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The carbon tax proposed by Congressman Curbelo last week would cause minimal changes in prices at the pump due to the accompanying repeal of the federal excise tax on gasoline. According to energy model projections, avoiding increases in gasoline prices would sacrifice few emissions reductions, because U.S. motorists’ thirst for gasoline has historically been relatively indifferent to moderate price changes.

However, in a new commentary, CGEP Scholar Noah Kaufman describes why the effects of a carbon tax on vehicle emissions may be more substantial than conventional wisdom suggests. Research indicates that drivers may be about three times more responsive to fuel price changes caused by policy shifts versus normal price fluctuations. If drivers responded at this higher rate to a $50 carbon tax, this could avoid nearly 100 million metric tons of carbon dioxide emissions by 2025, which is larger than the expected annual emissions impact of the Trump administration’s proposed weakening of vehicle fuel economy standards.

Kaufman acknowledges that a carbon price by itself may not rapidly decarbonize the transportation sector, but he argues that it is an important component of a cost-effective strategy for addressing vehicle emissions. By avoiding higher prices at the pump, the Curbelo proposal may be sacrificing larger emissions reductions than we once thought.

 

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Putting a price on vehicle emissions is better policy than it seems