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Wednesday, June 4, 2008

Global warming, reality, and gas prices (including taxes)

Senate debate this week on addressing climate change is raising concerns about further raising the cost of gasoline (see NY Times article and Senate Environment and Public Works Committee website for debate info). While higher prices are hard to sell to the public, it sounds like we're missing the point. If we want to address climate change, we need to reduce greenhouse gas emissions. The most significant greenhouse gas is carbon (CO2) from burning fossil fuels such as oil. Economics would say to reduce demand of something, raise its price.

I'd like to see the Senate consider a carbon tax that would not only help reduce demand for gasoline, but if applied broadly, would help everyone to understand that burning fossil fuels produces greenhouse gas emissions. Just as higher gas prices today have caused people to consolidate trips, reduce driving, consider buying cars that get greater miles per gallon, and use public transportation, a carbon tax could do the same. It would be a polluter pays tax that adds the cost of environmental damage to the price we pay for activities that cause that environmental damage. The funds could be used to fund R&D on ways to produce energy that does not harm the environment and to reduce an existing tax (a "tax shift") - perhaps the AMT since it is not making our income tax system be simple or efficient.

Also, transitional and equitable relief must be considered. Certainly it would be very disruptive to people's lives and the economy to start a carbon tax on utility companies and/or their customers today because they can't overnight change so as to not burn fossil fuels. A tax should be implemented in over several years. Initial revenues can be used to help coal burning utilities to reduce their greenhouse gas emissions, such as by also using renewable energy sources. Also, equitable relief should be provided such as rebates on utility bills for low-income individuals.

BUT - we should not avoid doing something about climate change because gas prices will go up because of course they need to go up if we want to discourage so much burning of oil so we can start to reduce greenhouse gas emissions.

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