Gas prices have risen dramatically, and Sen. Hillary Clinton (D-NY) and Sen. John McCain (R-AZ) have proposed suspending the 18.4-cent-per-gallon federal gas tax over the summer, a proposal criticized as “stupid,” “pandering,” and “destructive nuttiness.”
But the problems with the proposal run deeper than the economic reality that the plan would add up to a “huge windfall for refiners” that also increases “our transfer of wealth to Saudi Arabia.” It is also the type of thinking that could lead to an utter breakdown of our national imperative to deal with global warming. Fuel taxes are the fundamental governmental mechanism for limiting the consumption of gasoline and making users pay for the costs of pollution — just as cigarette taxes capture the “negative externalities” of the societal health costs associated with smoking.
As Sir Nicholas Stern described in his report on the economic costs of global warming, “Climate change is a result of the greatest market failure that the world has seen.” Because polluters have never paid a price for the emission of greenhouse gases into the atmosphere, no steps were taken to avoid fossil fuel consumption.
In July 2007, Yale economics professor William Nordhaus wrote a paper entitled, The Challenge of Global Warming: Economic Models and Environmental Policy. In it, he wrote:
The measure of whether someone is serious about tackling the global warming problem can be readily gauged by listening to what they say about the carbon price. Suppose you hear a public figure who speaks eloquently of the perils of global warming and proposes that the nation should move urgently to slow climate change. Suppose that person proposes regulating the fuel efficiency of cars, or requiring high-efficiency light bulbs, or subsidizing ethanol, or providing research support for solar power – but nowhere mentions the need to raise the price of carbon. You should conclude that the proposal is not really serious and does not recognize the central economic message about how to slow climate change.
When Sen. McCain unveiled his proposal for a gas tax holiday, Joe Romm at Climate Progress responded:
Let’s be very clear — the greatest threat to the long-term health and well-being of this country is unrestricted greenhouse gas emissions. The key strategy that McCain and Obama and Clinton have embraced is a cap on emissions coupled with a trading system that sets a market price for carbon dioxide. That is how you get decarbonization at the lowest possible cost. Now, the greatest threat to the success of a cap and trade system is that somebody might artificially limit the carbon price, either through a safety valve designed into the system (see here) or because some weak-kneed President (or Congress) walks away from that price the first time the economy suffers a downturn.
When Sen. Clinton joined McCain’s call for a fuel tax moratorium, Bradford Plumer at the New Republic’s Environment and Energy blog wrote:
But if we want a realistic shot at averting drastic climate change and weaning the country off oil so that Americans don’t keep getting slammed as prices rise inexorably to $200 a barrel, well, then it’s not enough for presidential candidates to just lay out nice policy white papers; we’ll actually need politicians who don’t shriek and start pandering furiously at the first sign of higher prices.
Matthew Yglesias at the Atlantic.com agrees:
I started out thinking that Hillary Clinton was just making a clever dodge on the gas tax holiday, but now she’s lighting in to Barack Obama for having the correct position on John McCain’s stupid idea. This is basically the environment/energy/transportation equivalent equivalent of Obama’s anti-mandate fliers and it makes it very hard to imagine that she’s prepared to try to do anything about climate change.
James Handley at the Carbon Tax Center describes the problem in especially vivid terms:
Now the specter of catastrophic global warming is snapping into sharp focus like a jack-knifed tractor trailer blocking all lanes as we careen along at 75 mph. Sirens are wailing and lights are flashing thanks in large part to the Nobel-winning work of the Intergovernmental Panel on Climate Change and Dr. James Hansen’s NASA-Goddard Climate team, un-muzzled despite Bush Administration threats. And yet, U.S. energy policy is still “pedal to the metal” on the global warming accelerator — with McCain and Clinton urging us to “step on it” with a gas tax break. The exact opposite of what economists say is the essential step: pricing carbon emissions.
The next president will have to make up for eight years of lost time in confronting the climate challenge. And it is critical that person recognizes that this a threat that can’t be pandered away.