Econbrowser: MC on gas taxes and the president's plan...

Menzie Chinn over at Econbrowser has put together a thoughtful post on gas taxes, consumption, and the AEI. Seeing as how Bush is in CO at the NREL touting the AEI today, it seems worth a look.
The foregoing suggests that if the objective is to end oil addiction -- at least in my lifetime -- the current set of Administration plans will not achieve that goal.
Of course a gas tax now will save a lot of pain in the future, but who cares about the future?
Politics is the art of the possible. Any United States official who may have to face election or re-election knows that advocacy of a gasoline tax is political suicide.

Ask Walter Mondale.

Ask Jimmy Carter.

I think the GHG cap-and-trade system that applies to all fuels would be better. It covers the 'fungibility' aspect which should make motorists feel they haven't been singled out. If my arithmetic is correct the current European carbon spot price translates to about 30c per US gallon of gasolene. The price of coal fired electricity would rise about 10% with a smaller rise for piped NG. Not sure on the increase for airline travel due to the jet fuel component. As a side benefit there is less need to subsidise ethanol, nuclear, clean coal and other low emitters they get an immediate price advantage.
If they stop that stupid international trading of quotas local prices will skyrocket and the results will be much more different.
Why is international trading stupid ?  Seems like the best way to economically reduce carbon emissions.  There is an economic/political limit to the pain that reducing carbon causes.  Reducing the "pain" and maximizing the carbon reduced seems like a good thing !

GW does not cae whether CO2 comes from Germnay or France, or Ireland or Iceland.

A single example, the Icelandic Gvo't subsizied draining bogs in the 1960s & 1970s.  Turns out that these bogs oxidizing is their biggest source of artifical carbon (they would be wealthy beyond belief from carbon credits if they could figure out how to reduce volcanoc emissions).  There is so "push" to water these bogs again except for carbon credits (still pending if they qualify).

It is as stupid as closing US coal power plants, only to find them moving to China where they power the industries we closed here.

International trading of quotas is providing developed countries a very cheap and convenient way to dump all their carbon emissions on 3rd world countries. It also gives another reason for developed countries not to want the developing ones to have their own industry etc.

I would welcome carbon trading within a country, but this one is doing more harm than good.

I hear the same argument in Sweden but it is often complemented with our heavy industries being the most enviromental friendly there is so there will be no global enviromental benefit if they move or get worse carbon restrictions then in other countries and so on.

But it might be as for farming where every country have the worlds best food. Are US heavy industries world leaders in efficiency and low emissions?

Regarding jobs moving around it hurts me if they move from my country but I am not important for the world. On a global level it makes sense if the richest countries get lazier and poorer and have to scale down their energy use and so on and the poor countries work harder and get richer. The global market is an efficient and in some ways fair mechanism for this.

I dont deserve to be rich simpley from existing, wonder how I can work more efficiently to become rich? It probably have to be some kind of team work.

I always feel a kind of mental disconnect when I read about gasoline taxes as a hypothetical concept. Chinn writes, "A back-of-the-envelope calculation can be useful in defining the potential impact of a gasoline tax." His other statements also imply that the concept of a gasoline tax is new and speculative.

What universe is he living in? In my universe, we already have a gasoline tax!

The Federal gas tax is 18 cents per gallon, and states apply taxes which vary but are about the same amount. Many counties and cities add additional fixed or percentage taxes. Back when gas was cheap, taxes were the biggest contribution to the price. That's not true any more but they still make up a substantial amount.

What Chinn and others are talking about is not creating a gas tax, it's raising the gas tax. I don't understand why they can't speak plainly on this issue! You'd think if anything it would make their case easier, as they are not proposing to add a tax on a commodity which was previously untaxed; they are just arguing over what the proper level is of an existing tax.

Why do you suppose people don't frame the issue in these terms? As I said, I experience a moment of mental vertigo every time I read this stuff, wondering if I slipped into a parallel universe overnight.

It's not a tax, it's a usage fee.  ;-)

Gas taxes are earmarked for transportation repair and improvements, which makes them okay.  Fees are okay, it's only taxes that are evil.  Or so the thinking goes these days.

I would say a tax meant to discourage consumption or fund alternative energy, rather than pay for highways, is a new tax, not an increase in the current one.

And it's not being 'raised' it is being 'adjusted' ;)
Americans are pretty complacent about taxes as long as they don't have to pay them up front. Just sign them up to pay through the nose in the future and they'll go along without a peep. Like Bush has done. When he started out, there was no deficit. But in short order he turned that into record deficits. All payable, and will be paid, by taxpayers.

To say he cut taxes is like saying a certain store offers "price cuts," only to find out the prices went up, but they allow you to pay half on credit. See, you walk out with the purchase, and still have cash in your pocket! Nice. A real bargain.

So we could have an increased gas tax as long as it was on credit. Then no one would mind. (Maybe put it on a bill that's payable from each person's estate on their death, or something like that :)

BTW Don, Carter and Mondale make for a mighty small trend. Not too convincing. The conventional wisdom says you're right about raising the gas tax being political suicide, and probably you are, but I'm not convinced. Anyway I support a big increase in gas taxes. The email I got recently from the democrats in my state about their plan to lower gas prices through legislation (huh?) just increased my disgust with them. What a bunch of losers!

One of my first actions as Emperor of North America will be to impose a $5 per gallon tax on petroleum products such as gasoline, diesel and heating oil (same thing), kerosene and jet fuel (same thing). Also I'll have to put a steep tax on substitutes such as propane and natural gas. At the same time I'll announce that these taxes will increase by ten percent per year for the next ten years.

The power to tax is the power to destroy.

And what about bootleggers who try to evade the tax. Death by stoning. No lesser penalty will do.

Note that by the end of World War II, John Kenneth Gailbraith, the mastermind of rationing and price controls, admitted that at least half the gasoline consumed was bootleg.

The truth is that there is such powerful feeling on the matter of cheap gasoline = freedom and the American Way of Life that rational discourse on the topic of gasoline taxes (outside groups of economists and a few others) is impossible. Not difficult--flat out impossible.

IMO, the examples of Carter and Mondale are the whole population of politicoes foolish enough to advocate an increase in gasoline taxes. (In other words, there is no "small sample" bias when looking at an entire population. And Americans hate all taxes, not just gasoline taxes. And look at the great popularity of temporary repeal of some state gasoline taxes in the aftermath of Katrina and Rita . . . .)

I have said it before: Politics is the art of the possible.

I figure you're right about the political impossibility of raising gas taxes. Too bad. I've long thought that higher priced gas would lead to a lot of positive changes in our society. The good news is it looks like that will be happening over the next 5 - 20 years due to market forces, not taxes. I hope we can adapt in an orderly way! I definitely think 80 minute commutes are a lifestyle choice and can be dispensed with. Ditto for gas guzzling vehicles. If we were anywhere near to using gas conservatively, and still facing major supply reductions, things would be a lot more dire. But we're not.
What Mikey and Sailorman are referring to:

A Self Organized Critical System:

IMHO, you both are looking for "Demand Destruction", but
constructive Demand Destruction.

Controlling forest( another SOC) fires with limited burns
would be the same actionin order to keep a general
conflagration from occuring.

The same with our Electric Power Grid-which, again IMHO,
is the most important causal link between humans and current

Plotting the logs of the frequency of blackouts versus
their magnitude, they observed that the frequency of large blackouts
was much higher than they expected. Rather than falling off
sharply to fit the bell curve produced by a Gaussian, or normal,
distribution, the frequency of blackouts fell off much more slowly.
The curve fit what is called a power law--which refers not to the
power in a circuit but to the fact that the probability of a blackout
is related to its magnitude by some constant exponent.

So that the best thing the US could do now would be to initiate
rolling blackouts across the country and fractionalize the Grid
Regions(there are 5 now?) into 50 self contained grids. 1/binaries/IEEEblackoutarticle.pdf

For systems theorists the first message of their
eerily smooth distribution curves is clear: big
blackouts are a natural product of the power
grid. The culprits that get blamed for each
blackout - lax tree trimming, operators who
make bad decisions - are actors in a bigger
drama, their failings mere triggers for disasters
that in some strange ways are predestined. In
this systems-level view, massive blackouts are
just as inevitable as the mega quake that will
one day level much of Tokyo. (Fairley, 2004)

Well stated.

When the power system goes down (permanently), I'll miss electric light, the Internet, telephone service, and running water, but shucks, that is just the way the cookie (or society) crumbles.

Note that in 1900 few Americans had running water or any of the other nonessentials that we take for granted.

Now, if we get lucky and blackouts are not going to be permanent, then perhaps I'll be able to keep the one luxury I'll really miss after TSHTF, namely long hot showers. Short warm showers using solar heat are an O.K. substitute, however. Or maybe I'll build a traditional Finnish sauna.

Hot Springs will become famous again.

I love the ones in the Jemez Mountains behind Los Alamos.


What is wrong with running a very large grid and only fracture it into as large icelands as possible when it is overloaded?

My impression from the grid failures in Sweden is that each large grid failure has resulted in three reactions. Better maintainance, that then often slides in some other area after a few years. More interconnects to add redundancy, some of that overcapacity is then lost as electricity use grows. And better automatics for icelanding of the grid and house turbine running of powerplants to make rebuilding the grid much easier.

It seems like the system has constantly become better in three steps forward one or two steps step backwards way. I expect this cycle to be repeated. Each addition require brain power and not much energy compared to the previus investments or the power the system distribute since the basic infrastructure is sound.

And if the whole grid goes down there is of course a plan for restarting it from a situation with no running powerplants. Its not a perfect plan. For instance in the analysis done after a large failure it was discovered that important switch yards had too few hours of emergency power to manover the remote controlled switches etc. So more accumulators, emergency diesles and larger diesel tanks were added. The abandonment of much of the civil defence has probably left some things lacking. On the other hand do manny municipial combined heat and power plants trust the central grid less and is both ecouraged and willing to add black start and icelanding equipment. In my home town we got a pair of marine diesels used as peak district heating and power plants that also can be part of the local grid and supply the slaghterhouse and McDonalds hamburger patty factory with power and steam. We got our burgers on UPS  :-) (Partly, we had a better system during the cold war. )

This also ought to work for continent sized grids. Why destroy an efficient system when it can be made more resilent? There is no conflict between running it as a whole and taking care of the parts. You only need to react in an intelligent way each time the system breaks down and reality tells you what is wrong with it.

Texas today is an electrical island, with only one small DC connection (~600 MW from memory) with the rest of the US and none with Mexico.

BTW, in Swedish and Icelandic, "Island" is the nation & island of Iceland (English) (where pure Old Norse is spoken).

In English, an isolated bit of land in the sea is an island.

Best :-)

Norway, Sweden, Finland and eastern Denmark, Själland, is one syncronized grid.

There are DC connections Norway - western Denmark, eastern Denmark - Germany, Sweden - western Denmark, Sweden - Germany,  Sweden - Poland and Finland - Russia (Second page is in english)

Not all new projects are on the map. There will probably be new DC lines eastern Denmark - western Denmark, Finland - Sweden, Finland - Estonia, Finland - Russia. I do not know about the status for Norway - Germany.
Inside Sweden there will probably be a new 400kV or HVDC interconnect from north of the long lake to Malmö and there are also some smaller upgrading projects planned. The investments are sized for energy trading and reliability goals.

I do not get why it should be hard to make the US grid more reliable. A non functioning grid means 0 income for power sellers, power distributors and power users. Should not the free market fix most of this? Much like insurance companies work.

I do not get why it should be hard to make the US grid more reliable.- This would be Redundancy.

Redundancy is opposite on the spectrum from "Growth".

Optimizing one is neglecting the other.

Ackerman*s Law is expressed by the ratio: e =

For systems theorists the first message of their
eerily smooth distribution curves is clear: big
blackouts are a natural product of the power
grid. The culprits that get blamed for each
blackout - lax tree trimming, operators who
make bad decisions - are actors in a bigger
drama, their failings mere triggers for disasters
that in some strange ways are predestined. In
this systems-level view, massive blackouts are
just as inevitable as the mega quake that will
one day level much of Tokyo. (Fairley, 2004)

The connection between chaos and
blackouts began to tighten when
researchers started to work with actual
[blackout data. 1/binaries/IEEEblackoutarticle.pdf]

In other words, because the Power Grid is a Self Organizing Critical (SOC) System, it's very nature begs for blackouts the way
a forest begs for fire, a sand pile begs for avalanche.

The best way to combat all three scenarios is to initiate/force
change at the smallest level possible, while making every critical
system as isolated as possible.


Raising gas taxes is not impossible, as long as the MSM is in your pocket, and will help you pin the blame for the tax on the "tearists!"
So the solution to $3 a gallon gas is $3.50 a gallon gas?

And the moneys go to Washington so politicians can buy more votes.

While the oil we save gets used in China to grow their economy and steal more of our jobs.

Sorry, this is a turkey.

The Chinese will be able to afford the oil that that they want/need because they have the exports* to pay for it.  As do the Japanese, Europeans, Latin Americans, Indians, Aussies, etc.  The US does not.  In 2004 we (roughly) sold $1 abroad for every $2 we imported.

We and the poorer 3rd world nations are the worlds' "weak sisters" that will have to make do with what is "left over".

We want the Chinese to conserve so that we can get the "left overs" soon enough, NOT as you posit, the other way around.

The sooner we start saving oil, the better.

Restated, it does NOT matter to the Chinese if we save oil or not.  They are first in line in a competitive world to get what they want.  We are at the end of the line, and the pot may be dry by the time be get to it.  So better get used to it now rather than later.

* The Chinese have been VERY aggressive in exporting to EVERY oil exporting country except Norway.  Bicycles to Venezula, arms to Sudan, consumer goods to Russia, etc.