A Better Gas Tax?
Posted by jeffvail on March 24, 2008 - 10:00am
Topic: Demand/Consumption
Tags: demand destruction, economics, gas tax [list all tags]
This isn’t an argument about whether or not taxes—particularly energy taxes—are “good” or “bad.” Rather, this essay has a narrow focus: IF we’re going to attempt to reduce gasoline demand through taxation, what is the best way to do it?
Here’s my somewhat counter-intuitive theory: to most effectively reduce long-term gasoline demand, gasoline taxes should increase, not decrease, long-term price volatility.
First, let’s look at European gasoline taxes. In the UK, gasoline tax is .50 GBP per liter plus 17% VAT ($3.75/gallon before VAT, $4.42/gallon with VAT). In Germany it’s .65 Euro per liter plus 19% VAT ($3.80 per gallon before VAT, $4.53/gallon with VAT). Compare that with US taxes, which range from a low of $0.26/gallon (Alaska) to a high of $0.63/gallon (California). The much higher European taxes operate to reduce price volatility because they remain static in the face of changes in the underlying price of gasoline. For example, if taxes effectively double the price of gasoline, then a 10% increase in the pre-tax gasoline price results in only a 5% increase in the after-tax price of gasoline paid by the consumer.
Why does price volatility matter? Let’s pretend that individual consumers consciously perform risk-management analysis on their future gas requirements (in decisions such as where to live or what car to drive). In that calculus, the theoretically rational consumer would look at the gas requirement of a purchase at today’s gas price (say, the gas cost of a daily commute). This consumer would also consider the possibility that gas prices would increase or decrease, and calculate the present value of these changes. The key question here is not whether gas will get cheaper, because that only results in making a presently affordable choice still affordable. Rather, the key question is whether it is possible that gas will get so expensive as to force the consumer to forfeit the presently affordable choice. Therefore, the potential for volatility making gas cheaper won’t spur an increase in present demand choices to the same extent that the potential for volatility making gas more expensive will reduce the present demand choices.
Here’s an example. You’re looking in to buying a moving, and the new location is 10 miles (each way) farther to your job. You drive a car that gets 20 mpg (only for the sake of simpler math). If present gas prices are $3/gallon, and you commute to work 200 days per year, then this new location will cost you $600/year more than your old location. If you assume that volatility is low—say, that prices can only move by a factor of 2 either way—then the most you could save is $300/year (at $1.50 gas), and the most additional expense would be $600/year (at $6 gas). However, if volatility is extreme—say a factor of 10 either way—then the most you could save is $540 (at $.30 gas), and the most additional expense would be $6000/year (at $30 gas). The second scenario—more assumed potential for price volatility—will have a greater demand-reducing effect on today’s choices than does the low-volatility assumption because the risk of rising prices is much more potentially damaging than the potential benefit of falling prices.
It’s difficult to compare European and American gas demand (especially the elasticity of that demand) because the culture and built-environment are so different. However, assuming everything else is equal, what happens when the underlying cost of wholesale (pre-tax) gasoline goes from $2/gallon to $4/gallon? In Europe, assuming a gas tax of $5/gallon, the price rises from $7/gallon to $9/gallon—a change of 28.6%. In America, assuming a gas tax of $.50/gallon, the price rises from $2.50/gallon to $4.50/gallon—a change of 80%. When contemplating a consumer choice such as what car to buy (and how much to weigh fuel efficiency) or how long a commute is affordable, the higher volatility regime necessitates that gasoline demand will play a higher role in that decision, all things being equal.
What does this mean? It tells us that, IF the goal of a gasoline tax is to cause consumers to make choices that reduce gasoline demand, then that tax should operate to increase volatility. One way to do this is to make the tax per gallon a function of the price of that gallon of gasoline—for example, make taxes 100% of the wholesale price of exchange traded gasoline on a week-to-week basis. This would, nearly, double the volatility already present in wholesale price swings, whereas setting gasoline tax at a fixed level equal to the price of today’s wholesale price of gasoline (and not adjusting it continually as that price changes) would effectively halve volatility.
So far, this analysis has made one essential assumption—that consumers will rationally consider the risk inherent in future gasoline price swings, and will adjust their risk calculations based on the impact of a changing tax regime. Surely that won’t be universally true, but, in addition to at least some of the general public, more sophisticated businesses will should be able to understand this (especially when the policy is explicitly labeled as intending to increase volatility), and it can be communicated to the public in general as the rationale behind a shift in tax regimes. Getting Americans to consider a gas tax increase as a good idea, of course, is an entirely separate matter!
Do examples from the real world validate this notion that increased price volatility reduces the demand for a commodity? I think it does, at least within the world of energy. As I recently observed, gasoline consumption choices in Germany seem to actually be moving away from efficiency (though I can’t show that this is more than correlation based on anecdotal evidence). Within the US, a recent report by Deloitte concluded that US utilities are focusing on “demand management” and energy efficiency rather than investing in new generating capability precisely because there is increasing uncertainty over the future of regulations on greenhouse gas emissions. The Deloitte report suggests that increasing volatility leads directly to increasing efforts at demand reduction.
While I’m the first to admit that gas taxes are only a preliminary step to dealing with Peak Oil, if we’re going to use them for the purpose of demand reduction, we should do so in an efficient—rather than counter-productive—manner. A common adage is that gas tax must sting in order to work—and a tax that is designed to increase volatility is a tax that is more effective at stinging. Gas taxes should be variable and a percentage of the current underlying price of wholesale gasoline in order to enhance, rather than reduce, the consumer’s exposure to volatility. The pessimist in me realizes that this is very unlikely in America (I think it’s more likely that gas taxes are rolled back to pander to the near-term concerns of voters). Maybe the Europeans will listen—they explicitly use gas tax to reduce demand, and seem to understand that such a tax must sting to work, but currently tax in a counter-productive fashion.
If you want to force people to reduce fuel consumption, then wouldn't an increasing tax work better? Such as a dollar the first year, two the next, and so on. that would assure that everyone factored in an increasing price for fuel.
Sounds good to me. I imagine there are a million ways to do this.
You could allow the tax to increase in lockstep with the commodity above a certain price, and then set a minimum absolute tax amount below some threshold, or even put a floor on the price of the commodity itself. Say gasoline would never be cheaper than $3 a gallon (or whatever), and if the commodity price dipped below that level, the tax would automatically kick in and rise the the level to make it cost $3.
I know the purpose of this exercise is to assess the best way to tax and I agree that a percentage tax is better than a fixed tax. However, we still have the problem that it is very clear that demand elasticity is very low within the U.S. Massive increases in gas prices over the last few years have resulted in almost no reduction in demand. Besides, taxes spread the pain to everyone, the frugal and the extravagant. Under a gas tax regime that actually significantly decreases demand, even a person who consumes below the average consumption will be negatively impacted, especially if he/she is of low or moderate income.
Rationing is the way to go so that those who have figured out a way to consume moderately will experience no tax based increases in price paid. They are rewarded for their frugality. Those who, for whatever reason, consume beyond their allocated amount pay the price at the pump plus the market price of gas certificates or credits. This is similar to a cap and trade system,but applied to consumers. In addition, those without cars, including the poor, can supplement their incomes, or lack thereof, with payments for their gas certificates.
Those of us who have already made choices to reduce our demand would probably fall within a gas ration that reduces the current supply by 20%.
Best hopes for rewarding future frugality and conservation.
There's a huge anti-rationing sentiment in America. We tend to think of it as "communist," "un-American," or against the "free-market." I'm not disagreeing with your suggestion, just suggesting that this policy be framed differently: provide a tax credit (or even an outright rebate) on annual federal tax returns for $XX, equivalent to whatever level tax an individual with "reasonable" consumption would pay (and use that gasoline tax to pay for this rebate). This allows those without cars, or who use very little gasoline, to avoid penalization, without uttering that forbidden word (in American politics): rationing. By the way, we already do this kind of rationing-via-tax code in many places in America.
Nice article, Jeff. I do think that it is more than possible, though that you are overestimating the opposition to rationing in place. In fact, historically speaking, rationing has been a pretty easy sell once enough people want to sell it. I agree that we have a strong prejudice towards free market solutions, but all we need are a very small but highly publicized instances of actual shortages, and people's attitudes generally change quite quickly. I've written more about this here, but I think rationing could enter the bag of tricks really quite rapidly: http://sharonastyk.com/2007/06/15/could-rationing-be-made-palatable/
Sharon
Hi Sharon,
I completely agree. I wonder if you are familiar with historian Dr. Mark Roodhouse's study of the history of rationing in the UK and the implications for present policy? It is a fascinating piece of work, in which he argues that advocates of carbon rationing can strengthen their case by revisiting the history of rationing during the 1940s and 1950s.
He highlights (among other things) that in 1939 and 1940 the UK government rejected proposals to rely upon increased taxation to cut consumption because the impact of tax rises would be slow and inequitable, and that they instead looked for the best way to cut consumption quickly and ensure that reduced supplies were shared out equitably - rationing.
While Dr. Roodhouse's focus is on carbon, he considers Dr. Fleming's TEQs proposal, which is designed to simultaneously address both climate change and Peak Oil.
Incidentally, I also recently found this rather nice story looking back from 2021 to the day when TEQs were introduced in the UK in 2011!
All the best,
Shaun
Two things come to mind:
The historical opposition to taxation runs much deeper than any objection to rationing and was a major if not the major driving force in the formation of our country.
We already have a functioning precedent in the way the electrical grid deals with shortages, rationing in the form of rolling blackouts and brownouts.
There's a huge anti-rationing sentiment in America.
Rationing has not been popular elsewhere either. So long as the myth of 'you are upwardly mobile if you work hard' exists in the US of A....so long as people who are not middle class see themselves as middle class....rationing will still be seen as not the best way out.
Rationing was done during WWII, 'accepted' by the population...as it were. The promise was 'there will be an end'. Peak Oil looks to be an unending shortage of liquid fuel.
Before 'rationing' there will be 'fuel for these services paid by taxes 1st at low price' in a reaction to tax load.
I would agree that it is crucial to the public acceptance of rationing that 'there will be an end'. The Mark Roodhouse historical paper I referenced above in my reply to Sharon also emphasises this.
But I would disagree that the permanent nature of Peak Oil implies permanent rationing. The purpose of a well-designed rationing system must be to stimulate and support the transition to a society of leaner energy use. If it achieves its purpose it will make itself obsolete. If it fails in its purpose we will be overwhelmed by climatic feedbacks and a different type of end will be rolling into view...
You're assuming that the tax is increased in isolation. Why? No less a luminary than T. Boone Pickens has suggested that employment taxes be reduced by the same amount as fuel taxes increase. This would put money back into the pockets of workers, most of it at the low-income end where employment taxes weigh most heavily.
Rationing is as damaging as the 70's-era gasoline allocations (which produced long gas lines in some parts of the USA and no waits elsewhere). It fails to influence behavior except at a very arbitrary dividing line. Take me as an example. I go through an 18-gallon tank about every 2-3 weeks; if the ration was set at the average consumption of about 12 gallons/week, I'd have plenty left over. I'd have no incentive to change; I could save fuel, but it wouldn't pay me anything to compensate for the inconvenience. Neither would it give me any breathing room for an emergency.
A fuel-tax increase would pay me every time I didn't drive someplace, every time I coasted up to a traffic light (which I already do), and for every other act which cuts fuel consumption. If it was offset by a cut in my FICA taxes, I could just pocket that money and live better. Rationing has no upside.
Got any proof of this previously occuring?
Any proof of any rollback of any tax anywhere, anytime without being demanded by the constituency?
We seem to be able to get tax cuts for the rich.
If your only purpose here is nay-saying, just GFY.
Your elegant prose and incisive wit will surely attract scores of adherents to your peculiar form of reasoning.
Let me try it, TSTY.
I agree: another aspect of an effective gas tax would be one that increases over time. I like the idea of a gasoline tax in America that increases 20% of the RBOB wholesale price of gasoline each year. Sure, a larger increase would be nice, but political practicalities need to come in to play as well. Just to be clear, the point I'm trying to make in my essay is that this increase should be a % of the underlying RBOB wholesale gasoline price (to increase the consumer's exposure to volatility), not a fixed amount per gallon (such as $.50/year).
I have an idea for a gas tax that makes a lot of sense to me, see if there is a problem that I have not thought of (I am probably not the first to think of it either). Instead of having a straight gas tax that has a strong adverse effect on poor consumers and no political support, collect a large tax on every gallon of gas sold, but then divide up the proceeds evenly and pay all residents back an equal share. So you could institute a $3.00 a gallon/tax but at the end of the year all adult U.S. residents would get a check for X dollars, where x is $.00 times the average per capita fuel use (minus administrative costs).
Using this method the person that uses the average amount of gas would break even, someone using large amounts of gas would pay more, and someone who used little or no gas would get paid a dividend. This would create a strong market incentive to conserve fuel without unduly hurting the poor. OVer time the average fuel use would presumably decline.
There would of course be a number of logistical problems, such as accounting for the transportation industry and regional differences, and how to pay out the dividends, but these could be easily overcome. You amy also want to skim off some of the proceeds for alternative energy research etc.
Thin edge of the wedge my friend. As soon as the politiicans startskimming off a bit here and a bit there, before you know it there is nothing left to be redistributed.
The American taxpayer needs to pay more tax anyway to to reduce the federal and (presumably) state deficits. You also need to reduce oil consumption in toto if you want to combat the huge trade deficits that seem to be finally catching up with your dollar. Two birds, one stone.
The American taxpayer needs to pay more tax anyway to to reduce the federal and (presumably) state deficits.
Or to cover the debt.
I'm waiting for tax protesters to join the constituionilsts, home schoolers, and excessive internet posters as enemies of the state.
The mention of utilities being sensitive to volatility reminded me of how much we focus on TOD on end user behavior. Presumably a utility manages more by the numbers than the man on the street. Price volatility would wreak havoc with FedEx or any large entity dependant on energy commodities. That would suggest pushing the tax upstream to producers and inporters.
Part of the "reduce demand" scenario ought to be quantity limits. Make it it explicit and part of the political process who gets what.
cfm in Gray, ME
The larger fuel users will almost definitely buy derivatives on the price of fuel. That is, they have a "hedged" stable price that they will pay. If the fuel price is higher than that, the derivative has positive value, and they use that value to pay the difference. If the fuel price is lower, the derivative has negative value and the savings they make on the fuel get eaten up paying for the derivative.
So large fuel users don't worry about volatility like individual end users. They do care about average costs though, naturally, and will respond to an increased tax.
The response can be unexpected though. I heard this story second hand... one of Australia's bigger fuel users has decided not to register their fuel usage (which would have earned them tax credits) because once you get above a million dollars per year in tax credits, you are automatically included in the greenhouse gas reduction program, and the company in question found being able to continue to pollute silently was more valuable to the company bottom line than millions of dollars in tax credits.
Gas prices in the U.K. and the U.S. are not comparable due to the taxes. Please tell Matt Simmons. Selling increased taxes on gas to Americans is made more difficult by the simplistic application of EROEI which does not recognize price as relevant.
Consequently when EROEI is calculated it is on a world basis which is probably correct for the world. But for Americans the cost of imported oil is its energy value which goes to the country that extracted it. From the American point of view imported oil EROEI is negative since the energy value is paid out at purchase. Refining, distribution and consumption are all energy users not producers. Domestic oil EROEI that is widely known and discussed on the TOD is probably correct since Americans collect both the energy gain of extraction and the economic gain of oil's use. Until this fallacy of logic in EROEI is corrected for imported oil it will be difficult to convince even TOD readers that increased taxes on oil are absolutely necessary.
Since imported oil is now the far larger share of crude consumption in the U.S. with only about 5 mbpd being domestic, it is probably safe to say that the overall EROEI for oil is negative i.e. less than one. How can this be? The large EROEI of domestic oil is offset by the payments for foreign oil which represent the energy that the foreign producer receives for extracting it. There is no free lunch and it is a logic error of the first order to count things twice. All Americans receive when purchasing foreign oil is oil's economic gain which then must be used to buy more energy in the form of imported oil.
The result is a constant drain on the economy which is currently made up by inflationary monetary policy to the point of causing global inflation since the dollar is international currency. Until EROEI is either abandoned or corrected to include price, there is no way for tax proponents to justify increases. People have to be shown that an oil tax increase results in real income increases due to reduced purchase of imported oil. Americans retaining a larger share of the economic gain of oil for themselves is the gain.
How can this be accomplished? Clearly the answer to match the increased taxes on oil with a reduction in other taxes or tax credits. This is rarely discussed but is quite obvious.
It seems like, regardless of the subject, you talk about EROEI. Reminds me of the saying,"when all you have is a hammer, everything looks like a nail".
I think a very clear message has to be given, i.e. we MUST decrease our consumption and explain why, Climate Catastrophe, Peak Oil and security of supply.
Next immediately ban the sale of all new cars (and 3 ton SUVs etc) that emit more than say 255g/km, impose an annual tax on the next "band" down e.g. 200 - 255 g/km of say USD 1,000 per year.
Have a rolling plan to reduce these bands each year, so in year 2 ban those over 200g/km with increasing tax on 150-200 g/km. Rinse and repeat until cured of the addiction.
Another long term plan to steadily increase the fuel price to European levels over say 4 years.
This will very clearly tell people that they need to drastically reduce FF adiction.
The tax income needs to be used to benefit people rather then just being swallowed in with all other taxes. Say to subsidise generation by renewables with a feed-in tariff.
from the Climate Code Red report which Jason Bradford remined us all to read the other day.
It's been discussed a bit before: http://theoildrum.com/node/3600
Sorry for the long extracts, but I think apropos. From Part 3
A lesson from the Apollo 13 response sandwiches this quote:
The first issue of the Hubbert Center Newsletter reprinted a gasoline tax article by James MacKenzie and Kathleen Courrier from the May 8 1996 LA Times. A dozen years later this controversy continues.
http://hubbert.mines.edu/news/Ivanhoe_96-1.pdf
or http://hubbert.mines.edu
The assumptions in this article are faulty. It assumes people are either A) looking to move or B) looking to get another car, and hence higher prices will tilt the decision making.
But this is a very small subset of people. The vast majority of people will be doing neither of these. Fewer people are buying new cars, and fewer people are moving, due to the credit crunch for one thing.
So what does higher taxes on fuel do to the average person? Especially the average person who is grossly in debt? What are the economic consequences of people not only trying to pay down debt, but having to pay not only more for auto fuel but more for home heating fuel and more for food?
Simple, deeper recession. That is, imposing higher fuel taxes will drive up the cost of everything else, which will put more squeeze on the consumer and put the US deeper into recession.
Thus all higher taxes on fuel will do is speed up what higher oil prices will do. It won't stop over all world consumption of oil. It will just bring peak oil consequences here sooner.
I don't think I'm assuming that either of those things must be true, though I also disagree with you that it's faulty to assume that many people are either looking to move or looking to get another car.
First, the third group of people--into which almost all of us fall--is the group that can modify behavior to reduce gasoline demand. Carpool, combine trips, drive the more fuel efficient of your two(+) cars, take public transportation, telecommute part-time, etc. The vast majority of Americans have the ability to choose one or more of those, but generally choose not to. Those Americans that have not yet made one of these choices have, either consciously or subconsciously, decided that there is insufficient economic incentive to make them make the time, convenience, or status sacrifices that they would require. Increasing the gas tax can change that.
If gas taxes are directed into enhancing public transportation options (e.g. Alan Drake's rail electrification proposal), then they do not merely speed up the rate at which peak oil hits us, but rather smooth the transition to an economy less dependent on oil, and therefore reduce the degree to which peak oil does hit us.
Finally, there are thousands and thousands of new cars sold every day. While you may not personally be looking to buy a new car, literally thousands of Americans will do so today, and tomorrow, and the day after. If they choose a car that gets 10mpg better gas mileage because of an effective gas tax (as I argue here, PART of that effectiveness lies in increasing, not decreasing volatility of prices), then that will create a very real reduction in gasoline demand.
Cars on the road are getting older on average (and if you notice also people with minor fender-benders are not getting them fixed) means that people are holding on to their cars longer. Just about everyone has to finance a car to get a new one. The other day the TV was interviewing someone who gets a new car every 2-3 years. What they found was that the trade in value of the car was less than what they owed and the difference was tacked onto the new car. Thus the loan on the new car was more than what the new car was worth by several thousand dollars. Never again, they said, would they ever buy a new car (they simply could not afford it.) The next meltdown in loans is either going to be CC and/or car loans. Few will be able to buy new cars, watch the new car sales over the next 6 months or more.
As for fuel in general, if you put on a gas tax, companies will simply pass that along to consumers, and governments will have to raise taxes to cover their own higher fuel prices (unless lower levels of governments are exempt from fuel taxes. But here they are not.) Higher fuel taxes will mean more costs to farmers, more costs to truckers. They cannot cut back on their demand, so they pass the higher fuel taxes on in higher prices of products. Thus the higher taxes will eventually get downloaded onto to consumers. So consumers will get a double whammy due to higher fuel taxes.
Since the vast majority of workers cannot telecommute (hard to do so if you work in a factory or store or drive for a living), and the transit system sucks for the vast majority of people (takes too long and transfering to different routes), the car travel is their ONLY method to get to work. Example, the Toyotal plant near here has no housing around it at all. No public transit and workers come from many small towns around here. They have no choice but to drive.
So what does that mean then to these people? It means the only way they can afford higher fuel taxes, and the consequences passed down to them with higher goods prices, means they have to cut back on other things. That by definision is consumer demand, which makes up the vast majority of the economic activity in the US and Canada. Slumping consumer demand brings on recessions. Since the US is likely in one now, higher fuel taxes will just put the US into a deeper recession.
Everything is interlinked in the economy. You can't just twiddle a knob somewhere and expect it to not have ramifications elsewhere in the economy. This is exacty what the Fed is trying to do to stave off a banking collapse, which they must try and do. If they fail and the system collapses there will be millions out of their homes, millions more out of work looking for handouts, and millions more rioting in the streets, and quite likely thousands will fall through the ever widening cracks in the system and die. Higher fuel taxes will do the same thing.
Besides, any slack the US does in conserving oil is more oil China will buy and burn themselves.
Energy intensive foods will rise in price more than less intensive foods. Consumers will then shift their preferences towards less energy intensive ones based on the relative price changes. So, your "double whammy" could actually be a "double benefit": farmers will try to be more fuel efficient in their farming techniques and consumers will give the right buying signals to farmers so that the farmers will favor a less fuel intense basket of crops.
You are correct on that score. But that's exactly why we need an across-the-board fossil fuel tax that affects all areas of the economy. If you just put gas-guzzler taxes on cars then people buy light-trucks instead (witness the "muscle car" Dodge Magnum, which is a light truck and pays no guzzler tax). If you mandate higher mileage vehicles generally, then people will drive more. More effective insulation means people run the heat hotter. More efficient air conditioners mean more people move to Florida and Arizona.
You realize all this does is buy a little, very little, bit of time. It is no silver bullet to stave off the inevitable.
Jeff,
I think that if you increase gas-tax, people drive less.
I can understand your reasoning, but I think it is irrelevant.
Respectfully, I think you missed my point (this is quite likely my fault for poor communication):
Increasing gas-tax might not make people drive less: a gas tax (as currently exists in Europe) that decreases the consumer's exposure to volatility from oil-price increases might actually make people less concerned about making choices today that protect them from future increases in oil prices. Conversely, a gas-tax that increases volatility exposure to the consumer may actually result in greater demand destruction for the same amount of tax-revenue collected.
So, while I agree that generally more gas-tax means gas consumption (though we don't have a great understanding of the relationship here due to challenging elasticity questions), I'm only trying to argue here that IF we're going to try to use gas tax to decrease demand, we should try to use the most effective type of gas tax, and that this is one that increases the consumer's exposure to volatility.
Fuel taxes won't work. It won't drop demand enough as there is a point where you can only cut back so much, the rest of the consumption being essential. And as long as more people enter the system (be it immigration or new people driving) then any reduction in per person consumption will only be swamped by new people.
If you want to conserve fuel the only way you are going to do that is by:
1) ration fuel (not through cost but by allocation), you only get what you need to work
2) no new vehicles allowed on the roads. That is, no new licences for drivers. The beginning of the end of personal cars. This will force new people to live closer to work and take transit.
None of those are politically viable, and neither is higher fuel taxes. People who can afford to pay will, and be happy those that cannot pay (the poor working class) will be off "their" roads.
Fuel taxes DO work... the only question is how high the tax has to be. A $1000/gallon tax would be remarkably effective at reducing demand, don't you think? And you can make this "equitable" (whatever the contemporary political definition of that is) by the method mentioned above--offer some kind of rebate equivalent to tax on a "reasonable" use.
It doesn't matter whether you ration, ban cars, or use taxes, we're still discussing how to divide up a limited and (soon) decreasing supply of oil. You can argue that rationing is a better way to do it than taxation, on the theory that it ensures the "working class" gets their gas. Or you can argue that rationing prevents the economy from allocating supply to the point of highest value (e.g. people who really "need" to drive more than their ration can't, and people who don't really need to drive, but have the ration available, do). That's the classic question of politics--how to divide a finite set of resources among an infinite set of demands. Suggesting that a ration be set at what people "need" to work only guarantees its failure--who decides "need"? how does this transition those in jobs that won't exist as oil becomes more scarce, like long-haul truckers, who "need" a lot of gas? Who decides how much of a "commute ration" is reasonable? Seems like a very messy solution.
Fuel taxes will only hurt the poor and working class. It won't drop demand as more people enter the system. It won't curb demand in the long haul. All you will be doing is make poor people poorer. And you will destroy jobs too. Imagine half the cars not sold as people can't afford to drive them. All the millions of workers, union job workers, who would loose their jobs. Millions would then drop out of the work force, loosing their homes, defaulting on loans. Deepen the recession.
What it will do is make the wealthy very happy as they will no longer have to wait on clogged roads with the rest of the "rif-raf". Wealthy people will just drive as they do now.
You can choose to sacrifice now, or sacrifice much more later. These millions of union jobs making cars are going away. They *could* transition to making renewable energy systems and building a post-oil economy *if* we provide necessary incentives for that, such as through a gas tax that will simultaneously reduce our dependence on gasoline by forcing us to make the painful yet necessary economic choices to re-focus our lives away from gasoline consumption. Or, we could just ration gas so that these working class folk continue to drive their F-150s to the factory from their suburban home, until that factory isn't around any more, and until they can't afford to drive because the underlying cost of oil has risen too high. Pick your poison--I'll take the one that, while painful, simultaneously provides the possibility of transition. I don't think this is especially likely to happen, but I prefer "not especially likely" to giving up.
It's funny to see a doomer be so wrong on all points.
When you're done shooting, I'll give you a lift to the hospital to have the remains of your foot patched up.
Are insults common here when one disagrees with someone?
We are not in 1978 any more. This is a whole new world.
1) You missed my meaning, maybe I wasn't clear. I meant GLOBALLY fuels will not be cut back as prices go higher as demand will continue to consume all there is available world wide. What ever the US does not consume due to a recession countries like China will just take up the slack and consume what the US does not. Thought I specifically said that. Thus prices for oil will continue to rise in spite of a US recession, in spite of gas taxes in an attempt to curb consumption. In 4-6 years China will consume the same amount of oil that the US currently does.
2) You're sure of that? You know for a fact that will happen? You have a magic crystal ball that shows you that Mexican's will stop crossing the US boarder, that Canada will stop bringing in 250,000+ per years of immigrants? Dream on. We have radical left wing people here who claim we need to bring in MILLIONS more as climate change refugees.
3) Apples and oranges. You cannot make the comparison with out qualifying the differences. Europe can tollerate a bit higher fuel prices than the US because of their higher density of people. The US and Canada has a much more wide range of people that need more fuels to move food and goods. (though the situation in Europe is deteriorating fast)
It's too simplistic to just say "raise fuel taxes and consumption will just go down." The Law of Unintentional Consequences rules supreme in economics. Chaos controls the system. You can in no way predict what hundreds of millions of people will individually do when pressed. One of the things you missed stating during the 78 crisis was that people were shot at lineups to get gasoline.
No, they are common when someone is continually obtuse, dogmatic, and incapable of a reasoned argument. Having a clear, and wrong, political axe to grind doesn't help your case Mr. Global Warming is a Conspiracy.
ITS DIFFERENT THIS TIME! NO REALLY!!! I MEAN IT!!!!
AWESOME! And when geological peak hits hard, China will starve and the US will be well positioned with lower fuel infrastructure. Awesomeness... we are willed with win! Just because my neighbor is doing something stupid doesn't mean I should too. I have a fixed rate mortgage and no sympathy for people getting foreclosed on for a reason.
I see in your universe the law of supply and demand have been rescinded. Somehow this massive recession you claim higher fuel taxes will cause WON'T slow down immigration. Gotta wonder where you took your Macro economics class from.
Hmm..... I'm a member of the "Left Wing Radical Group" in the U.S.A. I don't hear that here. Maybe the "Canadian Left Wing Radicals" are different.... maybe I missed a memo. I find the people who want immigrants the most are the Right Wing Corporatists. (George W.) They want
slavecheap labor.We will have plenty of our own refugees too worry about when NYC, New Orleans, and Miami are underwater. There should be a law that anyone who denies climate change has to buy a waterfront property and is not allowed to move out if in fact the water does rise..... but this topic is about Gas taxes, not your favorite axe.
Europe is different. Clearly we couldn't possibly learn ANYTHING from those worthless smelly Euro-trash bastards. Nope, not a thing.
Yeah, about the only thing every single economic theory agrees on is clearly wrong, BECAUSE THIS TIME ITS DIFFERENT!!!!!!
You are picking and choosing what part of the free market you want to believe in? There is a word for that..... It is wrong. As in, you are wrong. You don't understand how to analyze data in a fair manner, you don't understand how to evaluate theory's in a fair manner, in fact.... your education has given you a lot of facts and no useful way to tie them all into a logical coherent whole. I hope it was free cause that is the only way you got what you paid for.
All of that and you can't even keep from expressing yourself in either contradictions or tautologies:
Well, duh. Did you think there was some incentive for oil producers to pump oil they could not sell, and just leave it in tanks or in pools on the ground? Demand will consume "all that is available" because there is some price at which producers will shut down on the low end, and consumers will close up at the high end (can't consume more than is available by definition)!
When your output is falsehoods and tautologies, you can expect people to point at you and laugh. Ha ha!
"Are insults common here when one disagrees with someone?"
You've raised the ire of the self appointed TOD pro-tax Flagellants, jr.
They want you punished for using oil.
Mention an alternative to their pet theories but don't expect a rational response.
We had a chance to to secure our energy future but elected Reagan instead.
Fuel taxes will only hurt the poor and working class.
Err, "the poor" lack machines to put fuel into.
Cars cost FAR more than the gas, what with the insurance and other costs.
Rationing need not be implemented at the micro level but could be done quite effectively at the import terminal, particularly in the United States. I realise that politically this would be difficult but it is proabably easier to justify on trade imbalance terms than peak oil or climate change terms. The basic idea is that the US government sets the import quota each month and the free market allocates the available supply within the US. The price volatility would be there and behaviour would modify over time as people adjusted to create certainty in their lives.
Thsi may have an effect on international oil prices as well. The monthly quota announcement would be eagerly anticipated by traders and this would setup another level of volatility which actually be out of sync with gas prices at the pump. Exporting nations would hate it and may in fact reduce supply in anticipation of the lowest possible US quota.
This forced reduction in supply to the US consumer effectively delivers peak oil to the US earlier than the rest of the world. As teh US is the market that will require the biggest adjustment, it is probably wise to get it started by whatever means you need to, artificially induced or not. The advantage of going early is that there is at least the ability to ramp up the quota and suck in more oil for nation building programs once the need, urgency and behaviour modification have taken root in the mindset of the US public.
Fuel taxes DO work. European cars get nearly double the mileage US cars do. I recognise that driving patterns are different, but that is partly the point. However the Europeans have (probably unwittingly) been preparing for this point for several years. Their fleet is smaller and something like half diesel. The US by comparison has literally driven up a blind alley. SUV's and very little diesel will take years to unravel (and so it won't happen).
The situation with diesel is interesting though. It is the vital fuel. It is very close to jet fuel and probably is intwerchangeable to a significant degree at the production/refinery level. When shortages do begin to become painful diesel is going to be allocated first to "vital" activities such as military (the US military is standardizing on JP-8), farming and social services. It will be interesting to watch what happens as this unravels, especially in Europe. Will the gasoline fleet or the diesel fleet be stranded first?
Jeff,
I'm a bit late with my reaction, sorry about that.
I very well understand you point. You say: Because of volatility, people get confronted sometimes suddenly with high bills. Maybe they get smart and switch to small cars. People don't like surprises.
How about: Let's raise tax and people are always confronted with high prices. You can be pretty sure they will buy a small car.
Europeans use about half the gas Americans use, because gas is about 2.5 times more expensive. That would suggest a long term elasticity of around 0.4. Short term is worse (around 0.1), because people cannot just sell their house, take another job or dump their car.
Your argument that the volatility has an impact on vehicle choice etc is a clever one, but I would think it is a second order effect.
There is no question about how people react to high gas tax. About 120m Japanese and about 350m Europeans react the same way. The 0.4 elasticity seems like some kind of a nature-constant in economics, usually the elasticity is around there. Except of coarse for some special goods like drugs or designer handbags etc, but oil is definitely not in there.
Just my 2 c's, ignore it if it makes you laugh out loud. ;-)
I think it's a moot point now. As Al Gore said last night on Futurama in the year 2012, "That hundred dollars would have bought a gallon of gas."
I disagree that it's a moot point--in fact, I suggest the opposite: The faster that oil and gas prices rise due to peak oil (or global demand increase), the more time-critical it is that we apply an increased gas tax that A) effectively reduces demand, and B) directs that revenue specifically toward easing the transition to a world with lower daily oil production.
An apparent Peak Oil joke made by Al Gore playing himself.
The movie's carbon neutral according to Fox.
Yow! As in, "we can't get a gas tax with the carrot and stick approach, so let's just try a really big stick!" Increased volatility might reduce consumption, but it will absolutely never sell unless you can formulate some kind of lottery-like system that convinces people that they'll win more often than they lose. Of course, if they're winning more often than losing, you probably won't get your desired end result. But people who pay the lottery lose almost all of the time, but they keep playing anyway.
I think we'd be better off learning from the Republican playbook. Sell people a short-term gain with a long-term loss, but make the long-term loss absolutely crystal clear so people can plan for it. A few years ago, when TOD was on a "let's sell increased gas taxes" kick, I suggested an alternative. Instead of an all-stick gas tax approach, sell them a system that decreases volatility, but increases costs over time. Since costs are going to increase anyway, I proposed we just sell the system to decrease volatility, but I think it would reduce consumption more if we explicitly say costs will increase.
So, the country creates a liquid-fuel price-smoothing system. Here's how it would work. We set a price band that increases each year. When prices fall below that band, we increase taxes to keep prices in the band. When prices rise above the band, we decrease taxes to keep prices in the band. Most of the taxes build in a fund that must break even every other year on non-election years. At no point can the fund be negative. The band gets reset based on prices and fund balance each year, but it also increases by at least five percent per year. Any excesses at the rebalancing go to paying social security/medicare deficits.
So here's the carrot: prices aren't going to rise so high, so fast that they break the bank. The stick is that prices are guaranteed to rise, but at least you have some idea about the schedule. You can make longer-term plans that way. Market prices are free to float as they did before, but with some stabilizers built in.
Even that has *zero* chance of happening, because everyone can see that as soon as the price falls, they'll be paying higher taxes. Not here! It isn't pessimistic to say that nothing is going to happen in the US, it's simple realism. The only change that people would go for is lower prices. That's not going to happen. If we get any tax increases, it will be because the roads are crumbling.
I agree that this plan has little chance of working in America (well, federally, might work in a few states). I think it is quite practicable in Europe, where they're already using high gas taxes, just in a relatively ineffective manner. That said, I think the decrease volatility in exchange for long-term increase is exactly the wrong approach, for precisely the reasons that I outline in my article: it will be less effective at decreasing consumption for every dollar of tax revenue raised.
I also worry about it from a moral hazard point of view: if we keep telling people that they don't need to sacrifice now, that there will be plenty of growth (and future generations) to sacrifice later, that's exactly what we'll get. And if we don't sacrifice now (or at least SOON), we're screwed (IMO), for lack of a better phrase.
Of course, almost no one believes that prices will *really* be rising over the long term. If you told the average American that gas prices will be $5 a gallon next year, they'd snicker that it wouldn't surprise them, but in the next breath they would say you're nuts. In the third breath they would swear at you under said breath for suggesting such a thing. However, they don't really believe prices will get that high and aren't doing anything to prepare for it.
I don't think it makes much difference whether prices get to $5 a gallon due to volatility or steady price increases, except that a) volatility is likely to get there faster but only hold there briefly, b) slow and steady will take longer to get there but will stay there, and c) if people *know without a doubt* that $5 a gallon is coming, they can plan ahead. To get that plan ahead value, you'd somehow have to guarantee from very reputable sources that the volatility will cause prices to rise to $5 a gallon in the next year. Good luck with that. God Himself couldn't convince most people of that. And even $5 a gallon isn't going to shake things up enough.
To pick up on Sharon's point, Harvard economist Martin Feldstein has called for years for tradeable permits to deal with fuel security issues. He calls it a system of "tradeable Oil Conservation Vouchers". That's essentially a market-based rationing system. Everyone gets a certain amount of rights to buy fuel. If you exceed your credits, you have to buy them on the open market from people who have used less than their allocation. As he points out, this could be implemented quickly through vouchers distributed by the states. I think that is actually a workable and likely solution if the current market-based pricing becomes unpalatable.
Speaking for the US, we cannot afford to place an increased gasoline tax on our already strained economy. Also, any member of congress who votes for such a tax is guaranteed to be out on their ear at the next election.
A less economically damaging way to constrain consumption is to announce and then develop a federal emergency gas rationing data base. During an oil shortage, this data base would be used in conjunction with credit and debit cards to limit the amount of gasoline used by each driver per month.
Just the announcement of the development of such a data base would deter the purchase of inefficient cars because the government would be tacitly recognizing peak oil and drivers would not wish to take the risk of not having enough fuel to get to work.
Once such a data base was created, it would also serve as a consumption weapon which could be used to deter production restrictions.
In a true oil shortage, the implementation of rationing would keep the price of oil from spiking and causing severe economic damage.
This strategy would increase the percentage of fuel efficient cars in the fleet without economic damage or restricting consumer choice.
Agreed, a rationing system would reduce volatility, and despite Jeff's (interesting) point that increased volatility through taxation may serve to reduce demand, with a rationing system demand is simply reduced by the cap (whether imposed by supply limits or by policy). It really does seem a much better bet than taxation. Have you examined the TEQs rationing system yet? This allows us to guarantee our emissions budget is met as well as addressing peak oil.
You're on the right track, Jeff.
The problem with taxes (besides the obvious, ie. I've gotta pay them :) ) is that they mask price signals. In a high-tax environment diesel looks better than gasoline because of the added fuel mileage. In a low-tax environment people look at the fact that diesel increases in price faster than gasoline as the price of oil goes up, and opt for the product that's more prolific in a barrel of oil.
I think the tax system is, also, a major problem for biofuels in Europe (in addition to the fact that all good oilseed crops are grown in the Tropics.) In the U.S. e85, with current engines, is basically a break-even proposition in most places. In Europe, e85, with current engine technology which gives much inferior fuel mileage, is a bad deal. The slightly lower cost, percentage-wise, doesn't even come close to making up for the lower fuel economy.
a gas tax? the current gas prices ARE a gas tax.
Gas prices are still incredibly cheap when you consider how much work you get out of a gallon of gas. At $3.51 per gallon (what I paid this weekend out in the sticks), this works out to about $.22 per cup.
I certainly can't get a cup of coffee for this price. A 12-ounce cup at Starbuck's runs $1.50, quite a markup from the $.33 it costs for the equivalent amount of gasoline. God forbid, I decide to drink a tall latte. It would cost me more than 10 times the price of a similar amount of gas.
Since I drink so much coffee, I tend to get dehydrated. If I stop and get a bottle of water at a convenience store, the price will be similar to the price of a cup of coffee, but maybe a little cheaper. I think $1.50 for 16 ounces is realistic. This water costs me $.75 a cup, three times what that amount of gasoline would set me back. Voss bottled water from Norway cost $2.99 per bottle. You would think at that price you would receive at least on liter of water, but no, it actually only 800 milliliters. An equal amount of gasoline only runs you $.73.
If my theoretical vehicle gets 16 MPG, this cup of gasoline will propel myself, a couple or few friends and a bunch of our stuff 1 mile for less than a quarter. What if I had to pay someone to push my vehicle and all of its contents for this mile? Think they'd do it for $.22? Not freakin' likely.
Factor in the external costs of cheap gasoline; depletion of a non-renewable resource, pollution which affects health care costs and the environment, loss of productive farm and/or natural habitat land to urban sprawl, anthropogenic global warming, and having a military budget larger than every other country in the world combined and $3.51 a gallon looks like a real bargain to me.
Sounds like you'd be better off drinking the Gasoline, I wonder why you didn't.
I'm also unfamiliar with "the Cup" as a measure of energy density, I'm more familiar with the Kilowatt-hour
of which I'm told there are about 35 in a gallon(US) of gasoline, so at $3.51 this is about $0.1 per kWh, I could be wrong but I don't regards this as very cheap, that's just from looking at my electricity bill. In other words apples are not like oranges.
I think that the simplest why to arrive at the "right" usage level would be if the hidden costs were added to the pump price and the true cost was paid by the end user, this is never going to happen in the current political environment
The big problem I see with a gas tax increase is that it makes the government dependent on the new source of income. The government then has an incentive to get as much oil sold as possible. The government then becomes a player on the wrong side of the table. This happens whether the tax is based on gallons sold or the price of gasoline sold.
I might point out, too, that if the tax is based on the price of gasoline sold, the government has an incentive to maximize the price of gasoiline, so as to maximize the tax they collect. I expect drivers would not be happy with this situation.
So,
maybe the best idea is to do What They Did. ie. Tax Credits for Alternatives.
Who'd a thunk it. :)
Tax credits for alternatives... hmmm, that's given us ethanol, E85 Suburbans, and photovoltaics that aren't economically viable without the tax credits. And it makes those alternatives dependent on continuation of the tax credits for fiscal viability--look at what's happening in wind. No, I don't think tax credits are the answer, but that isn't really what this post is about. As I said, IF we're going to have a gas tax (as we already do, and as Europe already does), then how do we make it cause the most demand reduction...
Sorry, I assumed it was about Tax Policy.
But, while I'm here, let me say this: Ethanol, actually, is financially viable if it's burned in a ten, or twenty, percent mixture. E85 is kind of a close call, at present; but, as the price of oil increases, and production costs of ethanol decrease, it should be pretty much a slam dunk in a year, or two.
It only affects government income if it's allowed to keep the money. Pickens' proposal includes a 100% rebate of fuel taxes via reduced employment and other taxes, so net government revenue doesn't change (at the first order).
At some price well short of $100/gallon, consumption of gasoline would fall to a small fraction of today's level. The incentive to substitute other things for oil-burning transportation would justify all kinds of measures we don't see today. Even if the economy kept going, the revenue stream wouldn't; it would decay to a much lower level.
This is academic anyway. Taxes of more than a few dollars a gallon couldn't be sold even as strategic sacrifices, and the actions would be reversed after the next election.
So why keep proposing it?
TOD should be advising its readership on how to prepare for impending fuel shortages and certain rationing instead of wasting our time like this.
Because a few dollars a gallon is all it would take. The incremental cost of a Prius-type hybrid (~$2000) is profitable when gas hits about $3/gallon. $6/gallon fuel would justify PHEVs and a host of other measures. More to the point, a tax shift away from income toward fuel wouldn't leave any fuel-saving measures unrewarded. Rationing would miss plenty.
You miss the point. In a free market, there is no "shortage" as such; price rises until demand drops to meet supply. The point of a tax is to depress demand without letting the oil producers enjoy the revenues; it transfers the benefits from them to us. That gets rid of the whole rationale for rationing. To the extent that the tax is offset by elimination of taxes on employment, it is progressive and would actually benefit many low-income people. People burning lots of fuel to make little income should probably find another line of work anyway.
Fuel prices are rising uncontrollably as things are now.
I'll treat this like the blanket statement it is.
Recent Fed actions invalidate any statements that the U.S. economy operates with a "free market", if it ever was.
And in the larger sense, shortages exist where there is declining availability of supply. Market forces may have nothing to do with a given scenario.
And the consumer response is lagging behind. The point of the tax is that consumer response would be ahead.
have nothing to do with the subject of this discussion. They're one of the causes of the fuel price increases (which caught consumers napping).
If you don't have any relevant response, just say so (or say nothing). When someone like T. Boone Pickens promotes the redistribution of income toward the poor via a change in tax policy, one would think that you'd be in favor. Instead, it looks like you reflexively oppose things based on labels. That knee jerk much?
then in the very next sentence...
If this type of convolution is what passes for thought in that brain of yours, no wonder a gas tax makes perfect sense to you.
IF the goal of a gasoline tax is to cause consumers to make choices that reduce gasoline demand, then that tax should operate to increase volatility.
No - if prices are volatile, ppl just bitch and swear, are angry, develop wild theories, and don’t realize how much they spend. When prices are more or less stable, eg. rise slowly as in the EU (see sinking dollar, gvmt. measures, etc.) people can get a handle on what is going on, and realize that next year, say, they may be paying double for heating / commuting, etc. Economic pundits have vaguely stable base to figure things out and make predictions, publish articles, etc.
That in Germany, Switzerland, and Sweden, ppl are (for ex.) buying bigger, heavier, thus less efficient cars, and in fact consuming more gas (though stats may vary, or not show it, or that may be compensated for by other factors, etc.) is not a counter argument. With volatile prices consumption would possibly be even higher.
The best way to tax is a) tax heavily, b) smoothly and predictably, c) bearably. All those words with inverted commas hovering around them.
Volatility will also augment problems and strife. The truck company goes bust; Marcia can’t make it to work is fired; family Smith with long commutes is suddenly and unpredictably thrown into the street; the airfield closes down, couldn’t collect on the planes; car manufacturers can’t sell because ppl can’t figure the operating costs; Big US Car Co. finally bites the dust, etc.
so Yes - creating confusion, disarray, uncertainty, will make many with low or medium budgets back off (consume less), provided that is a possibility. For many, it will not be so, and poor food (etc.) will compensate for the pump price. The rich of course will not care, and may even welcome the extra status of getting some plebs off the roads, bragging about their capacity to pay. Parts of the economy would be destroyed (see the truck co.) maybe that is positive - most would say not.
"With volatile prices consumption would possibly be even higher." This is where everything you say just breaks down. I'm not arguing that volatility is enjoyable, but that, between volatility and stability, volatility will maximize demand reduction. Taxes designed to reduce consumption of the taxed good have to hurt to work. That is, by definition, NOT enjoyable. As you admit in your last paragraph, increased volatility via taxation would probably work, you just wouldn't like it. Neither would I, but I like it better than what I see as the long-term alternatives...
Nothing can be enjoyable here, measures can only be, at best, effective and as painless as possible, for all - society, the economy, the poor, etc. With what results is very hard to judge - depending on the measures, arrangements, etc.
You may be right, as I said.
Nevertheless, introducing more uncertainty and confusion will most likely lead to aggressive and wild behavior, more isolation, more scamming or profiteering, and less social cohesion, rational plans, solidarity, best hopes and action for the future, etc.
The invisible hand will fix nothing, as it is a myth, and isn’t invisible - monopolies, cartels, protectionist laws, the powerful twisting arms, military, corporate might, geo-politics, crackpot state regs, subisidies, etc. etc.
How ppl react to wildly gyriating prices hasn't been studied afaik.
It is possible to reduce fossil fuel use and still have a healthy growing economy. We can do that by making a tax trade.
A good economy will need energy, but it also has to have property, labor and will have income. But we tax property, income and sales to pay for government services like education, public safety and all the other things that go up to making an economy and society.
Lets reduce taxes on property, income and sales; then have a tax on fossil fuels to make up for the reductions. Our economy isn’t going to run less well because we’re taxing fossil fuel/carbon fuels instead of property taxes, just run differently. Less costs on property and more costs on carbon fuels.
The land and buildings will be here 50 years, 100 years, 500 years and land even a million years from now, but the fossil fuel will be long gone. Doesn’t it make sense to tax the fossil fuels, to keep that around longer for future generations to also use, than to tax property which will be around for future generations to use whether it’s taxed or not?
Reduce the property taxes on every business for every employee by 1000 dollars and make that up with a fossil fuel tax. Reduce every homes property tax by 2000 dollars and make that up with a fossil fuel tax.
We could also shift most of those fossil fuel/carbon fuel taxes to consumption taxes and not production taxes. Any industry that has to compete on the world market would be taxed at a lower fossil fuel/carbon fuel production taxes rate that the world might agree to. We sure don’t need to tax and increase costs for companies that compete with China and India. But by taxing fossil fuel/carbon fuel as personal consumption taxes at a higher reate we would bypass that. Retail and restaurants could pay the fossil fuel/carbon fuel consumption tax rates.
From 2002, sales taxes are 3.2 percent of GNP, property taxes are 2.6 percent of GNP and income taxes are 9.9 percent of GNP. If we reduced each of these by 1 percent and increased fossil fuel/carbon fuels taxes by 3 percent, we would bring in just as much money to pay for government and not harm the over all economy. In a 14 trillion dollar economy, 3 percent of GNP would be about 400 billion dollars to trade from property, sales and income taxes to fossil fuel/carbon fuels taxes. (GNP rates U.S. economy)
Most of those tax reductions could go to lower income groups to decrease the resistance because energy taxes are a larger part of a lower income persons spending that higher income person.
Shuffling deck chairs on the Titanic.
As long as energy is needed in a growing economy, growing because more people are entering the system, you will not see an over all drop in demand of fuels. It would only be a small dip at first then once we are at the bear minimum of fuel usage required to run the economy then usage will rise again. Until the supply of fuel slows, then all hell is going to break loose.
Most people don't seem to understand that our Great North American Society was built around the car.
Any impingement on our ability to motor about is going to cause upheaval at every level.
Our system will have to collapse before any meaningful change can be enacted.
(pause, new idea takes hold) Unless you protaxers are really trying to bring about the collapse! Sheesh, I thought I was a doomer!