Taxes: Still the Best Bet

I'm not by any means fanatically opposed to reducing greenhouse emissions through non-tax methods, especially if -- as seems likely -- this is more politically feasible since it conveniently hides hosts, but I remain persistently unconvinced by arguments that non-tax approaches are superior on the merits to simply implementing a carbon tax. Kevin Drum, on the other side, notes that the price elasticity of gasoline consumption is low (people use about one percent less gas when prices go up ten percent) so even a hefty carbon tax is unlikely to produces substantial reductions in transportation-related emissions.

The problem here is that we need to ask ourselves why that is. The answer -- it seems clear to me -- is that there aren't a lot of ways, in the short run, for people to reduce gasoline use and the people most able to reduce their usage (car owners living in walkable urban areas) don't use much gas in the first place. But what alternative do we have? Kevin gets his stat from Daniel Sperling who argues instead that we should "require oil companies and other fuel providers to reduce carbon and other greenhouse gas emissions of transportation fuels by at least 10% by 2020." But here's the thing. Sperling himself notes that a carbon tax "would not induce drivers to switch to low-carbon alternative fuels because virtually none are available." But, of course, were such an alternative available, taxes would induce switching. And a carbon tax would make the development of such a fuel potentially quite lucrative.

It goes like this across the board. It takes years for higher CAFE standards to really make an impact since the newer, more efficient cars only displace the older ones over time. But by the same token, a high carbon tax would over time cause people to consider investing in more fuel efficient engines. Most of all, though I know people from southern California don't like to hear about it, it's totally crazy to put forward a plan to reduce carbon emissions that doesn't do anything at all to encourage people to drive their cars less at the margin over time.

UPDATE: Wait, sorry. The other thing is that a carbon tax (or something similar where you auction emissions permits) does do one thing in the short run, namely generate revenue. That revenue can then be spent on supplementary measures -- subsidies for hybrid trade-in programs, mass transit construction, alternative fuel development, renewable electricity generation -- of the sort Kevin's talking about.

Photo by Flickr user Bear69Designs used under a Creative Commons license.