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Cars and a carbon price

"Americans do hate paying more for petrol," writes Ryan Avent in response to my earlier post on America's love for cars, "but I think people wildly misunderstand the effect of politically acceptable carbon prices on its price. A $100 per tonne carbon tax, which is well beyond the realm of the politically conceivable, would raise petrol prices by about 20 cents per gallon -- about 8%."

Agreed! Harvard's Robert Stavins has a graph that shows this point nicely. What you're seeing here is the estimated changes in different sectors after we implement cap-and-trade. Transportation hardly figures in:

capandtradeeffects.png

But even if cap-and-trade is about coal rather than cars, I think it's basically undeniable that the popular understanding of global warming is that it's largely about how much driving we do, and what kind of cars we use when we do it. That's why the most-touted technological innovation thus far has been the Prius. Reversing that perception is difficult, and trying to make fine-grained distinctions about what cap-and-trade will do is even more difficult. So the persistent belief that cars are a necessity makes me pessimistic about a price on carbon, as you can bet that it'll be sold as a tax on driving.

By Ezra Klein  |  August 20, 2010; 5:34 PM ET
 
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Comments

what am I, chopped liver?

Ezra, recall the charts you recently got from Robert Stavins -- transportation (i.e., cars) is only a modest source of emissions reduction under a moderate cap and trade set up. The cheap opportunities are in electricity production.

Posted by: bdballard | August 20, 2010 12:13 PM | Report abuse

Posted by: bdballard | August 20, 2010 6:00 PM | Report abuse

Reversing that perception is difficult Ezra, which is why it would be helpful for you to remember, when writing throwaway lines about how people's love of cars will make carbon pricing difficult, to include a note about how that's not actually where most of the carbon reduction will come from. It's when we take these things for granted that mis-perceptions become thoroughly ingrained.

What a different conversation we could be having about the cost of carbon reduction if people thought first of nuclear power plants rather than Priuses (plural: Prii?) when pondering potential solutions.

Posted by: sanjait | August 20, 2010 7:19 PM | Report abuse

Carbon reduction from cars is going to be really tough- a 0.20/gal gas tax will not be enough incentive. We need something where the payback period on a more efficient engine is around three years. At an average of 12,000 miles driven per year... that's 480 gallons at 25 mpg, less than $100/yr.

I think what is oft underestimated is the importance of energy to personal consumption. It's going to take a very high carbon price to affect my behavior. Maybe I move the thermostat from 76F to 77F?

Posted by: staticvars | August 20, 2010 11:56 PM | Report abuse

My company's year 2030 solution for serving the electricity needs of our ratepayers required building twice as much capacity as the case in the absence of a carbon policy.

I was uncertain at the time if the carbon case captured the demand destruction resulting from the incredible rate increase required to support this level of capacity addition. The rates necessary to do so would drive business out of the state and therefore perhaps not require as much capacity addition. I felt they were perhaps overstating the case of what the company needed to do in a carbon environment. They failed to capture the destruction of wealth and opportunity.

2x as much capacity is an immoral imposition on future generations-- saddling them with ill and underperforming assets. Such a policy robs the future of wealth.

I am a skeptic. My skepticism arises because there is little in the nature world so one-sided in effect as the proponents of CAGW would have us believe.

What are the benefits of global warming? Are there none? Are they all catastrophic? How has mankind fared in the past in both cold and warm climates?

Lastly, plucking a $0.20 increase out of the price of gasoline and saying Ah-Ha! means little. Drive that $0.20 increase through the lines of production and transportation of all goods and services. Yeah, it's only $4 per fill-up. But it will show up in the price of everything you purchase.

Posted by: steveyp1 | August 21, 2010 6:52 AM | Report abuse

Check your math.

$100 per ton of CO2 would be about $1 per gallon of gasoline. $100 per ton of carbon would be even more.

Posted by: chase-truth | August 21, 2010 8:27 AM | Report abuse

Gasoline prices go up and down more than 20 cents most weeks. Who would notice if they were not told?

The Republicans made a huge stink when BIll Clinton added a measly 4 cents to gasoline. The noise died off when gasoline dropped below $1.

Posted by: bakho | August 21, 2010 8:58 AM | Report abuse

No one would notice a 20 cent a gallon hike.

But it won't remain just 20 cents for long.

The commenter "staticvars" gave the game away: Start the gas tax at 20 cents a gallon to get people used to it, and then start hiking it more and more until gasoline becomes too expensive to use.

Such has been the way of every Government domestic initiative: Get your foot in the door, then an arm, then your whole body--and then throw the door wide open.

We're not buying this anymore. Liberals aren't going to get their foot in the door with any more initiatives. Not one.

By the way, we do pay for electricity too, you know. A sharp rise in electric rates will be instantly visible to everyone who uses air conditioning or who has electric heat.

We're not going back to the Jimmy Carter era of turning down thermostats, shutting off lights, wearing sweaters and winter coats and shivering in the dark.

You liberals are through.

Posted by: sinz52 | August 21, 2010 10:17 AM | Report abuse

You go first. When the liberal fascists and the eco-fraudsters give up their cars, air-conditioning, electricity, and have a Neanderthal lifestyle to match their intellectual level, we can see how that works for them. In the meantime, they should be quiet.

Posted by: doctorfixit | August 21, 2010 11:55 AM | Report abuse

Well Ezra, an increased gasoline price, especially one artificially created by a government program, would be a tax on drivers. It would also be a tax on anyone who buys anything that is shipped via truck, rail, sea or air. But hey, most of us are out of money anyhow (except you clowns in DC), so what the heck, kick us when we're down.

Posted by: ted22 | August 21, 2010 12:46 PM | Report abuse

Please, Little Boy, stop the typing.

Sure, you just graduated from some college with a political science degree.

But you know absolutely nothing about any of the myriad topics you type about.

Posted by: susangorgo | August 21, 2010 12:51 PM | Report abuse

Archaeological remains of a lost city have been discovered 36 meters (120 feet) underwater in the Gulf of Cambay off the western coast of India. And carbon dating says that they are 9,500 years old. I am sure people in India were not driving SUVs or polluting the landmass with use of dirty fuel to cause the sea level to rise and sink their city. So this AGW fraud is just that a fraud. Climate changes by itself you cannot do anything to prevent it. More importantly I will not waste my money towards any effort to prevent climate change. I would use it to adapt to any change that may occur, if it occurs and when it occurs . So no money from me towards aiding and abetting carbon racketeering also known as cap n trade.

Posted by: deridemender | August 21, 2010 8:44 PM | Report abuse

Creating an ideology pegged to carbon dioxide is a dangerous nonsense…The present alarm on climate change is an instrument of social control, a pretext for major businesses and political battle. It became an ideology, which is concerning. CO2 emissions make absolutely no difference one way or another….Every scientist knows this, but it doesn’t pay to say so…

"What failed at Copenhagen was not just the summit. A notion of establishing the UN as a sort of world government through the use of climate politics -- has also failed."
(Die Welt -german news paper -Refering to EU President)

No Thanks.

Posted by: deridemender | August 21, 2010 8:47 PM | Report abuse

What is the point of this article - besides quoting someone else at length? (and Klein, as usual, trying to make himself look 'smart' ).
We could accomplish much of what cap and trade purports to do by simply mandating higher mileage for new vehicles. You don't need to have everyone driving a Prius to get a lot of benefits. Let me break it down for you:
Most people have a certain number of miles a week that they have to drive (to work, drop off kids, etc...). Lets say it is a 100 miles/week. If you drive an SUV with 10 mi/gallon economy, you burn 10 gallons of gas. If you go to a vehicle that has 20 mpg, you burn 5 gallons of gas - you save 5 gallons of gas, relative to the SUV. If you go to a vehicle that has 40 mpg (aka Prius), you burn 2.5 gallons. Notice that the savings in going from 10 mpg to 20 mpg is twice as great as going from 20 to 40 mpg. What does this tell you? 1) The low hanging fruit is the SUVs with sub-20 mpg mileage. Get them the hell off the road. 2) once you get everything to 20 or 30 mpg, there are diminishing benefits to going further (I urge people to do the math).
Big, all-encompassing legislation is not necessary. Just pass sensible mileage requirements for new vehicles (including pickups and SUVs) - and enforce them.
But the UAW doesn't want anything like this, so god forbid we do anything this simple.

Posted by: invention13 | August 22, 2010 12:03 AM | Report abuse

Where would the money go that is collected? Would it go to help the environment?

Ask Klein where the money collected...the billions collected...would go.

Posted by: WrongfulDeath | August 22, 2010 2:56 AM | Report abuse

I do not mind paying more for gas PROVIDED the extra money does not go into some political slush fund to dole out favors to the selected few. Five hundred years or so ago, the British had so devastated their forests (for firewood) that they had to resort to importing wood from Scandinavia. Then some enterprising individual discovered that coal (which was plentiful in England) could be used. Then something equally as stupid as importing wood was invented “Whale Oil”. Then another enterprising individual discovered that the earth again offered something of greater value – petroleum. We have gone past the time that something should take the place of petroleum – but just as the lumber importers fought the coal industry and just as the whale oil industry fought the petroleum industry – progress could not be halted. I hope and pray that the incentive to create something better than petroleum (perhaps electric vehicles) will save the day. The biggest hurdle will not be the technology but the entrenched political process that favors oil over national security. Theodore (Ted) Sumrall

Posted by: TedSumrall | August 22, 2010 11:35 PM | Report abuse

How do you suppose the idea that carbon emissions is all about SUVs got so deeply ingrained in the first place? Could it be that various progressive interests have been aggressively marketing it as exactly that for a generation?
For quite a few progressives, the question has never been how to mitigate carbon emissions at the lowest possible cost, but how to exploit global warming to market economic and social policies that would otherwise be non-starters.

Posted by: tl_houston | August 23, 2010 9:06 AM | Report abuse

Obama and George Soros helped create the CCX (Chicago Climate Exchange) and Al Gore and other progressives have invested heavily in it. Carbon credits (your carbon taxes) will be traded on the CCX and all the elite progessives will be seeing green (the color of your money going into their pockets). Check it out for yourself. WAKE UP AMERICA.

Posted by: dcharlson | August 23, 2010 12:41 PM | Report abuse

Previous writer was correct. A gallon of gas produces almost 20 lbs of CO2. A $100/ton would therefore be nearly a buck a gallon, not 20 cents.

Posted by: normalman | August 23, 2010 4:26 PM | Report abuse

Mr. Klein,

I do not know if you or the graph's creator highlighted that bar for "electric power" in yellow, but it seems to be the elephant in the room. A 45% increase in the cost of electricity will utterly ruin what is left of manufacturing in this nation.

Let's make this really simple. To run a production line you need 4 main things: people, machines, raw materials, and power to run the machines.

First, machines. To oversimplify a bit, heavy equipment costs the same no matter where you locate it.

Second, raw materials. Pretty much the same as equipment, but costs will go up a little for everyone if transportation costs rise. As it affects all companies, not just those directly paying the tax, this too is not a factor.

Third, people. Already we have the highest wages (i.e. labor costs) in the world, which is enviable, but this undeniable boon for American workers has the unintended consequence of causing employers to seek out cheaper sources of labor, especially in the emerging Asian economies.

And that leaves that last input, energy.

I realize that the Left studiously refuses to acknowledge that incentives matter when it comes to tax policy, but come on. We have been hemorrhaging manufacturing jobs for years, even without Cap and Trade.

Isn't it obvious that a 45% increase in energy costs borne only by American manufacturers will hurt the American manufacturers competitively? Doesn't it occur to you that more companies will "offshore" their manufacturing operations WITH a 45% tax on a key industrial input than will do so WITHOUT it?

Posted by: jseely | August 23, 2010 5:13 PM | Report abuse

Check your math.

$100 per ton of CO2 would be about $1 per gallon of gasoline. $100 per ton of carbon would be even more

You are sort of correct. If the tax is on CO2, it is $.85/gal (assuming gasoline is octane). However, if the tax is on carbon, the tax goes down, not up (by a factor of 44/12), resulting in a $.23/gal tax.

A more likely tax of $30/ton_CO2 leads to a price rise of $0.26/gal. Hardly the apocalypse, eh?

Posted by: brickcha | August 23, 2010 11:05 PM | Report abuse

Check your math.

$100 per ton of CO2 would be about $1 per gallon of gasoline. $100 per ton of carbon would be even more

You are sort of correct. If the tax is on CO2, it is $.85/gal (assuming gasoline is octane). However, if the tax is on carbon, the tax goes down, not up (by a factor of 44/12), resulting in a $.23/gal tax.

A more likely tax of $30/ton_CO2 leads to a price rise of $0.26/gal. Hardly the apocalypse, eh?

Posted by: brickcha | August 23, 2010 11:06 PM | Report abuse

NRDC has looked at the intersection of a climate bill and gasoline/transit costs:

Under federal climate-protective policies that include an economy-wide cap on carbon pollution and the recently-approved improved efficiency standards for passenger cars and light trucks, households across the country will, on average, consume less gasoline and save money.

In the aggregate, Americans can expect to save over $24 billion in vehicle transportation costs in 2020.

http://switchboard.nrdc.org/blogs/ltonachel/consumers_save_money_on_gasoli.html

Posted by: MeghanNRDC | August 24, 2010 1:42 PM | Report abuse

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