I have in mind a fairly detailed set of policy ideas that fit into the package I’d label “ideal climate policy response.” I also have in mind changes I’d accept to this package that would correspond to “second-best”, “third-best”, “fourth-best” policies, and so on down the line. And at this point, we’re well down the line. But you have to start somewhere.
To me, the straightforward, revenue-neutral carbon tax seems like something no reasonable person would oppose, but of course plenty of people do oppose it, so my judgment of what is likely to be politically workable and what isn’t is clearly somewhat suspect. Even so, I venture — who could oppose this:
A petroleum tax of $5 per barrel on every barrel of petroleum produced in America or imported, which would be put into place next year and increased by (my preference) $5 per barrel every year.
Point 1: Everyone seems to hate imported oil, and by now we should have a pretty good sense of the risks of domestically produced oil, as well. This stuff is bad news for everyone, so why not tax it until we don’t need to use it anymore?
Point 2: $5 per barrel is a change most Americans wouldn’t notice. Since the beginning of June, the market price of crude has moved up and down by $5 a barrel multiple times. If consumers haven’t been troubled by these market movements, they shouldn’t be troubled by the tax increase.
Point 3: Adding $5 per barrel per year to the tax wouldn’t be that big a deal. A decade from now, the tax would be $50 per barrel. But oil prices now are about $50 higher per barrel than they were a decade ago. The difference would be that rather than having that increase go to oil producers, it could go to the Treasury to be redistributed, to reduce other taxes, to fund alternative transportation infrastructure, or to reduce the deficit.
Point 4: The revenue would be pretty substantial. Assuming fairly inelastic demand, the tax would generate nearly $37 billion in its first year (Americans consume roughly 20 million barrels of oil a day). With no demand response, the revenue generated would be ten times that in ten years, or equal to about a third of the projected deficit for that year. In all likelihood, there would be a substantial demand response by that time, which would reduce the revenue take. But that would be great! We’d be using less oil.
That initial $37 billion, by the way, would make up about half the DOT budget. It would very nearly pay for California’s high-speed rail network — the whole thing, with one year’s revenue.
Point 5: Many wonderful things would result from the tax, including reduced emissions (of CO2 and other pollutants), reduced risk of spills, reduced imports and trade deficit, increased investment in efficient automobiles, increased use of transit, increased private investment in transit-oriented development, increased biking and walking, and so on.
Point 6: It’s simple. Have you obtained a barrel of oil out of the ground or from a foreign source? Then you owe $5 in federal tax!
Point 7: No one would have to utter the words “gas tax”.
The downside would be…well reduced profit for oil companies, private and state-owned. A small bite out of household budgets, but on the order of what’s likely to happen from market moves anyway (and which can easily be offset through partial use of revenues to reduce tax burdens).
Sometimes I lie in bed awake, wondering why things like this don’t pass through Congress at light-speed. I mean, I understand the forces that oppose it. I just don’t get why common sense isn’t enough to overcome that opposition.