons
(to the bank, dry cleaners, florist, pharmacy, etc.), then those short
walking trips are of the same value, and are "functionally equivalent"
to much longer trips for the same purposes by automobile to dispersed
locations. Residents of places like San Francisco or Manhattan are no
less "mobile" as a practical matter, even though they drive far less
per capita, and walk and take transit over much shorter distances at
much higher rates than residents of the same incomes who live in
dispersed low density suburbs.
A key function of transit, particularly rail transit, but often overlooked, is to connect and maintain these islands of walkability. Research funded by the American Public Transit Association (APTA) indicates direct fuel savings of around 0.25 to 0.30 gallons per transit trip. But other research (see, for example, http://www.nrdc.org/media/pressreleases/020610.asp) indicates that, for every passenger mile on transit, several passenger miles by automobile are suppressed. Thus, if sufficient investment is made designed to triple annual transit usage (e.g., adding another 100 billion annual passenger miles by transit in the U.S.), several hundred billion passenger miles by automobile would be suppressed or precluded. This of course assumes parallel improvements in urban walkability.
Michael D. Setty says
Is there some way to get this comment section to recognize spaces between paragraphs without having to insert <br><br>?
Michael — The actual extent of the "rebound" effect to which you refer (though not by name) at the top of your post, by which improved mpg lowers the cost to drive a mile and thus increases VMT, is vastly overrated. See the Small & Van Dender paper which I cited in my original post. As for paragraph breaks, I’ve inserted them in your comment (it’s easy enough to do). Going forward, you might want to observe the protocol of holding the length of comments at less than that of the original post. Thanks for writing.