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Tradeable Gasoline Rights

Martin Feldstein, Wall Street Journal via Economist’s View
The rapid rise in the price of gasoline has produced calls for tougher fuel economy standards on new cars and trucks. Although reduced gasoline consumption would be good for the environment and for national security, such a regulatory change would be a mistake. A far better approach would be a system of tradeable gasoline rights, or TGRs. These could be distributed in a way that actually raises the income of a majority of households while giving everyone an incentive to reduce gasoline consumption.

In a system of tradeable gasoline rights, the government would give each adult a TGR debit card. The gasoline pumps at service stations … would be modified to read these new TGR debit cards… Buying a gallon of gasoline would require using up one tradeable gasoline right as well as paying money.

The government would decide how many gallons of gasoline should be consumed per year and would give out that total number of TGRs. In 2006, Americans will buy about 110 billion gallons of gasoline. To keep that total unchanged in 2007, the government would distribute 110 billion TGRs. To reduce total gasoline consumption by 5%, it would cut the number of TGRs to 104.5 billion.
(5 Jun 2006)
This seems to bare quite some relation to Dr. David Fleming’s Tradable Energy Quota system, described as an “effective and fair response both to climate change and oil/gas depletion”.

According to a recent Bloomberg report, Republican consultants with ties to the White House are pushing for Harvard University economist Martin Feldstein to replace John Snow as the U.S. Treasury secretary. Feldstein was chairman of the White House Council of Economic Advisers under President Ronald Reagan. -AF

Discouraging Energy Use – Gasoline Tax

Mark Thoma, Economist’s View
Once again, Robert Frank calls for a $2 a gallon tax on gasoline with the
revenue from the tax used to offset payroll taxes,
but this time there are refinements designed to overcome objections to the
initial proposal:

Policy Is Far Too Complicated to Be Left to the Politicians, by Robert H. Frank,
Economic Scene, NY Times
: …[T]he recent spike in gasoline prices has
prompted a wave of proposals that if enacted would do far more harm than good.
Senator John Thune, Republican of South Dakota, among others, has advocated
suspension of the federal gasoline tax of 18.4 cents a gallon. Similar proposals
to suspend state taxes have been advanced in New York and at least 12 other
states. These proposals make no economic sense…

An immediate problem is that a tax cut would be offset in part by OPEC’s
response to it. … Dealing with OPEC is … like dealing with a rational
kidnapper… A visible transfer of money to the victim’s family (like an
inheritance) would serve only to increase the kidnapper’s ransom demand.
Similarly, since OPEC now realizes that motorists are able to pay $3 a gallon,
its best response to a gasoline tax cut would be to raise the price of oil by
enough to keep gasoline prices at $3. …

Gasoline prices are rising because the world’s appetite for oil has been
outstripping dwindling supplies. Legislatures cannot repeal the law of supply
and demand. To escape the burden of widespread energy shortages, we must consume
less energy. And to achieve that goal, gasoline prices need to be higher, not

An academic economist clearly runs less risk than a politician in proposing higher gasoline taxes. But how much political risk would such a proposal really entail? According to a recent New York Times/CBS News poll, 55 percent of Americans would be willing to support a higher gasoline tax if it reduced dependence on foreign oil… It may be na├»ve to expect our current crop of leaders to take affirmative steps to alleviate the energy crisis. But … surely we can demand that politicians do no further harm.

(8 June 2006)
Mark considers tax per gallon, TGRs (mentioned above) and CAFE standards as three possible ways to manage decreasing demand on oil, personally favouring an emphasis on taxes. -AF

Hooking us won’t solve gas crisis
Thomas Friedman (NY Times), Wilmington Star
We are financing both sides in the war on terror.

Is there a company more dangerous to America’s future than General Motors? Surely, the sooner this company gets taken over by Toyota, the better off our country will be.

Why? Like a crack dealer looking to keep his addicts on a tight leash, GM announced its “fuel price protection program” on May 23. If you live in Florida or California and buy certain GM vehicles by July 5, the company will guarantee you gasoline at a cap price of $1.99 a gallon for one year – with no limit on mileage. Guzzle away.

As the Associated Press explained the program, each month for one year, GM will give customers who buy these cars “a credit on a prepaid card based on their estimated fuel usage.

“This program gives consumers an opportunity to experience the highly fuel-efficient vehicles GM has to offer in the mid-size segment,” Dave Borchelt, GM’s Southeast general manager, said in the company’s official statement. Oh, really?

Eligible vehicles in California include the 2006 and 2007 Chevrolet Tahoe and Suburban (half-ton models only), Impala and Monte Carlo sedans, GMC Yukon and Yukon XL SUVs (half-ton models only), Hummer H2 and H3 SUVs, the Cadillac SRX SUV, and the Pontiac Grand Prix and Buick Lucerne sedans. Eligible vehicles in Florida include the 2006 and 2007 Chevrolet Impala and Monte Carlo, Pontiac Grand Prix and Buick LaCrosse.

Let’s see, the 6,400-pound Hummer H2 averages around 9 miles per gallon. And the hulking Chevy Suburban gets around 15 miles per gallon. It will be wonderful if more Americans can experience that too – with GM-subsidized gas.

Our military is in a war on terrorism in Iraq and Afghanistan with an enemy who is fueled by our gasoline purchases. So we are financing both sides in the war on terror. And what are we doing about that? Not only is GM subsidizing its gas-guzzlers, but not a single member of Congress, liberal or conservative, will stand up and demand what most of them know: that we must have some kind of gasoline tax to compel Americans to buy more fuel-efficient vehicles and to compel Detroit to make them.
(6 June 2006)
Also published in the NY Times on May 31st.

Carbon Taxes Are Good For You
Big Gav, Peak Energy(Au)
The [Australian] Minister for blocking wind farm development, Ian Campbell, has announced that “carbon taxes are stupid”. As he is a master of the dark art of stupidity, perhaps he could be considered an expert on stupid things, but I still think he’s several beers short of a sixpack, as usual.

Personally I’d say a well implemented global carbon tax would solve (1) global warming (2) peak oil and (3) resource wars over oil and the terrorism that results from these – so perhaps they wouldn’t be such a bad thing.

I’ve even come up with a plan that seems more workable than relying on international treaties like Kyoto that can be ignored by rogue states like Australia and the US – make them part of WTO rules…
(8 June 2006)

Proposal: Replace the Payroll Tax with an Energy Tax
Jeffrey J. Brown, GraphOilogy
[ The following has been published on EB before, but only deep within an article of Hubbert Linearization, so I think worth running again. -AF ]

Some have argued that the suburbs are dead; the suburbanites just don’t know it yet. It’s probably more accurate to say that the suburban commutes are dead; the suburban commuters just don’t know it yet.

We recommend that the United States abolish the payroll tax (Social Security + Medicare tax) and replace it with either a liquid transportation (petroleum) fuel tax or an overall (nonrenewable) energy tax.

The majority of American households pay more in the payroll tax than in the income tax. This would be a tax cut for most households and it would a massive tax increase on those who are profligate in their use of energy. No matter where one lives, the cost of goods would go up, but if you lived close to where you work, your effective tax rate would go down. Of course, those who persisted in long commutes would pay the price.

There would of course be very powerful forces opposed to this idea–the housing industry; auto industry; airlines; trucking–the list goes on. But the fates of these industries are sealed. It’s not a question of if they will contract; it’s just a question of when. The sooner it happens, and the sooner these industries start emphasizing energy efficiency, the better off we all will be.

A high gasoline tax does not necessarily equate to a lower standard of living. Norway, with the highest gasoline tax in the world, has the highest standard of living in the world, perhaps partly because their car ownership per 1,000 people is about half of what it is in the US.

There would be some other benefits. As we turned to walking, biking and mass transit, our health would improve. There is pretty much a linear correlation between obesity rates and total miles driven (here in the US, we are the world champs in both categories). In addition, since this is in effect a consumption tax, everyone who now avoids paying Social Security taxes would no longer be able to avoid paying them.

However, the primary reason for implementing the proposal is that it would cause an immediate and massive across the board push for greater energy efficiency and it would unleash enormous free market forces against profligate energy use.
(6 March 2006)