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Climate Hustle

EPA’s war with California proves America needs a carbon tax

Posted on 10 April 2018 by dana1981

Last week, Trump’s EPA announced that it will repeal the vehicle fuel efficiency standards set under the Obama administration and replace them with weaker requirements. EPA also threatened to revoke California’s ability under the Clean Air Act to impose its own greenhouse gas standards. If they do so, California’s attorney general will sue the EPA.

Xavier Becerra@AGBecerra

The Trump Administration’s assault on clean car standards risks our ability to protect our children’s health, tackle climate change, and save hardworking Americans money. We’re ready to file suit if needed to protect these critical standards: https://oag.ca.gov/news/press-releases/attorney-general-becerra-epa%E2%80%99s-assault-federal-greenhouse-gas-emission-standards  https://twitter.com/business/status/980867241565736960 

This lawsuit would be tied up in court for years, and in the meantime California’s more stringent standards would remain in place. Those standards have been adopted by 12 other states, which along with California account for one-third of new car sales in America. Weaker federal fuel efficiency standards wouldn’t much help the US auto industry if they don’t apply to one-third of domestic sales.

The Obama administration set the stricter fuel efficiency standards after the federal government was forced to bail out the auto industry. Struck by the 2008 global recession and a spike in fuel prices, US auto manufacturers, whose fleets were less fuel efficient than foreign competitors, were in dire financial straits. The auto industry thus accepted the federal bailout and didn’t fight the higher fuel efficiency standards – until Donald Trump came into office. California also agreed to the new federal standards in 2008, and now wants to use its Clean Air Act authorization to keep them.

The auto industry has argued that low gasoline prices are the problem, but that’s not a problem they want to solve. In fact, US automakers are in the process of repeating the same mistakes that led to the industry collapse a decade ago:

brad plumer@bradplumer

"GM will end production of the Chevrolet Sonic subcompact car... part of a broader push by Detroit auto executives to abandon low-margin cars in favor of sport-utility vehicles." https://www.wsj.com/articles/gm-to-kill-chevrolet-sonic-subcompact-car-1522850577?mod=searchresults&page=1&pos=2 

American gasoline is too cheap

Other than Russia, no developed country has gasoline prices nearly as cheap as America’s. Australia’s are closest at 35% more expensive than American gasoline. Canada’s are 46% more expensive, and European petrol is about twice the American price.

Automakers are complaining that they can’t meet the stricter fuel efficiency standards because those low fuel prices are causing more Americans to buy gas-guzzling trucks and SUVs. The problem isn’t technological – every major auto company offers a range of hybrid, plug-in hybrid, and/or fully electric vehicles, but these account for just 3% of new car sales in America today.

It’s also important to note that American fuel prices are artificially low because they don’t reflect the associated costs of climate change damages. This is known as the ‘social cost of carbon’ – the costs taxpayers incur to pay for the added damages from climate-intensified hurricanes, floods, droughts, heatwaves, and so on. Economists call these costs ‘externalities’ because they’re not reflected in the market price of fossil fuels. Putting a price on this sort of pollution is ‘Econ 101’, and 95% of economists support either a carbon pollution price or standards like these fuel efficiency rules.

The solution could not be clearer, but it’s not a solution most Americans want to hear – gasoline prices should be higher.

A carbon tax would be a win-win solution

Automakers admit that consumer demand for gas guzzlers is the problem. Conservatives claim to be worried about the ballooning national debt (despite having passed a trillion-dollar tax cut). Environmentalists and scientists want to cut carbon pollution. Donald Trump claims to be worried about America’s crumbling infrastructure. The stricter standards would save $1.7 trillion on fuel by 2025; buying inefficient cars would cost Americans money.

Implementing a carbon pollution tax could solve all of these problems. 

  • It would raise fuel prices, thus increasing consumer demand for fuel efficient cars, allowing the automakers to easily meet the more stringent standards. 
  • Having fuel-efficient fleets would also protect US automakers the next time gasoline prices spike and demand for economic cars rises, as it did in 2008. 
  • By reducing fuel consumption, a carbon tax would reduce American carbon pollution, thus helping tackle climate change. 
  • It would generate tremendous revenue that could be used in a variety of ways like reducing the deficit, cutting other taxes, or funding infrastructure projects. 
  • Or, to blunt the financial impact of higher fuel prices on Americans’ finances, the revenue could be partially or entirely returned to taxpayers, which would spur economic growth.

In short, it’s the sort of policy that everyone looking out for America’s long-term best interests should support. Unfortunately, the key power players in this story don’t.

Automakers tried to make a deal with the devil and got burned

Automakers don’t lobby for a carbon tax because their most profitable models are inefficient trucks and SUVs. As an industry group spokesman told the LA Times,

Manufacturers need to sell vehicles that customers need and want today to fund the technological shifts and electrification and automation expected in the future

That’s a charitable way of saying that automakers want to maximize their near-term profits by continuing to sell lots of gas guzzlers. So, they instead hired a group to submit a climate denial report to the EPA and asked Administrator Scott Pruitt to negotiate a weaker, compromise standard with California. The New York Times reports that talks are quietly ongoing behind the scenes, but thus far Pruitt’s comments have not been encouraging.

In fact, the EPA Notice repealing the standard didn’t even mention climate change or public health – the primary factors underpinning these fuel efficiency standards. Instead, Pruitt simply scrapped the federal standard and threatened to go nuclear by revoking California’s ability to set its own standards, and California responded by threatening to take EPA to court. The automakers are not pleased.

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Comments

Comments 1 to 6:

  1. The people currently controlling the actions of the USA Government, not just the EPA, attempting to 'legally' get away with the promotion and defense of damaging Private Interests proves that even the 'Rule of Law' needs to be responsibly governed.

    Every aspect of human life and activity, including the making-up and enforcement of Rules of Law, needs to be Ruled by the objective of developing a suatainable better futre for all of humanity.

    Government by 'all of the people' for 'the benefit of all of the people' is a brilliant guiding principle. Maybe some day the USA will break free from being "Ruled by undeserving rich/winners claiming that they need to be richer for the Good of all of humanity".

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  2. I need to revise a term in my opening para.

    "The people currently controlling the actions of the USA Government, not just the EPA, attempting to 'legally' get away with the promotion and defense of damaging Private Interests is strong evidence that even the 'Rule of Law' needs to be responsibly governed."

    And I would add that "Government by 'all of the people' for 'the benefit of all of the people' - including all fuure generations of humanity" would also be a great objective for global leadership. If the USA honored that ideal they would be the most helpful nation on the plant. When they do not honour that ideal they can become the greatest threat to the future of humanity.

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  3. Some of the ideas coming out of America lately just don't make any sense.

    For example Scott Pruitt doesn't want Obamas federal fuel efficiency standards, and now he doesn't want California being able to set its own fuel efficiency standards. So Pruitt apparently hates federal rules and also the states having power. This looks like it's anti constitutional.

    The idea of the constitution was to limit federal power, but ensure states could set their own laws. What Pruit is doing would horrify the writers of the constitution and the founding fathers of america.

    And Pruit is downgrading other federal environmental rules. This makes no sense either because he is damaging quality of life for generations of people for the sake of short term corporate gains. Pruit is doing more harm than good. Corporate rights are of course important, but ultimately corporates have to serve the public good. Corporations are a means to an end, not the end itself.

    Pruitt is out of touch with reality.

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  4. Franklin said a Revolution ever 200 years.  The USA is overdue, but I think for not much longer. 

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  5. bjchip, actually that's fiction.

    Franklin never said it.

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  6. Good article! A comprehensive, national carbon tax (levied at the source where it enters the economy, mine, well, port) that is also revenue-neutral (money 100% re-distributed) which allows 1) the tax to be significantly high so to have adequate economic "bite" (i.e. at least $100/m-ton CO2, ramped in place), while also 2) assuring its maximum political durability, is an absolute must to achieving any significant & sustained reduction in carbon emissions. Everything else will be futile.

    The hard part is building the political-will to enact such a rev-neutral tax macro-policy. Getting all climate warriors on the 'same page', screaming the same thing 'in unison' is essential to building this political-will. If you want to be a part of the only real solution to achieving carbon emission reductions, then join your local Citizens Climate Lobby chapter, and get involved! CCL is an amazing organization with loads of talent and resources, but to achieve real change requires everyone to get involved!

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