Don’t go to that old CAFE

We live in a changing and dynamic world, but politicians insist on making bureaucratic rules for a lethargic system that changes only when they say so. I am talking about CAFE standards. They look like a good idea, but they are a dodge. What we really need is a carbon tax. CAFE standards give the appearance of action while letting politicians pander, prattle & posture.

What is our goal? We want to use less carbon based fuel? The most direct way to do that is to make carbon based fuel more expensive. I favor a carbon tax, but anything that consistently raises the price of carbon based fuels will work. Consumers can react to the higher prices in any number or combination of ways. They can simply drive less. They can car pool. They can buy more fuel efficient vehicles, ride bikes, walk. Some can switch to public transportation; others can telecommute. There are some people who will think up even more innovate solutions. If you raise the cost of the carbon based fuel, you engage people’s attention, intelligence and imagination in finding solutions.

CAFE standards can accomplish some of these same things, but much less elegantly, with significantly more waste and corruption and less imagination or innovation. Beyond that, by targeting a symptom rather than a root cause, we set ourselves up for failure.

We Americans get an extraordinarily good deal on gas price and it shows in our consumption.

In a rational world, CAFE standards would work, but people do not always behave rationally. Most people do sort of mental accounting for things like fuel or food. If they spend less for fuel because their car’s mileage has improved, they do not just save the money. They drive more with that “found money”. Americans drive more than 2.5 times as many miles today as we did in 1970. Better mileage is great… except if it allows you to just drive more. If you look at that chart linked above, you will notice that miles driven sometimes DOES go down – when the price of gas goes up. Clearly price works; CAFE does not because we have dynamic system.

Part of this dynamic is also a fixed versus variable cost problem. CAFE standards drive up the price of cars. You might pay $2000.00 more for a car because of these standards. Frankly, I do not have a problem with that. BUT it places the cost at the wrong point. Most people will own a car. They will absorb this one time cost and think of it no more. That is a fixed cost. The goal should be to get them to drive it less. For that we want the variable cost of fuel to be higher. Otherwise it is like going to the all you can eat buffet and being expected to only take moderate amounts of the good foods. You discourage consumption by increasing variable costs.

CAFE also is susceptible to political manipulation. For example, Democratic politicians from Michigan favor making cars and trucks meet size-based mileage standards instead of fleet wide targets, which would favor big cars and punish those firms already producing small efficient vehicles.

"If we have a big disconnect between what the consumer is asking for and what the manufacturers have been ordered to produce, that's extremely difficult," says Mike Jackson, chief executive of AutoNation Inc. to the WSJ. "That's sort of like if you want to do something about dresses in America, [mandating] that we can't sell anything larger than a size eight. If you don't put America on a diet at the same time, you have a disconnect between the regulators and what the consumer is willing to do."

So let’s go to the carbon tax, go on that reduced carbon diet and stop messing around. That is what will work. Pass higher CAFE (if you can) but do not expect it to do anything except make some people feel virtuous and give others an excuse to do nothing much. It will not reduce CO2.

There is no magic to this. The solution is simple. Reduce carbon based fuels. A carbon tax will help do that. Everything else is just a distraction.

Posted by Jack at June 26, 2007 10:10 PM
Comments
Comment #224177

I agree that a carbon tax is the way to go, but I also favor higher CAFE standards. We haven’t made much gain on average vehicle fuel economy over the last 20 years. Much of the rest of the world is way ahead of us on this.

What I fear, Jack, is that the carbon tax is such a tough sell to both the left and the right that it’s not going to happen in the next several years. I hope I’m wrong. In the meantime, I don’t think we can afford to wait but must take what we can get.

Posted by: Gerrold at June 26, 2007 10:35 PM
Comment #224178

Gerrold

CAFE just does not work. We drive more when we get better mileage. We only drive less when the price rises. Europe is way ahead of us. They have much higher fuel prices. It is not the result of CAFE type standards.

The carbon tax is coming. There is growing support among thinking people, left and right. If CAFE lulls some people into a false sense of success, it may derail the real progress.

Posted by: Jack at June 26, 2007 10:45 PM
Comment #224180

Jack, Whats wrong with both a carbon tax and raising the mileage standards? The implementation of CAFE can be just as innovative and imaginative should the automakers choose to act upon it. Its good for America so it must be good for GM and all the other companies that are involved in the manufacturing process. With their advertising budgets I believe the “problems” they suffer could be overcome. Why would we not want to regain the lead in effficient vehicle technology? Seems almost communist, this resistance to change, on the part of Mr. Jackson doesnt it. We just need some of that “put a man on the moon” spirit from these corporations afraid to make a positive step to invigorate the reduction in the use of imported oil.

Posted by: j2t2 at June 26, 2007 10:55 PM
Comment #224181

Jack,

I agree that the carbon tax is preferable to CAFE, but in politics you can’t make the perfect the enemy of the good. And I see don’t why CAFE doesn’t qualify as “doing something”.

CAFE *could* be corrupted by the political process… but so could any policy. It’s like I saying shouldn’t eat a salad for lunch, because I *could* put fatty dressing on it.

CAFE standards can accomplish some of these same things, but much less elegantly, with significantly more waste and corruption and less imagination or innovation.

Empty words. In what universe does making something run on less fuel cause waste? Imagination and innovation? Did you contract this out to a speechwriter?


Posted by: Woody Mena at June 26, 2007 10:57 PM
Comment #224183

Jack, your intentions are good, but a carbon tax does not set a good precedent. It’s soaks consumers once again so that corporations and manufacturers don’t have to do their part. Why do we have to pick up the slack for years of technological laziness from the overly pampered detroit manufacturers. We’ve let gas prices go astronomical, and how many miles per gallon has that added? The most positive reduction in gas consumption over the past few decades has come in the midst of the rise of fuel standards.

It doesn’t really make economic sense to do things this way. This seems like just another great way to hobble the economy, to pass on more costs to consumers as transportation prices eat into bottom lines and paychecks.

And what happens, ultimately, when people begin to be capable of absorbing the costs? Europe can afford to absorb high gas costs because it’s glued together with decent mass transit. America, like it or not, has built its economy on roads.

We can’t merely seek out the best way to conserve, we must seek out the best way to thrive, and the way to do that is to lead on the technological front. Stop coddling the Detroit Automakers and propping them up despite their bad decisions on gas mileage.

Require better gas mileage from the manufacturers. That will make transportation cheaper and reduce fuel consumption, a double edged economic benefit. You might think that as a Democrat that I’m not looking at this in terms of economics, but I am, and I think the best way is to set the requirements, and let the market figure out a way to deal with those requirements.

Let’s stop making Americans pay for a culture of inefficiency they don’t want and never asked for.

Posted by: Stephen Daugherty at June 26, 2007 11:44 PM
Comment #224184

Jack, some interesting proposals as always.

But I’d like to see SOME evidence beyond theoretical conjecture about how people make financial suggestions in general that suggests that our driving and automobile-buying habits aren’t in some unique category unto themselves, which I strongly suspect they are.

You mention that we drive 2.5 times as many miles today as we did in 1970. But if fuel prices are a significant reason for this behavior, then why didn’t we drive more in 1970 when gas was, after being adjusted for inflation in 2007 dollars, cheaper than it is today?

I just think we’re talking about a much more complex and nuanced set of dynamics than simple cost here.

How many people REALLY do curtail their driving because of gas prices? How many people even have that option?

You talk about bicycles and using mass transportation, but I really don’t think that there is any vast untapped potential for such an approach that could make a dent in the overall problem. Try telling low income seniors in rural America who have taken a job at the drugstore 20 miles away to make ends meet that they should ride their bikes or take the train. That you’re gonna raise their taxes to punish them for not doing so.

The majority of Americans do not live in or near major metropolitian areas where they can just hop on a train or bike to to work every morning. It’s simply a geographical fact of this huge continent.

And a huge number of those who do, are already not driving. New Yorkers (and I know because I used to be one) already have enough reasons not to drive their cars from Brooklyn or Queens to work every morning. The impossibility of parking alone determines this.

I think what you’re basically proposing here is a punitatve tax on anybody who lives in rural or small town America.

Those who are financially comfortable aren’t going to give a damn. They’re already happy to buy giant SUVs instead of cheaper and more economical cars. The’re not gonna care now if they pay more for fuel to maintain their symbols of status.

Who this hits is the poor and middle class. And I simply do not believe that the poor and middle class are spending a lot of time pleasure-driving back and forth to their vacation homes instead of just trying to get to work and make ends meet.

I’m just not convinced by this page you’ve taken from the Democrat’s playbook that says if you see a problem, raise taxes and it will magically go away.

Posted by: Loyal Opposition at June 26, 2007 11:58 PM
Comment #224189

I believe Jack is correct when he says that better fuel efficiency correlates to more miles driven. I support higher CAFE standards not because I believe they will reduce gasoline consumption, but because I think it would reduce the hardship of a carbon tax (or higher gasoline prices, if we can’t get a fullscale cabon tax). As people rightly note in these debates, some miles driven are unavoidable if people are going to keep their jobs. But there is a correlation between higher gasoline prices and fewer miles driven; the past 18 months we’ve actually seen a decrease in miles driven even though there are more drivers on the road than the year before. Gasoline prices are a factor in this decrease, the first we’ve had since 1981, another year with relatively high gasoline prices.

It sucks, I know, and I don’t want to pay more for gasoline, either, but I think the fact is, if we want to cut carbon use, we have to increase its cost.

The purpose of a carbon tax is not simply to foster greater conservation, but also to make alternative power more attractive. At any rate, this is a hugely important issue, and I plan to comment in more detail when I’m not so sleepy.

I am so encouraged by the tone of the discussion so far, and am very encouraged by Woody’s comment. Loyal Opposition, I actually think a carbon tax will be harder to sell to the Left than to the Right. Anyway, here’s the EIA’s 2007 Annual Energy Outlook. The EIA of course is the source most other studies use.

Posted by: Gerrold at June 27, 2007 12:55 AM
Comment #224191
I believe Jack is correct when he says that better fuel efficiency correlates to more miles driven.

I reserve judgment about that, but I’d really like to see it justified with evidence instead of simply asserted. It just seems totally counter-intuitive and illogical to me.

Imagine two families who are neigbors. One has a gas-guzzling SUV and the other has a Prius.

Are we seriously to believe that the family with the SUV says, “Damn, we only get 20 miles to the gallon. This weekend, we’re gonna make it to the shopping mall for our family outing at best.”

Meanwhile, the family with the Prius says “Hurray, we get 50 mpg! We can get all the way to the beach and back!”

I find this ridiculous. I’ve owned gas-guzzlers AND fuel efficient cars, and can honestly say that factors totally apart from how much I paid for gasoline influenced when and where I drove.

Also, I’ve never heard anybody in my life say that they’re going to drive more or go one place instead of another just because they get more miles to the gallon out of their automobile.

If anything, the only reason that people with more fuel efficient cars might drive more is that these are newer and more technology-advanced cars. If you have a newer car, you probably have more money. If you have more money, you have more free time and more ability to go places (i.e. vacation spots, where they charge you even more money).

By the same token, if you have the means to travel unnecessarily (and go anywhere other than where you HAVE to go just to put food on your table), you don’t care what you’re paying for gas.

If you own a gas-guzzler and not only want but have the ability to take a ski vacation at Tahoe or a sight-seeing excursion up the coast in Maine, fuel is going to be a relatively minor part of your expenses. Even under a punishing fuel tax.

That is, unless you want to make the fuel tax so huge and severe that you prevent the poor and the working class who live outside of metropolitan areas from even commuting to their jobs. Anything that stops the financially comfortable from touring around frivilously in their automobiles is going to have to be so major that it also keeps poor people from showing up to work. In this case, the cure sounds worse than the disease.

Posted by: Loyal Opposition at June 27, 2007 1:44 AM
Comment #224194

Loyal Opposition,

I couldn’t sleep and saw your comment, so, in lieu of a sleeping pill, I’ll respond at least to one or two of your questions.

I welcome debate on this issue because the stakes are so important and because I don’t believe most people truly realize the enormity of the problem we face (assuming, of course, that you accept that reducing carbon is crucial).

Here is a link to the EIA’s analysis of proposals by the National Commission on Energy Policy to meet the nation’s energy challenges. This report was completed in 2005. Among the proposals was one to increase CAFE standards by 36 percent. On page xii you can get a summary of projected effects over the next couple of decades. You can see that gasoline consumption is projected to decrease in 2015 and 2025, but, and this is not made clear on that page but is later in the report (I shall reference), that decrease is not based on current consumption, but on the amount of consumption we would have without the CAFE standards.

Now look on page 20 at the chart on oil consumption (millions of gallons per day). You can see that CAFE does have an impact, but that, regardless, consumption is much, much higher in 2015 and 2025 than today (see page 19 for numbers).

Now, I don’t really know how much, if any, increase fuel efficiency leads to increased driver miles. I think it is probably true that some gains are offset by increased use, but I don’t believe anyone really knows. We do know that since the last time CAFE standards were imposed that miles per driver have increased quite a bit and overall gasoline consumption has skyrocketed (forgive me for not providing exact figures, but they are in the EIA report I liked to earlier). You are quite right to wonder if other factors are involved. I assume they are. Increased population and economic intensity, for example.

Regardless, the EIA projects that stricter CAFE standards will not lead to decreased gasoline consumption or CO2 emissions (see page 19)— at best it leads to a decrease in the rate of increase. It is clear to me that more drastic steps need to be taken if we are serious about this issue.

Posted by: Gerrold at June 27, 2007 4:17 AM
Comment #224196

Gerrold-
At this moment, I think people are motivated enough. Get the gas mileage up on cars, and people will jump on it. I really don’t get why we’re messing around trying to motivate people, rather than just doing what most people already consider in their best interest.

At the very least, a decrease in the rate of increase is what we need. But there’s also another issue I think: breaking the technological conservatism of the automakers, forcing them to devote dollars or at least patented technology they already have to reaching those goals.

Posted by: Stephen Daugherty at June 27, 2007 7:56 AM
Comment #224197

J2t2, Woody et al

The congress will not enact innovative regulations and auto makers will not implement them in innovative ways, except to avoid them.

In a non-dynamic system, CAFE would do no harm and may even do some good. In a system where people react to changes, CAFE will simply encourage more driving while allowing politicians and businessmen too much cover to avoid the real issue.

The higher prices brought by the carbon tax will provide incentive to improve our technologies and will allow innovation and imagination to be the keys.

Stephen

Using less carbon based fuel means using less carbon based fuel. Politicians, bureaucrats and consumers want to avoid this simple truth by enacting all sorts of laws and regulations that obscure it. These are not helpful and reduce the pressure to take real action.

LO

We are much richer today. We have more cars. The incentives have always been for more cars and more miles driven. This is not an easy fix and it will take time, but it is simple. Market forces coupled with government incentives have created our current transportation system and fuels mix. These were decent choices when we made them. Why not use a cheap form of energy (oil) and facilitate the freedom to drive as they wished? The conditions, however, have changed. Oil is not a clean market. Most of the oil in the world is controlled by governments, many of them unpleasant. Beyond that, we have discovered significant external costs to oil use. A carbon tax is a way to use market forces to remedy this situation.

BTW – the poor and the middle class have also made choices based on the cheap oil regime. Our whole society is set up that way. It took years to become as we are; it will take years to change. That is why we need to start now.

Gerrold

I agree with most of what you write. My prolem is with the sort of game theory of standards and driving. I fear CAFE will actually have the perverse result of exacerbating the problem by allowing us to avoid the solution longer and encouraging the behaviors and adaption we need to stop.

Posted by: Jack at June 27, 2007 8:00 AM
Comment #224201

Jack, once again why not both? Using the logic that the car manufacturers wont respond with innovation is a little short sighted for you. If one does the rest will be forced to follow. And if we are going to let the auto industry off the hook because they dont want to comply who is next those that dont want to pay the carbon tax?

Posted by: j2t2 at June 27, 2007 9:35 AM
Comment #224202

Jack, I believe BOTH a Carbon Tax, and the new CAFE standards are required. One without the other would not go far enough, and/or cause hardships for many parts of society. Frankly, I favor outlawing any new vehicles that do not attain a certain minimum MPG, say 20MPG. There is absolutely no way someone needs to drive a vehicle that gets 8MPG.

I say we need both because when you raise the price of gas by $2-3, or whatever the tax rate you suggest, that will hit some folks very hard. They will need to buy cars that get much better MPG, and if we do not require those cars be built, they may not get built in a timely manner. If there are not enough high MPG cars available, then the price of them will rise to where poorer folks cannot pay for them. Witness what happens to the price of Hybrids as the price of gas rises. When gas first went above $3 per gallon, Toyota was charging a premium for the Prius. When gas went back to closer to $2 per gallon, they were giving big rebates. No, we need to start mandating fuel efficient vehicles. Driving a gas guzzling SUV is NOT a constitutional right. It’s a privilege.

Finally, I have been analyzing my driving habits, and frankly I do not see how I could drive significantly less without moving to a city like NY or Chicago with good mass transit. I try my best to consolidate errands, never just go out for a drive, etc. I work from home, and only go out when I have a customer meeting. If my miles driven are higher, it is simply because the places I need to go are further away, which is not something I can control. I also drive more for work because if I can drive somewhere instead of fly, I do. Flying is too much of a hassle these days, driving is easier and more relaxing. I suppose I could stop going out on Saturday night to dinner and a movie, but that has other repercussions for the economy. I believe we drive more today simply because we have spread our communities out more across a greater area. We have left the big cities for the “country”, which necessitates longer commutes, and longer trips to the mall and grocery store. This is a trend not likely to reverse itself. More likely, people will stop buying other things, like HDTVs, nicer clothes, better toys, etc., and continue to commute the same distances to work.

In short, we need a 2 pronged approach here: Financial incentives via Carbon Tax, and mandated higher MPG vehicles. We need to hit this from BOTH sides of the equation, not just one.

Posted by: Steve K at June 27, 2007 9:35 AM
Comment #224203

Jack et al,

Well, you might be right that politicians will use increased CAFE standards to claim they are addressing the energy/carbon issue instead of taking other needed steps. But CAFE standards will be raised; even Detroit has gotten on board in hopes of keeping the new standards as low as possible.

Right now the numbers being bandied about in Congress are 36 mpg for cars and 30 mpg for trucks by 2020. It’s a drop in the bucket and even by the rosiest scenario won’t affect gasoline consumption or oil imports by more than a few percentage points. I hate the way these issues are talked about by politicians and the media — they say X amount of barrels will be saved, but almost never talk in terms of percentages or that actual consumption will still sharply increase. Some good things actually work against us — a growing economy translates to increased consumption.

The carbon tax was a hard sell to me for years because I held out hope that incentives to consumers/producers and R&D expenditures alone could curb our carbon addiction, even though I knew the numbers didn’t support that belief. Don’t get my wrong — incentives and R&D have helped, a lot, but not enough to do more than slow the rate of increase. The EIA site has historical information.

A carbon tax elegantly addresses all of our carbon usage, not just from the transportation sector. The revenues can be returned to citizens via direct government rebates. If every citizen receives quarterly a rebate, then it’s a progressive solution because those with more consume more carbon.

Having said that, I’d like to find some good studies on the projected correlation between carbon taxes and carbon-use reduction. At least that would give us a better idea of how high the tax would need to be and how much it might affect consumers and the economy.

Posted by: Gerrold at June 27, 2007 9:55 AM
Comment #224208
The congress will not enact innovative regulations and auto makers will not implement them in innovative ways, except to avoid them.

OK, I won’t waste any more time worrying about this issue then. If Congress won’t enact a law that would actually work then we have nothing discuss, barring a change in our system of government.

Posted by: Woody Mena at June 27, 2007 11:26 AM
Comment #224210

Gerrold-
You can’t make a carbon tax work if you’re paying people back. The very point to Jack’s plan would be to make it economically punishing to consume more gas. Giving people refunds would give them back that money, smothering whatever disincentive existed for breaking our carbon addiction.

To be effective on that front, though, we have to subject the consumers at the heart of our economy to punishing levels of taxation. At that point, we’re shooting ourselves in the foot, and in more than one way.

Developing these technologies will be expensive. Though economic growth increases consumption, it also increases funds available for research. At the end of the day, that’s what we need, because what we need to happen is a technological breakthrough, followed by a successful diffusion of that technology. Once that occurs, economic growth will diminish as an driving engine of the problem, and will become a driving engine of change.

I don’t think we can solve this problem through brute force economics. What we need are more subtle approaches. What we need is a dual strategy of electrification of mass transit coupled with the greening of power generation. In fact, that could be the form of the proposal. Making things electrical reduces source pollution from them, and changing the generators of that electricity to carbon neutral sources.

If we’re going to be using Ethanol as an additive, we need to put work into cellulose-based generation of that. Corn-based production of that not only creates net carbon increases because of the use of natural gas in its production, but it also has negative effects on food prices, fertilizer runoff, not to mention the fact that it would be impossible to replace our gasoline usage with it, given the limits on the crops we could raise for that purpose.

These are just a few of the things we could do, and we need to do more than one or two of them. If we are to make a carbon tax, we should use it as a complement to tougher fuel standards after they have been phased in. Every time we raise the CAFE standards, wait a year or so, and phase in a higher carbon tax. Use it to encourage turnover already in progress, let the market sell high efficiency vehicles in the meantime.

The Tax by itself, though, is just a Republican way to avoid regulating. The Republicans need to improve their judgment on when to mandate change, and when to encourage it.

Posted by: Stephen Daugherty at June 27, 2007 11:37 AM
Comment #224212

Stephen D.,

I’m no psychologist but I find it reasonable to assume that people won’t stick their hands in a fire even if they know a few months later they can get a nice healing salve. But I’m open to debate on this point. I haven’t researched the psychological mechanism I’m referring to; I’m not even aware of what it’s called. (Anyone know of relevant studies?) Regardless, my goal is to push for a wide-ranging disincentive to use carbon; if we can find a way to ease the impact on lower incomes, I think we should. Would you also say the EIC would prevent conservation at the pump? To a degree I agree with you — the more money you have, the more you can spend on carbon. But I doubt it’s a 1-1 coorelation. I don’t wish to overstate my knowledge on this; I’m open to research.

Stephen, you’re pinning your hopes on a breakthrough that will be economically more attractive than oil. But I really don’t believe a single breakthrough is going to do it; I really think that when you look at the improvements so far in alternative fuels, we’re talking incremental improvements. I do believe that given enough time these alternatives will on their own or with the help of subsidies displace much oil. but we don’t have decades. And we know how R&D typically works — the breakthoughs can’t typically be predicted, and they are often of a different nature than expected. They can be enormously influential but not necessarily address the issue you need addressing. At any rate, I differ from Jack’s previously stated position in that I favor subsidies, R&D, AND a carbon tax. I think the issue is that crucial and our time that limited.

What you say about going electric I support, in principal. With clean coal R&D, nuclear, the suite of renewable fuels, etc., and more widespread local (smallscale ) production of power pumped back into the grid, then moving the transporation sector to primarily electricity could be a large part of the solution. A carbon tax would help there, too. It’s an enormous undertaking, and I think we do need some brute force.

All, I’m not ideologically wedded to a carbon tax. It would suck. But when you look at the actual numbers, it’s hard to see a more politically feasible solution that actually is a solution. Let’s look at other studies, other proposals, other projections, but let’s not dismiss out of hand the carbon tax.

Posted by: Gerrold at June 27, 2007 12:38 PM
Comment #224213

Stephen D.,

I forgot to comment on your carbon tax plus CAFE idea. It certainly is something to consider. Jack might say that they would cancel out, and they might to some degree, but in general I think it would move us in the right direction.

Posted by: Gerrold at June 27, 2007 12:43 PM
Comment #224214

Jack
A carbon tax would help but CAFE standards do work and there is a history of them working. Dog won’t hunt.

Posted by: bills at June 27, 2007 1:12 PM
Comment #224216

Gerrold-
I think one important idea here is that of efficiency. We need to give people as few excuses as possible to hang on to the old technology, the old practices and regulations. If we can maintain economic prosperity while we make the transition that will certain ensure that some will drag their feet less. If we can make it seem even more efficient, more effective than the old technology, then the skeptics might even become the boosters, and good old fashion greed would push the solution to the problem, instead of helping to make the problem worse.

Posted by: Stephen Daugherty at June 27, 2007 2:10 PM
Comment #224217

Jack:

“In a rational world, CAFE standards would work, but people do not always behave rationally.”

You can say the same thing about the carbon tax.

We need them both. We can’t make the carbon tax high enough to be of much use. CAFE standards will help in our general quest for greater efficiency in use of cars, and they will lead to greater efficiency in other machinery.

Increasing efficiency is a very important way of fighting global warming.

Posted by: Paul Siegel at June 27, 2007 2:20 PM
Comment #224219

Yes, agreed, greater efficiency is required, and to the extent that efficiency is sexy, all the better (I’d love this car, for instance, assuming you had clean electricity).

The Carbon Tax Center has tons of information on how a carbon tax would be administered and what its projected effects are. I’d start with the FAQ section.

Posted by: Gerrold at June 27, 2007 3:02 PM
Comment #224239

J2t2

I think CAFE runs the risk of creating complacency while locking in old technologies. Firms will respond by lightening vehicles and trying to figure out ways to cheat by renaming vehicle lines. Politicians (especially Dems from auto states, BTW) will play along.

The carbon tax is not political in that way. It will raise fuel standards by incentives. The car makers cannot game the system by changing the names and the politicians cannot claim credit for progress they are not making.

The irony of the CAFE proponents is that they trust business and politicians to be honest much more than I do. I figure they will cheat and given that the one controls the production and the other controls the law, they will succeed. Unions, BTW, will also support the cheating. Most of the establishment will be in on it. The CAFE standards are letting them all off the hook with a game they can scam. The carbon tax will catch them.

Steve K

The carbon tax will penalize the lower mileage cars, but your solution misses the point. If someone has a car that gets 50 miles to the gallon but drives 1000 miles a week, he is worse for the environment than someone who owns a car that gets 10 miles to a gallon, but drives only 50 miles a week. The carbon tax gets at the true effects. Your system is just a way to make the self righteous feel righteous.

Re your driving habits – that is what everyone says. Oddly enough, when the price goes high enough, they figure out other options. In the short run, your driving habits are probably not very flexible. In the medium and long run they are. You might buy a house nearer where you work, buy a smaller car, carpool etc.

My daughter just got a job in Baltimore. She grew up in Europe and like me is “transit oriented.” She found an apartment near the light rail line (she ONLY looked near the light rail line) and she commutes to work that way. The other trainees all drive to work. It never occurred to them to tailor the housing choices to the transit alternatives. The alternatively say she is LUCKY to live near the rail lines or stupid not to drive. I submit her choice is perfectly rational. She does not need even to own a car at this point in her life. BTW when I bought my house ten years ago, I ONLY looked near the metro lines and bike trails. Now my colleagues say that I am lucky to live near the metro, and/or stupid to ride my bike (today we had 90 degree high humidity and maybe they have a point). Everybody has options.

Gerrold

Europe already average the 35 MPG equivalent. The technologies to reach that standard are available today. You can buy a car tomorrow that will give you 45 MPG. We do not buy them because we like the other kind. If gas is cheap, that choice makes sense.

Woody

Yes. Forget the CAFE.

Stephen D

You can protect lower wage earners with a tax credit and every wage earner with a tax benefit on income. The carbon tax does not have to raise taxes, only their incidence. Since we need to change habits, the tax should be tied to behavior. A poor guy who walks or uses transit can expect to have more money. One that drives a big wasteful car will have less. I do not have a problem with people paying their way for how much CO2 they produce and I do not consider paying for what you do punishment.

BillS

CAFE standards have increased MPG. At the same time total miles driven per American has risen even faster. The causality is not perfectly clear, but clearly we use more gas than we did before CAFE so they did not reduce our consumption.

Paul

The carbon tax does not need to have cooperation from the consumer and it does not depend on them being virtuous or honest. The cost is baked into each transaction. People learn best when the lesson is near the action. This is at the same time. The higher prices will drive efficiency. CAFE is at best just a distraction.

Posted by: Jack at June 27, 2007 10:16 PM
Comment #224241

Jack, Those namby pamby corpratist running the Auto companies do not deserver to draw a salary half the size of the lowest paid worker at their company, let alone a salary thousands of times higher. Where is Henry Ford when you need him. Would Henry have cut and run from a problem facing his country or would he have lead the charge to better gas milage? In reality the Auto companies should be at the forfront of this challange instead here they are ducking and running hiding behind the skirts of their bought and paid for Congress and we sit here and say well lets do something else it might upset the auto companies. I say if we are really that bad off we build 1 giant garage over the whole country and all run our vehicles at the same time and inhale the gases. Hell the Europeans already have the technology to get 45+ mpg and we cant figure it out? The lack of moral integrity you have observed in the auto exec’s is certainly alarming I would say these people should not be involved in the free market as they are to self serving to be leaders of the greatest country on the earth. Your analysis points to a serious defect in the free market do you think? I still believe both a carbon tax and the increased CAFE standards should be applied to this opportunity.

Posted by: j2t2 at June 27, 2007 10:38 PM
Comment #224245

j2t2

Say what you want re auto executives. The fact is that they, with the cooperation of union leaders and auto state politicians, will avoid the effects of the CAFE standards. In addition the consumers will change their habit in ways that adapt to the new milage by driving more.

You can complain about the dishonesty (or cleverness) of auto execs, union bosses, politicians or consumers, but they WILL overcome these rules. The carbon tax is elegant in that it does not depend on being smarter than these guys. The carbon tax is merely an expense. It gives all these smart guys the incentive to use less carbon. It puts their intelligence & imagination in the service of good.

That is the beauty of the free market. It does not depend on virtue. It can harness the imagination, talent and intelligence of people who do not need to want to cooperate.

Posted by: Jack at June 27, 2007 11:35 PM
Comment #224247

Jack, Once again why not both? The wealthy have found tax loop holes for every tax why will this one be different? If these clever buckaroos can get around the CAFE standards pray tell why not ta…. Oh Now I see. Well Jack its all so clear now of course lets jump on the lower and middle class with the carbon tax but lets skip the corpratist and the wealthty. After all that is the beauty of the free market.

Posted by: j2t2 at June 28, 2007 12:00 AM
Comment #224254

j2t2,
I find it hysterical that given the kind of opportunistic capitalist Henry Ford was, can you say Panzer Tanks, that you would hold his example in such high esteem as to lament his absence from the automobile manufacturing arena.
In my opinion, and based on current events, if Herny Ford were here, there would be no U.S. production of cars, overseas manufacturing eclipsed our own worth in terms of capacity and affodability years ago. Which would likely leave you complaining about the lack of citizen workers, or something like it.
Henry ford was a blathering anti-semitic hero to Hitler. I don’t know why I am surprised at the idolotry, but I am.

Posted by: Yukon Jake at June 28, 2007 1:06 AM
Comment #224260

Yukon, He is not my idol however a quote attributed to ol’ Henry, “Whether you think you can or that you think you can’t you are usually right” made me think of him in this context what with all the auto exec talk and all.

My point is really very simple why not both the standards and the carbon tax. So far all I have gotten in response is the auto execs are to smart, to clever to whatever to agree to it. It seems all they can do is come up with reasons for why they cant do it, which amazes me. This attitude is why the foreign auto makers are surpassing the American automakers. So despite all the bad things about ol’ Henry he did say at least one smart thing in his time.

Posted by: j2t2 at June 28, 2007 3:10 AM
Comment #224261

Jack,

By your logic, I should forget the carbon tax.

You wrote, “The congress will not enact innovative regulations and auto makers will not implement them in innovative ways, except to avoid them.” By saying “forget the CAFE” are you suggesting that it is an innovative regulation?

At any rate, the problem with the carbon tax is that you would need to make it something like $2 a gallon to really impact people’s behavior. (I have read that gas would have to be $5 a gallon to get people to drive less. Considering the lack of good alternatives in most places, that seems like a reasonable guess.) We both know that it is politically impossible to put a massive tax on gasoline. Whichever party did it would be voted out in the next election.

The good thing about the CAFE is that it least it will reduce gas burned per mile (by definition). You can talk about politicians weakening it, but that only means that we shouldn’t let them. There is a difference between criticizing a true CAFE and criticizing a fake, crippled CAFE. I think a true CAFE is politically viable.

Posted by: Woody Mena at June 28, 2007 7:53 AM
Comment #224267

J2t2

The carbon tax would be included in products and fuels. There is no loophole unless congress specifically creates exceptions and it those cases the dishonesty will be very clear and open to attack. The carbon tax alone is sufficient to do the job of raising mileage standards and spurring innovation. We do not need CAFE.

CAFE is potentially pernicious because it will be designed to be full of loop holes. Auto state Dems are already pushing for a CAFE by type of vehicle, which will protect the big gas guzzlers. Beyond that, CAFE indirectly encourages driving more miles. When you lower the cost of driving, you probably will get more of it. CAFE lowers the cost of driving (if it works).

As I wrote on many occasions, taxes are fungible. You can (and should) make a carbon tax neutral. You can give income tax credits to the poor and tax cuts to others. We are not trying to tax; we are trying to alter habits. Also we assume that the average rich guy produces more CO2 than the average poor guy and so will pay more in carbon taxes. If this is not true, than the poor guy is just as bad or worse for the environment as the rich guy. Our goal is to reduce CO2. If the poor guy is harming the environment, he should stop it too and not be given a pass to wreck the world because he is wretched.

Woody

The reason CAFE does not work is that our society is dynamic and people make choices based on incentives or costs. CAFE lowers the cost of driving per mile. It creates an incentive to driving more miles by reducing the variable cost. It raises the price of new vehicles, but that is a fixed cost that does not affect how many miles you drive.

The analysis above assume CAFE is done honestly and good - the “true” CAFE. Even then it is not working and eveen that happy assumption will probably not be borne out (see above to J2t2), which will make it even worse. As best CAFE an ineffective expense; at worst it is a penicious way for politicians, bureaucrats, businessmen and union bosses to seem to be doing something while doing nothing useful.

Posted by: Jack at June 28, 2007 8:26 AM
Comment #224268

BTW

I agree that a direct carbon tax will be very hard politically. We can probably set up some kind of cap and trade for carbon. This is not as elegant or direct, but it will have many of the same effects.

Another thing that can raise gas prices is a surcharge on foreign oil and a tax on U.S. oil firms. I am sure most liberal will like these things. I do not like them because they are inefficient and enacted for the wrong reasons, but I do see that they can be used as a stealth tax on gas. You still have to figure out how to get at coal, however.

Posted by: Jack at June 28, 2007 8:31 AM
Comment #224269

Jack,

I understand that a carbon tax creates an incentive for less driving, but how much of an incentive? Consumption of gasoline is notoriously inelastic; people tend to drive about the same amount no matter the price. So if you want to realistically debate a carbon tax, you should suggest a figure. How much do you want to raise the cost of a gallon of cost (directly or indirectly)?

If you can’t come up with a solid figure, this is just a theoretical debate.

Posted by: Woody Mena at June 28, 2007 8:36 AM
Comment #224279

Woody,

Check out the Carbon Tax Center. It contains, imo, very reasonable proposals for initiating a carbon tax, the rate of its annual increase, and an analysis of the effects.

The short answer is that the authors of the analysis believe that a carbon tax at the rate they specify (in gasoline price terms, approximately 10 cents increase each year) would result in a carbon reduction of 40 percent by 2020 over projected carbon emissions. That is impressive, but not enough, as examining projections in the EIA report I linked to earlier shows.

The Carbon Tax Center does not believe that carbon taxes alone are enough (sorry, Jack). It also supports emissions standards, incentives, subsidies, etc. Jack I believe overstates the case agaisnt CAFE standards. According to the EIA, they will have an effect, but not enough by themselves to dramatically slow the rate of increase. But they do help. If anyone has any actual analysis and not just opinions that show otherwise, I’d like to read them.

Posted by: Gerrold at June 28, 2007 10:29 AM
Comment #224329

Jack-
The problem with the Carbon Tax is that it targets emission by attempting to reduce consumption, rather than by taking a measure that directly reduces it. CAFE standards directly do so.

A rise in fuel efficiency requirements would generate windfalls in both emissions reductions per vehicle and in the cost of transportation. Would people drive more? Of course, but raising the standards is only a start.

Posted by: Stephen Daugherty at June 28, 2007 5:58 PM
Comment #224331

It shouldn’t be either/or. Besides, I think it is proper to compare a carbon tax to the various carbon emissions schemes, not to CAFE, which by best estimates does have a positive, albeit relatively minor, effect on vehicle emissions but does not affect emissions in the other economic sectors.

Posted by: Gerrold at June 28, 2007 6:19 PM
Comment #224332

That should be
“carbon emissions trading schemes.”

Posted by: Gerrold at June 28, 2007 6:21 PM
Comment #224335
I am talking about CAFE standards. They look like a good idea, but they are a dodge.

Sooo… Your position is that better fuel efficiency is bad? Why not higher CAFE standards AND a carbon tax? Not that I’m in favor of a general carbon tax, but it seems like there are many approaches to energy independence and lower carbon emissions.

Posted by: American Pundit at June 28, 2007 6:52 PM
Comment #224336
CAFE just does not work. We drive more when we get better mileage.

More than what?

We only drive less when the price rises.

Oh, I see. You’re trying to limit travel. Why don’t you just call for a law banning travel, Jack? Why beat around the bush? :)

Posted by: American Pundit at June 28, 2007 6:55 PM
Comment #224345

Anyone else find it odd that the self-proclaimed conservative is the one calling for a tax?

If you want to pay more taxes, move to France! :>

Posted by: Woody Mena at June 28, 2007 9:29 PM
Comment #224347

AP

It depends on why milage improves. If it comes as a choice to save money, it has the proper incentive. If it comes from a general mandate, it does not have those affects. I wrote another post above.

Posted by: Jack at June 28, 2007 9:38 PM
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