Big City Lib asks the question (I'm paraphrasing), "Does the recent drop in gasoline prices (over the last 3 weeks) make the Green Shift an easier sell?" in this blog post:
BigCityLib Strikes Back: High Gas Prices As A Natural Carbon Tax, Part Whatever
I think the answer might be very slightly yes. There is a concept from behavioural finance called "anchoring". When gas prices went up over the last few years, people felt that prices were too high because they were used to lower prices in the past, and did not take into consideration how the supply and demand for oil has changed in the past decade.
Now that prices have fallen somewhat, people may feel that gasoline is relatively cheap. Gas prices may not make the news headlines until a new high is reached. A tax on non-gasoline fossil fuels may be more palatable (in combination with the Green Shift's tax cuts)
Of course gas prices are not the full story, especially as the Green Shift proposal does not increase the federal tax on gasoline, consumer electricity and natural gas prices are regulated (and so don't follow global energy prices in the short term), and there hasn't been a winter heating season since the spike in oil prices in the spring and early summer.
Nevertheless, the economic focus of the average consumer might now be on whether or not there is a recession coming, and not so much the price of energy. For that reason the tax cuts and credits of the Green Shift might be appealing to some voters. This is just a suspicion of mine, not a claim of fact.
Showing posts with label Gasoline. Show all posts
Showing posts with label Gasoline. Show all posts
Thursday, August 14, 2008
Monday, May 26, 2008
How a phased-in carbon tax shift could temporarily reduce gasoline taxes
I've seen a number of blog posts and op-eds saying something like, "How could a carbon tax not increase gas prices?" Well, here is a way to phase in a carbon tax and actually reduce gas taxes temporarily.
Suppose you replaced the federal excise tax on gasoline with a carbon tax and phased it in according to the following schedule:
Year 1 $10/tonne CO2
Year 2 $20/tonne CO2
Year 3 $30/tonne CO2
Year 4 $40/tonne CO2
Year 5 $50/tonne CO2
Then the carbon tax on gasoline would be roughly
Year 1 2.5 cents/litre
Year 2 5.0 cents/litre
Year 3 7.5 cents/litre
Year 4 10 cents/litre
Year 5 12.5 cents/litre
But the federal excise tax is 10 cents per litre! So there you go: replace the excise tax with this phased-in carbon tax and you get three years of some gas tax relief for voters, repeat, voters.
From what I've read it seems that at the $10/tonne CO2 level, what the federal government would lose from motor fuel taxes would be roughly balanced by revenue from taxes on other fossil fuels. That seems like a good place to start.
You may ask, why introduce the carbon tax if you're just going to decrease gas prices and incent gasoline consumption? Well the point is that there is a lot of other fossil fuel consumption that is not taxed: coal in particular. Globally, high oil prices may be reducing demand for oil somewhat, but it's not reducing greenhouse gas emissions so much because people are being driven to burn more and more coal (not in Canada, in other countries). Coal shouldn't be getting that free ride.
Suppose you replaced the federal excise tax on gasoline with a carbon tax and phased it in according to the following schedule:
Year 1 $10/tonne CO2
Year 2 $20/tonne CO2
Year 3 $30/tonne CO2
Year 4 $40/tonne CO2
Year 5 $50/tonne CO2
Then the carbon tax on gasoline would be roughly
Year 1 2.5 cents/litre
Year 2 5.0 cents/litre
Year 3 7.5 cents/litre
Year 4 10 cents/litre
Year 5 12.5 cents/litre
But the federal excise tax is 10 cents per litre! So there you go: replace the excise tax with this phased-in carbon tax and you get three years of some gas tax relief for voters, repeat, voters.
From what I've read it seems that at the $10/tonne CO2 level, what the federal government would lose from motor fuel taxes would be roughly balanced by revenue from taxes on other fossil fuels. That seems like a good place to start.
You may ask, why introduce the carbon tax if you're just going to decrease gas prices and incent gasoline consumption? Well the point is that there is a lot of other fossil fuel consumption that is not taxed: coal in particular. Globally, high oil prices may be reducing demand for oil somewhat, but it's not reducing greenhouse gas emissions so much because people are being driven to burn more and more coal (not in Canada, in other countries). Coal shouldn't be getting that free ride.
Labels:
Carbon Tax Shift,
Gasoline
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