12 Nov 2015

The climate crisis doesn't end with the Keystone XL

Obama says he will not give a permit for the Keystone XL, a project that I have supported in the past.

The end of the Keystone will:*
  • NOT keep Canadian tar sands from being produced
  • NOT reduce the number of trains carrying crude with far more risk of accident
  • NOT reduce American (or world) energy consumption
  • NOT "fix" the climate change problem"**
That's because the pipeline is only there to meet demand. If you want to reduce demand, then you have to raise the price of oil or -- more accurately -- CO2 emissions.

The best way to do this is via a carbon tax. The easiest way to do this is by raising the gasoline tax from its incredibly low level of $0.49/gallon ($0.13 liter -- it's $0.77/liter in the Netherlands) to merely $1/gallon.***

What do you get with doubling the tax?
  • Lower gasoline use (probably 5% lower, given the tax's small share of total price and 0.3 short term price elasticity) and thus CO2 emissions 
  • More money to pay for road maintenance (this article says they need to "double funding"), releasing general tax revenue for other uses.
Bottom Line: Obama the lame duck should go for a real policy: a gas tax or, better yet, a carbon tax (They work!)

* Coyote suggests a "hack" to allow a "Keystone-equivalent." It may happen.

** I am hoping that delegates at the upcoming Paris meetings commit to reducing GHG emissions via national -- NOT international -- regimes that can be implemented and enforced under domestic laws. The most promising regime is a carbon tax, because it raises revenues. Cap and trade is lovely on paper but usually a practical failure in implementation (e.g., too many free permits in the ETS). A shift of rhetoric, from "limits on economic activity" to "taxing harm", might get more political support.

*** Even easier, in countries that SUBSIDIZE fuel use, is to remove subsidies.


freude bud said...

In the US the federal gasoline tax is 18.4 cents/Gallon. Raising it to $1/gallon would be to quintuple it--politically pretty much impossible. Even if you consider state and federal combined--maybe you were thinking of California--doubling any tax that fundamental to so many peoples' lives is politically pretty much a non-starter. Maybe you should reconsider your opposition to cap and trade, which does have examples of working in the past, and which has a much higher chance of being actually adopted in the near term.

David Zetland said...

@freude -- Quintupling it only adds $0.80 to the price of gas, which is $3-4 already. Depends where the money goes, if course, in terms of political acceptance. Cap and trade? I think that's a broken system, given politicians' habit of giving away permits.

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