Raising the gas tax might be the only way to wean Americans off oil

Friday, March 5, 2010

GEORGE W. BUSH declared four years ago that America is addicted to oil, a dependency that dirties the air, leaves the economy vulnerable to the volatility of a single commodity and enriches distasteful foreign regimes.

Yet, surprisingly, climate proposals in Washington, such as the House-passed Waxman-Markey bill, wouldn't do all that much to slash American oil consumption in the near future. So what would it take to seriously reduce oil dependence? Harvard's Belfer Center for Science and International Affairs released a report Thursday concluding that Congress has one good option: increasing the national gas tax.

In general, the best way to cut emissions is by putting an economy-wide price on carbon. But that's not likely to pass any time soon, and, regardless, the report's models and other analyses show that even a meaningful and increasing carbon price would not raise the price of gas enough to change driver behavior in ways that put a big dent in emissions or oil imports. The authors found that pricing carbon dioxide at $30 a ton in 2010, rising to $60 a ton in 2030 (an optimistic scenario) would increase gasoline prices by only 24 to 46 cents a gallon over that period.

Critics might argue that instead of taxing fuel, the government should give tax breaks to those who buy products that consume less of it, such as hybrid cars. But the researchers found that doing so is expensive and can encourage people to drive more, limiting the benefits.

The logic of a gas tax, meanwhile, is simple: As in the summer of 2008, when gas prices rose a couple of dollars instead of a couple of dimes, people find ways to use less -- whether by taking fewer trips, carpooling or buying more fuel-efficient cars. Tax receipts could go to deficit reduction, or they could be rebated directly to households, rendering the tax far less regressive -- and more politically palatable -- while still sending an appropriate price signal.

No one knows exactly how America will find its way to a cleaner economy. That's why, as a rule, Congress shouldn't pick winners and losers in climate-change legislation and instead leave those calls to private actors operating in an environment in which emitting carbon becomes progressively more costly. But there are a few cases where it's clear who should lose -- and as soon as possible. Because of the range of social costs it exacts, oil is one of them.

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