Paradigm Shift: Gas Tax Q & A

Posted by Greg Allen on 08.21.2007

After getting some really good email, Greg Allen takes the time to address some of the more common misconceptions about the most significant action the government could take to fight global warming: raising the gas tax.

Last week's column about global warming got a lot of great email. One in particular pointed out some hastily added words in the conclusion that gave off a very bad impression and made an argument in its weakest form. Posted now is that email as well as my response trying to address every question it makes.

explain to me how your argument in the last couple sentences... differs." Even if the probability is low (and it isn't) the results would be so catastrophic we have no choice but to plan for the worst, and do everything we can. I'm sorry if we all have to deal with $4, $6 or even $12 dollar gas. But I'd rather see you poor and miserable than dead.

...differs. from the "let's get the terrorists at all costs before they get us" argument to justify armed intervention in Iraq and elsewhere. You can't; it doesn't. And if the well-off become poor and miserable, the less well-off become super-poor and dead. You don';t know whether the probability is low or not, and by your standards, any probability is high. Why do you drive? Why do you leave the house? Do you really plan your life around worse case scenarios, because being miserable is better than being dead? And have you calculated the "odds" of being both miserable AND dead...like destroying the economy with negligible effect? Is that really wise?
--Jack Marshall

You've made a clever and important argument I'm going to try and address it as thoroughly as possible. Feel free to write me again if you feel I'm missing your point or ducking the issue.

How is it different from terrorism?
1. Consequences of Action: Action against terrorism can be a bad idea because it increases the probability of terrorism For example, terrorism could also be so catastrophic we have no choice to act (I personally don't feel that's the case) but actions like invading Iraq might only increase the probability of terrorism, thus making inaction or less risky actions the best alternative. I know of no way in which gas taxes increase the likely hood of global warming disasters.
2. Scope: Even if the middle of New York City got nuked, life would continue for the rest of us (albeit with severe economic consequences) global warming, especially via Methane Hydrates makes the extinction of the human race possible and the death of billions actually rather likely. Read about the feedback loops concerning global warming to understand this. This same "low probability, but extinction level consequences" logic is used by astronomers who demand further action on potential future-level asteroid impacts.
3. Probability of terrorism: I currently live with an engineer who has explained at length various "choke points" within the United States infrastructure which are unguarded every single day and could be destroyed with less explosives than the amount used by the Oklahoma city bomber. For instance, there are six bridges in the United States that house unguarded, unshielded natural gas pipelines within them that could be bombed and cut off energy to much of the United States. Simply put, if domestic terrorism were at all likely, we'd be getting bombed a hell of a lot more.
4. Probability of global warming: I gather that you disagree with what I'm about to say, but for all intents and purposes there is no disagreement within the scientific community about the likely hood of global warming and its consequences. If you're familiar with the "petition of 20,000 scientists who are skeptics" its ranks are composed of dentists and family practitioners. Amongst climatologists and Nobel prize winners, there is only debate about time frame and scope, not cause, not broad effect. If you'd like more information about this, I can recommend some literature to you.
5. Feasibility of Action: The War on Terror is about spending billions of dollars in order to control and prevent the behavior of others. This is a very complex and difficult operation since even one mishap can be devastating. A gas tax, by contrast, leads people towards the behaviors a government desires because they feel it's in their own best interest. Much easier to enact change that way.

Why do I drive a car?
The average American makes 50,000 car trips in his/her lifetime. Based on this average, the odds of being killed in a car accident are 1 in 140 but decrease as I get older and survive longer. Plus, those odds don't take into account the quality of my driving, where I drive etc, but the point is the odds are very very low per trip per mile. Because of this, I am willing to risk death in order to accomplish daily tasks. If the death of millions or billions were on the line, however, I'd ride a bike.

Do I really plan my life around worst case scenarios?
Sure, that's why I have insurance.

Is being miserable better than being dead?
Never having starved or suffered from chronic illness, I'm not actually qualified to answer this. My intuition is yes. Especially if the misery will eventually pass, as I imagine a gas tax leading to alternative energy technology development would be.

Might a steep gas tax make everyone miserable?
Oh absolutely this is possible, but most of the people who advocate gas taxes (including myself) favor some mechanisms to minimize the misery. For instance, I can see need for very steep gas taxes because gas demand is relatively inelastic; however, such taxes would need to be introduced gradually, increasing a dollar every year perhaps. That way, people can expect and take into account the coming change and preemptively adjust their behavior by moving closer to their place of work, buying a bicycle etc. Many Seattle buisnesses have showers installed within the building so that people are more willing to take their bike to work (and not have to worry about showing up drenched in sweat). These sorts of changes take time and so a gradually introduced tax hike would help many people avoid the pain of higher taxes.

Will a steep gas tax just kill poor people?
I imagine you're speaking in hyperbole about the unequal effects such a tax would have on the poor. This is undeniably true, which is why tax prebates or something analogous to food stamps would likely be included for those near and below the poverty line.

Will a gas tax even be effective in reducing gas consumption?
As I said earlier, gas demand is inelastic, so the taxes would have to be steep. I vaguely recall reading that $3.00 a gallon tax only leads to 10% less consumption than $1.00 gas. It's likely real change might require gas to be $6 or $8--closer to European prices in order to cause significant change. Then again, car companies are already making ads about fuel efficiency. A little more could go a long way.

Effective in slowing global warming?
More than any other area of the economy, gas has the potential to get consumers demanding more energy efficiency. The research spurned by such a tax would likely be very significant indeed, even beyond the car market. Some global warming it seems is already assured, but the earlier action comes the more effective and easier it is like to be.

Would a gas tax destroy the economy?
Actually it's more likely to help the economy. Pollution is the classic economic example of market inefficiency caused by externalities. A pigovian tax would go a long way in restoring equilibrium. Plus, think of all the US car makers now unable to sell their gas-guzzling cars in Europe because they don't meet fuel efficiency standards. If we'd had a high gas tax in the early 90's, there's a lot of American businesses that would probably be doing much better on the foreign market. Additionally, the R&D made cost effective by such a tax would leave America at the center of a new, fuel efficient global economy. In the early years, a gas tax is likely to slow economic growth, but as the years go by and the taxes go up, all it's going to do is shift growth into new economic sectors. No harm there.


So that was my extremely long email response. Jack has since written me back with responses to my responses. If anybody is interested in seeing those, email me and I'll forward them.