Raise Gas Prices to Fight Climate Change
So at the very start of this article I have to say my idea goes totally against the grain of the majority of American pereceptions and values. Our country (and our lives) in the last 150 years have become so car-centric and dependent that it’s hard to imagine a world where anything like what I’m proposing here could actually work (although it really is working in a few nations as you’ll see.) That said, I’m going for it anyway!
Let’s start with the problem or opportunity, depending on how you look at it. Last year in the US there were 289 million cars driven 1.3 trillion (yes that’s trillion) miles using a total of 134.83 billon gallons of gas. This equates to 369 millon gallons of gas burned up in just one day!
But as we’re all so painfully aware by now, burning the gas isn’t the problem, it’s the pesky CO2 that’s the Big Hand-wringing Deal. Oh, not to minimize oil spills, environmental damager from drilling, exploitation of nations, wars, etc. So how much CO2 does this equate to — well quite a bit, actually.
Every day cars in the US produce 7.25 billion pounds of CO2… billion, let that sink in. The average car produces 20 pounds per gallon of gas and 4.6 metric tons (10,141 pounds) a year. For the year, that’s a whopping 243.5 billion pounds.
Certainly makes a good case for EV’s. But it’s going to take years to get all those ICE cars off the road, just in US alone. And used ICE cars end up getting sold and shipped to other countries for an extended life, but I digress, that’s another problem altogether.
So, I started to think about this problem and what could be done more quickly to reduce CO2 emissions. Retrofit fancy carbon sequestration tech on the tail pipes? No, much simpler and faster, in fact immediate — drive less.
What if we reduced driving (like during first year of COVID) say by 10%. By doing some relatively simple math this equates in one year to eliminaing 24 million (yes million) cars from the roads in terms of CO2. Now that’s a significant reduction of billions of pounds of CO2 not clogging up the atmosphere (not enough to get to net zero, but it’s a good start.)
But, you say, how in the world could we ever do that in a country that measures it’s personal productivity and worth in miles driven per day? It took a global pandemic that has killed over 1 million Americans alone to reduce driving in 2020 and we were back up in 2021 by 11.2%, actually catching up for that precious “lost time” at the wheel.
Well, in our capitalistic country there are some pretty good laws that regulate pretty much all of human behavior — they’re the laws of supply and demand. I know, pretty sad that these are the only laws of the land that seem to not be in dispute. I knew through my Econ 101 class in college that price is the arbiter of supply and demand. As demand goes up, with limited supply, price increases. And, it works in reverse as well — excess supply decrease price. As a result, when we increases prices, demand will decrease. This is second nature to the average US citizen-consumer. BTW, we also know that lower prices increases demand, well ok that’s a duh, but it’s very relevant here.
So, clearly regulating the price of gas at the pump would affect demand. But by how much? How much would you have to increase price to reduce demand by 10%. To know this you need research to determine the price elasticity of gasoline. For those of you who haven’t taken any economics classes, elasticity is a measure of how sensitive demand is to price. High elasticity means that demand is very sensitive to price and low, the reverse.
Well, after a bit of Googling, I discovered a recent research report from none other than the Lawrence Livermore Labs (part of DOE) that analyzed price sensitivity of gasoline and driving in Texas. This is what they concluded:
“We estimate that the elasticity of demand for VMT in Texas is -0.09 after accounting for differences in vehicle models: in other words, a one percent increase in the price of gasoline is associated with a 0.09% decrease in annual VMT.”
So, using the results of this study which probably tends to underrate elasticity because of sample bias (it’s the great state of Texas afterall), I came up with the adjusted price of gas using $5 as the baseline price — $10.55 — to get to a 10% theoretical reduction in demand in the US.
I can hear it now, the cries of anguish, rage, frustration, anger, outrage. Ok, I get it, it’s a pretty hefty increase. But, before we discount this as totally unworkable, let’s compare our gas prices with other nations. Turns out, US gas-consumers have been getting a pretty good deal on gas, like forever. The highest gas prices goes to Hong Kong at $10.97, followed by Norway at $9.64 and Denmark at $9.32. So there are nations that actually still function (and pretty well) with “high” priced gas. Yes, I know, Hong Kong has other issues not related to the price of gas.
An interesting sidebar to this discussion is that, no surprise, Norwegians drive less on average per day (supply/demand/price) than Americans — 57% less in fact. According to an analysis of car-related fatalities, if we drove the same amount per day as our nordic brethren (21 miles vs 39) we would save over half the number of people killed in car accidents in 2021. That would be over 20,000 people. That would be a good thing, right?
So, back to the main topic, how do we increase the price? Federal tax — I call it the Green Adjustment Premium (GAP) you can call it whatever you like. The additional $5.55 premium would have raised in 2021 $673.3 billion! These funds would be provided to support (in my perfect world) needed climate change work in the US. Things like enhanced solar, wind, geothermal subsidies, research, grid improvements, carbon sequestration, (the list is long.)
There are other desirable “side-effects” from this. For one, ICE vehicles would overnight become much more expensive to drive compared to EV and HEV’s. This would accelerate the shift away from ICE vehicles. People might even discover that there is a life to discover outside their cars. I can dream can’t I? I already mentioned the decrease in car fatalities, which to my way of thinking, should be justification alone.
Now I know there are problems with this approach — the biggest to me (politics aside) is the disproportionate impact to people in the lower income levels. In fact, the price elasticity study in Texas I mentioned above indicates this. Gas price increases have a greater effect on the lower income (more elastic). The higher incomers among us will bitch and moan a lot for sure, but be very willing and able to keep driving more even at these higher prices. One way to mitigate this is to provide a GAP reimbursement to those at or below the poverty line to offset the high cost. I’m sure there are ways of mitigating these “negative” impacts. I, also, wouldn’t see this applied to the trucking industry as this would significantly fuel (no pun intended) inflation since transportation cost is a significant part of the cost of most goods and services.
The main take-away is that we’re driving ourselves into extinction, literally. We need to think about how we drive, when we drive, where we drive, WHY we drive. Every time we get in our cars we need to remember that our tailpipes are producing 20 pounds of CO2 per gallon on average. If you have a 30 mpg car, that’s 1.5 pounds per mile. The average vehicle was driven 39 miles per day in the US in 2021. A 10% reduction is about 4 miles per day — a trip or two to the store. Or we can just change our driving habits and be bit less “aggressive” with the gas pedal; optimal mileage is around 50 mpg for most cars. Most modern vehicles have a mpg indicator — let’s use it! Do we really need to race to the next red light — let’s try hypermiling.
Cheap petro energy is not cheap at all, it’s just that the cost of it has been purposely obscured and delayed. It WILL be paid, sooner than later, it would be nicer to pay it at the pump than through climate collapse. But, as I said in the beginning of this article, this goes against our grain of us gas-guzzling Americans.
