New crises demand new modes of thought.
In the early 20th century, scientists were baffled by the paradox that the speed of light never changes, even if the observer is rushing toward the light source. Einstein resolved the crisis by redefining time from a constant to a variable.
In the mid-20th Century, America was struggling to escape its centuries-old legacy of slavery and segregation. Martin Luther King and the civil rights movement found us all a way forward, by redefining racism as an assault on the souls of whites as well as blacks.
Today, America’s and the world’s prodigal use of fossil fuels is creating twin crises: a climate crisis from emissions of heat-trapping pollution into the atmosphere, and a security crisis self-created by the industrial world’s thirst for other people’s oil.
We can solve both crises, but only if we relinquish deep-seated beliefs about fuels and energy. And the attitude we must fling overboard first is our sense of entitlement to cheap energy. We need to recognize that energy does not cost too much; in fact, it doesn’t cost nearly enough. To preserve Earth’s climate, and wrest political authority from the corporate oil barons and petrodollar sheiks, we must conserve fuel massively and permanently, starting now.
The United States, the biggest consumer of coal, oil, and gas by far, probably needs to cut back by 75% within just two decades.
Yet so long as energy is cheap it will never be conserved, except in token and totally inadequate amounts.
Energy-efficiency standards are often held out as the alternative to higher fuel prices. Standards have proven modestly valuable in some sectors, and going forward they can be a helpful supplement to price-based conservation.
But by themselves, standards will never come close to achieving the necessary reductions in energy usage. For every activity that is brought under efficiency standards, dozens of others will elude regulatory control, either through industry “gaming” or due to the creative unruliness of consumer capitalism, forever finding new ways to burn fuels.
(Cases in point: the “light truck” loophole to CAFE standards that spawned the SUV plague, and the advent of flights-by-the-hour air travel that consumes even more fuel per passenger.)
The lesson should be clear: whether the resource is muscles, water, fuel, or time, we humans squander what’s plentiful and husband only what’s dear.
To be sure, few people in public life have yet articulated the need to make energy expensive. One prominent advocate missing in action so far is Ralph Nader, the activist icon and two-time Green Party candidate for president.
Last month Nader published an essay, “Stop ExxonMobil From Squeezing Us Dry,” consisting of one tired nostrum after another for curbing oil company rapaciousness.
Gas prices have doubled in four years? Break up the oil giants! ExxonMobil gave retiring CEO Lee Raymond a $400 million going-away present? Slap on an excess profits tax! Alternative energy is lagging? Let an oil “extraction tax” finance investment in alternative fuels.
Actually, that last idea isn’t half-bad (though I think I have a better one, explained below). But for the most part, Nader’s program ignores the onrushing climate crisis and the ongoing security crisis. Indeed, by perpetuating the artifice of cheap energy, Ralph’s proposals would promote even greater use of fossil fuels, worsening the climate crisis while barely laying a hand on the petrolords abroad or at home.
To see why, it helps to look at recent U.S. gasoline trends. By comparing data on usage and price, we can infer that gasoline demand is almost 10% below where it would be if we still had 2002 prices. That’s because drivers have cut back in response to the higher price — not massively, but enough to offset most of the higher demand that would have come with the expanding economy.
The implied savings, around 700,000 barrels of gasoline per day, are almost twice the lost daily production from the partial shutdown of the Alaska Pipeline this month. Not exactly chicken feed.
Higher prices do reduce usage. The challenge is to find a way to keep raising fuel prices without harming our economy, our pocketbooks, and, of critical importance, the millions of poor families who can’t afford higher prices for gas, home heating, and electricity and shouldn’t be made to pay to solve a problem not of their making.
The solution is straightforward and politically appealing: ramp up steep taxes on fuels, and tax-shift or rebate the revenues progressively.
Tax-shifting is the phasing out of existing, onerous, regressive taxes, such as state sales taxes and federal social security taxes, as the fuel taxes are phased in.
Rebating is the pro rata distribution of the fuel tax revenues to the public — along the lines of the Alaska Permanent Fund, which once a year sends identical checks to all state residents from the state’s North Slope oil royalties.
In either case, individuals and families that use less energy than average would get back more in tax reductions or rebates than they would pay out in fuel taxes. Since most poor households drive less, fly less, live in smaller homes, and have fewer appliances and electronic devices than richer households, most of them would benefit monetarily from this tax plan — even those that drive clunkers, have drafty houses, and own hand-me down refrigerators.
So there is a way to raise energy prices while holding harmless the vast majority of the poor. We can call it progressive fuel taxation; or, if the tax is levied according to the carbon content of the fuel to take aim at global warming, progressive carbon taxation.
Here’s what progressive fuel taxation could accomplish:
- Slash use of fossil fuels by instilling across-the-board incentives to improve energy efficiency and creating the market pull for renewable biofuels, solar, and wind energy.
- Drive down the before-tax price of energy by reducing demand. (Excise taxes on any commodity always cut its before-tax price; this is Econ 101.) This would curb oil profits without the need for a complex, difficult-to-enforce excess-profits tax.
- Make polluters pay, while rewarding with cool cash every action that conserves fossil fuels.
- Diminish the political power of the oil/energy industry, as sales volumes and earnings plummet.
- Dry up the financing of “oilgarchies” from Africa to the Middle East to Indonesia — and Washington, D.C.
- Inject that money into our economy, providing more and better jobs at home instead of funding violence abroad.
Sure sounds a lot like Nader’s program of cutting the oil industry down to size while protecting consumers, but with the added dividend of cooling the climate and enhancing security by reducing fossil-fuel burning, money, and power.
Nader closed his essay by calling on bloggers and other e-activists to “start one big energy reform rumble that will be heard by both Washington and the oil giants.”
I’d like to turn that challenge around: Hey Ralph: will you lend your leadership to progressive fuel taxation, as you have to so many causes down the years? Will you, like Einstein and King, embrace a bold new vision and help liberate mankind from its energy shackles once and for all?
Get Grist in your inbox