BusinessBrief.com » Study: Fuel costs must (at least) double to reduce GHG emissions

Study: Fuel costs must (at least) double to reduce GHG emissions

March 23, 2010 by tguay
Posted in: In this week's e-newsletter, Latest News & Views, Legal & Compliance


Better boost your operating budgets.  Motor fuel costs will skyrocket if Congress decides to reduce U.S. oil imports and greenhouse gas (GHG) emissions. 

That’s the bottom line offered up by a team of Harvard University bright lights at the University’s Belfer Center for Science and International Affairs. The group says to expect gasoline to top $7 a gallon.

The team concludes that the only way to change the status quo in America — to reduce GHGs 17% by 2020 — is to adopt a mix of stringent rules that substantially increase fuel costs and increase vehicle mileage. To do this, the Harvard study suggests starting with a $0.50 a gallon tax in year one and adding another half-buck tax a year until the tax reaches $3.36 per gallon in 2020.

The Harvard team assumes CAFE standards will boost average mileage standards to 43.7 mpg, but most of these efficiency gains will be offset by an increase in vehicle miles traveled as Americans prosper, buy more cars and live with ever longer commutes.

Plus, electricity costs will also be on the rise because any comprehensive plan to create an energy policy that reduces oil imports and GHGs will require a carbon tax of up to $60 a ton of carbon dioxide released by power plants and industrial facilities.

The team locks in on driving up transportation costs as the primary way to achieve the interlocked goals of reducing American dependence on imported oil and reducing GHGs emissions.

Reason: 70% of oil used in the U.S. is for transportation. Therefore, just cutting GHG releases from power plants and large industrial facilities won’t get the job done.

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  • Thinker

    Rather than taxing the use of oil they should grant tax credits to those that DON’T use it. Rather than adding to the cost of commuting to work, a substantial tax credit to those that live close to where they work would substatially reduce consumtion nationwide. Driving up the cost is really ineffective when people just have to commute longer distances to have access to higher paying jobs.

  • Paul Mullen

    I am very dismayed when reading an article like this. A tax will not serve the purpose of reducing our dependence on foreign oil. There needs to be a comprehensive plan for installing alternate energy supplies. Mandating higher milage effiencies from automotive Manufacturers is a good start. How about nuclear facilities being installed? In general we do as a country need to have energy independence first and worry about being politically correct and green after we make sure we can stay warm and not be held for ransom by oil interests.

  • Graham Atkin

    The Harvard view you express is typically gloomy-doomy think-tank stuff. They need to brighten up and become innovative again. Heaven knows they are coddled enough. There are plenty of other people at Harvard and MIT who relish the challenge GHG’s present to us all.

    Regards and breathe easily

  • Gary

    More global warming nonsense. Do you think there is a link between GHG’s and warming, or are GHG’s a by-product of a warmer Earth? Real science would demand elimination of all other possibilities. What about Mars? It’s warming at the same rate as the Earth. How many SUV’s are registered on Mars? Maybe it’s solar activity? That hasn’t been eliminated. How about the last time the Earth’s temperature increased… before the industrial age; care to explain that? Is it possible that the Earth’s temperature is cyclical and has and will always vary? Do you trust the IPCC? Do you trust them after their bias and willingness to ‘bury’ and facts that don’t support their assertions have been uncovered?
    This is nothing more than a global wealth redistribution scheme. Is the rest of the world who would benefit from this redistribution going to return the products and services that the western world developed during this period that make their lives better? The reality here is that we do have an obligation to do what we can to be better stewards of our planet. That ‘revolution’ has already begun. But to accept this manufactured nonsense, that the normal and natural by-product of respiration is a harmful gas is a joke. This administration is misguided and is on a path to destroy everything pervious generations of Americans have worked to achieve. Our economy and economic health depend of inexpensive and abundant energy. Putting these kinds of restrictions on energy will be the final nail in our coffin. It will certainly close the lid on many small and mid-sized businesses, the engine of our economic growth and prosperity. Is that the change you voted for?

  • Mark

    Hope and change right? Imagine what this will mean to tourism and summer travel, on-site service business, and food costs. (that is a short list for sure).

    This is Insanity on the part of politicians.

    I believe we need to have a nation wide all person strike for at least two days. Not one dollar spent for two days. Stay at home, do nothing for two days. Shut everything down until Congress gets a clue!

  • LearningWhy

    The replies to this article show how difficult the psychology of this challenge is. Americans are a spoiled lot. Nations like Norway have been paying high prices for fuel for decades now. It is working very well for them.
    The higher price is exactly the incentive the market needs to change habits and get more fuel efficient.

    The money collected in taxes does not leave the national economy. It is used to build efficient infrastructure and to reduce other taxes, including tax breaks that encourage more efficiency.

    If we stay on our current course, the price of fuel will tend to rise anyway and that money will not be available to reduce other taxes, and we will continue to be burdened by inefficiency.

  • http://aol ron ross

    The govt, all 3 branches and there minions are clueless and incompetent. If this is enacted we will be paying $4 for a head of lettuce and it will be due to transportation charges. Drill here, Drill now and do it where there is crude and natural gas. Not drilling in proven areas of Alaska smacks of a ‘gotcha’ to Palin and not drilling off the coast of California is because BO is affraid of NancyBotox. Remember she is ‘just trying to save the planet’ This is hardly what I would call putting America first. In the meanwhile Iran builds the bomb, China will drill off Cuba (90 miles from here) but we have to drill 150 miles offshore. Oh, well!!! As the youth of today might say.

    Vote the incumbents OUT.

  • IDuck

    Nations like Norway have been paying high prices for fuel for decades now. It is working very well for them.
    _________________________________________

    Norway is roughly the size of Montana and has roughly the population of Alabama (and it’s a pretty centralized population due to geography and climate).

    I’m not sure that’s a very valid comparison.

  • Peter Belanger

    A great idea, but let’s double it to $14 a gallon — Americans will really start to prosper then.

    Too bad Obama missed Econ 101; his administration’s 7% private sector experience rate is the lowest in history.

    Make sure you and everyone you know votes in November.

  • Gary

    LearningWhy thinks: “The money collected in taxes does not leave the national economy. It is used to build efficient infrastructure and to reduce other taxes, including tax breaks that encourage more efficiency.” Does anybody else believe this?

    The only ‘shovel ready project’ Obama has funded is his own shovel, and he continues to shovel this $#&!. I’m disappointed that the more trusting Americans apparently eat this up! I really loved the part about reducing other taxes! That’s really a hoot. The way this administration spends, they will not be able to reduce any taxes, and they are still going to enslave our children because of their lack of restraint.

    I feel the warm guiding hand of Obama…. and it’s reaching into every part of private business. Someone needs to tell the ‘first fraud’ that private business and individual initiative is what built everything good in America. His ‘central committee’ mentality didn’t cut it in the USSR, and it’s not going to cut it here. Someone pass the vodka.

  • http://www.michianalaminated.com Mike Sutter

    Now let’ see, once we lower GHG’s by 17% by 2020 and Americans are “prospering”, does that mean the $3.36 a gallon tax is then eliminated by the government? Is there a Santa Claus or an Easter Bunny? “LearningWhy” should be able to answer all three questions prior to landing permanently in Norway!
    It’s absolutely incredible that we have people in this country who think they are intelligent and yet believe that increasing fuel taxes (or any other tax) is going to reduce other taxes.

  • Duine

    The central conclusion of the study is correct–that to reduce use of fossil fuels they must become more expensive. One of the ironies of the CAFE standards, which 70’s politicians, in a triumph of cravenness, foisted upon the car companies, is that it made cars more expensive, but the act of driving cheaper. So people ended up buying houses farther and farther away from work, driving more and more and, lo, our fuel use skyrocketed. Great job, Congress. But they were visionaries, and the car companies and oil companies got the blame, so of course even with the evidence that their actions helped create an almost irreversible structural dependence on oil they voted for another round of CAFE mandates, even as GM was going bankrupt.

    In spite of the dubiousness of the global warming issue, the goal of reducing fuel consumption is not such a bad thing. There is the matter of dependence on foreign sources, which it is a national security issue. But fossil fuels are a finite resource and their cost will rise of their own accord as they get harder and harder to extract and transfer payments to supplier countries will get higher and higher, and ultimately oil will get too expensive to use. It would certainly be better to have alternatives in place as we get nearer that point, to avoid the chaos of disruptions, and the only way to do that is to bring the cost of fossils closer to that of the alternatives. The question is, could not the market do that on its own, in time, or do we need prodding (in the form of a tax)?

    Alternatives are getting cheaper, but it is doubtful they will become as cheap, at least in the near term, as oil is now. I am sure the market would ultimately solve the problem on its own, but perhaps not in the smoothest way. For that I think it might not be a bad idea to advance the day of reckoning with a gradually increasing tax on fuel as long as it is offset by decreasing taxes elsewhere. It would give people more time to adapt. And to be effective it has to affect decisions at the pump, which is why I don’t think things like credits, industrial blueprints or other solutions remote from the problem would work. But you can trust politicians, especially the current crop, to mangle beyond recognition any sensible approach (Exhibit A: healthcare). Anyone who thinks this Congress would offset a fuel tax with tax decreases elsewhere is delusional. They would love such a tax…it would certainly help them get out of the enormous hole they’ve dug for us with “stimuli” and Obamacare, yet I think the directness of a fuel tax scares them.

    Taxes in any form are a drag on the economy. But depending on their structure they will drag more in some places than others. Some are so hidden and subtle that you don’t know what they’re killing. With this Congress taxes can only go in one direction, so I hesitate to even countenance the notion, but had we saner people in government a fuel tax could replace a more destructive indirect tax, say that political darling, the corporate tax. As with all taxes there will be winners and losers, but as long as it is considered a national goal that the greens be winners and the ungreens losers then on balance I think it is better to create them upfront rather than unintentionally, or through the politicians’ favorite, carefully coordinated cronyism. And it is certainly better than having the likes of Lisa Jackson picking winners and losers by fiat.

    Unfortunately politicians know that people get angrier at a direct tax they can put their finger on than the more insidious indirect taxes, so obfuscation is the rule. Death by a thousand cuts. Such is the democratic way.

  • Peter Belanger

    Cap and trade, under the guise of calling carbon dioxide a pollutant and reducing global warming (OMG, read “Red Hot Lies”), is just another ordinary bomb being lobbed at us by the ingnorant who grabbed power by promising bipartisanship. Get ready for the nuclear warhead, VAT, which I directly experienced in Europe. It will end the US as you know it.

    This administration is toxic. Vote, and get others to vote with you.


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