Proponents of raising the gas tax—and the chattering class is littered with them these days—have a simple, central argument: gas taxes create a market signal that pushes all vehicle consumers in the direction of fuel efficiency.
Indeed, some conservatives (and car companies) go further: they say that CAFE standards are bad policy because they force automakers to create products for which there’s no demand. It’s no good making fuel-efficient cars if nobody wants to buy them! (Americans love big, powerful cars. “Everybody knows” that.) Higher gas taxes should replace CAFE, because they create create demand instead of forcing supply.
A moment’s thought reveals a serious flaw in these arguments. Fuel costs are a relatively low portion of total vehicle costs—maybe 10-20 percent. There’s maintenance, insurance, parking, but most of all, the price of the car.
And when the time comes to buy a car, people don’t behave like the rational interest maximizers of economic myth. They rarely calculate out future costs like fuel. They consider the number on the price tag in front of them: the price of the car.
It follows that if you want a market signal, you should put it where it will have the most effect: on the price of the car.
As it happens, we have a policy like that! Let’s hand the mic to John Heywood, who has headed the Sloan Automotive Laboratory since 1972:
I think we need a purchase tax, a feebate system, like the French have instituted fairly recently. Fees for high-consuming vehicles and rebates for low-consuming vehicles. That will help reinforce consumer response to CAFE requirements by providing a market incentive.
There you go. A clear price signal, applied at the point of maximum effect, supplementing rather than replacing fuel efficiency standards. CAFE standards push automakers to make fuel-efficient cars; feebates push consumers to buy them. (Oh, and unlike gas taxes, feebates aren’t regressive.)
How is this not a preferable policy, both economically and politically? What am I missing?
Capturing the massive social benefits of fuel efficiency requires regulation
Comments
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Nickz Posted 3:31 am
17 Feb 2009
We need CAFE to provide planning certainty.
CAFE without feebates (or taxes) creates cars people don't want to buy.
CAFE or feebates, but no taxes, means buyers of used cars get no incentive for efficiency. Also, there's no incentive to drive efficiently.
Taxes without CAFE (and/or feebates) means buyers under-weight operating costs.
We need a balanced set of regulations and incentives to prevent or mitigate weird results, like the SUV loophole. It's very much like tax policy - minimize any particular tax, broaden the base, and prevent odd side effects.
Renewables's obstacles aren't technical, they're social: 20% of the workforce might be obsolete... http://energyfaq.blogspot.com/
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Sean Casten Posted 3:33 am
17 Feb 2009
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David Roberts Posted 3:41 am
17 Feb 2009
grist.org
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JMG Posted 4:00 am
17 Feb 2009
The main objection --- and it's not so much an objection as a caution --- to an auto purchase feebate proposal is that it's about 30 years too late. We've entered the bumpy plateau period of peak oil that is leading to the rapid decline phase soon enough. As a result, our economy, which was predicated on continuous growth, is going to suffer instead a continuous collapse in waves, kind of like reverse peristaltic spasms as the earth tries to disgorge humanity.
Thus, we're rapidly going to not be making or selling many new cars at all in this country. Rather than 15-17 millions a year, we'll probably do something closer to 500,000 a year before long, as cars return to being something for the rich.
So it's a fine idea in principle but I fear its moment has passed.
Thus, raising taxes on fuel (provided that we break the restrictions that limit the use of gas taxes to funding roads) is still probably the most effective bet -- the vehicle purchase decision is going to be a thing of the past for most Americans, so it's not the leverage point it would have been in the 70s.
The 5% Project
Let's live on the planet as if we intend to stay.
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ids Posted 4:04 am
17 Feb 2009
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BILL HANNAHAN Posted 5:20 am
17 Feb 2009
A retired school teacher buys an identical car and drives it to the grocery and church once a week, 1,500 miles per year.
Why do you think they should both pay the same penalty?
Fuel taxes collect fees in proportion to consumption and in proportion to emissions.
Things Everybody Should Know About Energy
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GreyFlcn Posted 5:28 am
17 Feb 2009
A retired school teacher buys an identical car and drives it to the grocery and church once a week, 1,500 miles per year.
Why do you think they should both pay the same penalty?
Fuel taxes collect fees in proportion to consumption and in proportion to emissions.
Let's flip that around.
If you really need a large car for business purposes, I don't really mind that.
If you're just using a large car for small errands, then I'd rather see that be discouraged.
-David Ahlport
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David Roberts Posted 5:38 am
17 Feb 2009
grist.org
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hapa Posted 6:01 am
17 Feb 2009
um. i firmly believe that, via a strange doohickey called "crazed securitized lending," one of the future costs that people did not calculate, pretty much all the way through the SUV craze and all the way up the lending ladder, was "the price of the car."
this is a part of the reason that GMAC is today on public life support and can be read as a sign that there's another trunkload of shoes to drop on the world economy in 2009. the credit bubble was mighty and wide.
feebate only (or "most strongly") has a high dependence on the replacement rate. because we don't know who will be lending or borrowing, at what interest, we have no idea what the replacement rate will be over the next decade but as is being discussed now, it's cough "below average."
it could well be that the long tail of this ugliness will beat on the low end of american society for much longer, implying that retrofits will be more important than getting cleaner cars into the great chain of automotive existence. it will, for instance, be a long time before people are living out of plug-in hybrids, unless there is serious public intervention.
i would say that to prepare for another oil price shock -- which is definitely possible, once the credit market is breathing on its own, and sadly for oil consumers, business credit has to come back online before jobs recover, right? -- is to make a generational commitment to public transit and smart planning; subsidize oil-thrifty living now now now; and ease in a neutralized gas tax.
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yak Posted 7:00 am
17 Feb 2009
CAFE and feebates are both useless because it's not gas-guzzling vehicles themselves we want to get rid of. If someone buys a huge SUV and then drives it once a year across the street, there's no reason to penalize. On the other hand, someone who buys a fuel-efficient vehicle and then uses the high mpg to justify getting a job 50 miles away from home is causing perhaps more emissions than if they had bought a lower efficiency vehicle. Since it's the emissions we want to reduce, it's the emissions that must be taxed.
Besides, you're wrong about the psychology. People are more likely to spend a lot of money in one go than in many pieces. It's not the $100,000 car that makes people wince, it's the $100/week price at the pump. Witness the decrease in driving that accompanied the rise in gas prices -- proof that people respond to gas prices by changing their driving habits.
Your plan leads to a skewed market and less efficiency, while taxing emissions actually internalizes externalities and increases efficiency.
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Curtis Moore Posted 7:00 am
17 Feb 2009
However, a feebate should not be based solely on CO2 emissions. On the contrary, the emissions of black carbon by a fuel efficient diesel can--and, I am convinced do--have a greater warming effect than carbon dioxide from a gas guzzler. Plus the diesel particles kill people and cause a life-long reduction in lung function in children (see issue 10 of my Health & Clean Air Newsletter at http://healthandcleanair.org/).
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F James Handley Posted 7:26 am
18 Feb 2009
http://www.cepr.net/index.php/op-eds-&-columns/op-eds ...
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mwildfire Posted 2:05 am
20 Feb 2009
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amazingdrx Posted 3:39 am
20 Feb 2009
When you burn 6 kwh of electricity in your car, instead of burning a gallon of fuel, you get 18 cents, 3 cents per kwh.
If you generate 6 kwhs at home to power up your car, you get another 18 cents. The cents add up to really quick payback times for plugin cars and solar systems.
Where does the money come from? It is taken from the subsidies for fossil, nuclear, and agribizz industries, well over 50 billion per year. How much is grid power subsidized right now? 5 cents per kwh? 10 cents? How to add up the largesse of the government in corporate welfare?
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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