The Vine

Will Climate Legislation Make Gas Pricey? (oddly, No.)


Jim Sensenbrenner, the ranking Republican on the House Select Committee for Energy Independence and Global Warming,
made a cameo appearance at the international climate talks in Poznan, Poland, this week, announcing
his opposition to any climate agreement that doesn't require the
developing world to reduce its own emissions. What's more, he predicted dire economic
consequences if the Democrats managed to pass a cap-and-trade bill in the United States, though he could
hardly contain his glee over the political opportunities he saw. He told
reporters that climate legislation would lead to "a doubling or
tripling of electricity bills and ten-dollar-a-gallon gas," which would then lead inexorably
to the Republicans regaining control of Congress in 2010.

everyone's entitled to dream of electoral comebacks, but it's hard to see where
Sensenbrenner's getting his numbers on gas prices. Back in October, the Congressional Budget Office
(CBO) released a study
estimating that a $28-per-ton price on carbon-dioxide emissions, which would have been the approximate going rate under
the Lieberman-Warner cap-and-trade bill, would raise gas prices in the United States by just 25 cents per gallon. That's not going to drive gas up to $10/gallon, especially in the middle of a recession, when worldwide demand for oil is cratering. (Note that a cap and trade system would work differently from a straightforward gas tax applied directly at the pump.)

Indeed, the real problem with any cap-and-trade legislation or carbon tax is that it wouldn't
raise gas prices enough. The CBO study concluded, unsurprisingly, that raising gas prices 25 cents per gallon simply wouldn't make much of a difference on driving or purchasing decisions. Yet there plenty of good reasons to steer
people toward more efficient cars, or even to get them to drive less, that go beyond the need to limit carbon-dioxide emissions. Each time a person decides to drive, he or she
contributes to local air pollution and makes everyone else's trip slower by
increasing the total amount of traffic on the road. Low gas prices allows
cities to develop in sprawled-out ways and provide little
for people to purchase fuel-efficient vehicles, making the economy
much more vulnerable to future increases in gas prices.

So there's an
argument for using a number of different policy levers—tax credits, subsidies, fuel-economy
standards—to reform the transportation sector. Some of those policy levers—like allowing states to set emissions standards for vehicles—could
have been included in the auto bailout bill, but weren't. That's one reason, perhaps, to be a little less disappointed that the
bailout bill's prospects are looking so grim.

--Rob Inglis, High Country

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