Wednesday, July 16, 2008

Ugh! Here come negative carbon taxes - gas subsidies from the automakers

I see that automobile companies are giving out gas cards worth roughly $1000 (got a flyer from Chrysler Canada in my mailbox recently saying they were giving out cards with $750 to $1,500 in gas depending on the model you buy) in an attempt to sell their big cars. Let's do an order of magnitude calculation and see what level of subsidy that amounts to. Let's assume that this vehicle gets 10 litres/100 km and is driven for 200,000 km over its lifetime. Then, over its life, it would use 20,000 litres of fuel. A gas card worth $1000 means a subsidy of 5 cents per litre of fuel over the life of the vehicle, order of magnitude.
Hmmm... the car companies, who are the best people in the world at selling cars, think that 5 cents per litre, equivalent to a negative carbon tax of about $20/tonne, will allow them to sell their gas guzzlers, that otherwise would rust on their lots. So, couldn't a positive carbon tax of that amount (roughly what's happening in BC) do an equivalent amount of good by causing people to buy fuel-efficient vehicles?

Okay, that was a pretty simplistic and rather rhetorical statement, but the point I want to make is that consumers do respond to price signals, and businesses even more so. It is quite incorrect to claim, as some do, that a carbon tax won't do anything to reduce greenhouse gas emissions.

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