Friday, June 22, 2007

The Senate's Energy Bill

By a 67-25 majority, the Senate passed an energy bill that would increase fuel efficiency requirement from 25 to 35 miles per gallon; the first improvement in such standards in almost two decades. The new standards come into effect from 2020, and (here is the best bit), the industry attempt to maintain higher standards for "light trucks" (read: SUVs) was beaten back. Hooray! Of course, Bush could always veto, but the sizable majority increases the pressure on him to sign. Incidentally, all of the Democratic presidential candidates (Biden, Dodd, Clinton, and Obama) supported the bill, while the two Republicans (Brownback and McCain) were absent.

Of course, I would like to see this twinned with an increase in the gas tax, which remains far too low in the US, imposing (as economists would say) a negative externality: by not paying the full social costs of driving, every driver simply drives too much. Steve Levitt (of Freakonomics fame) argues that the various social costs call for a roughly $1 a gallon increase in gas taxes. This is not a "leftist" issue. Greg Mankiw, formerly Chairman of Bush's Council of Economic Advisers and currently an advisor to Mitt Romney, also backs a $1 increase in the gas tax.

But which policy is best? Personally, I prefer the increase in efficiency standards, in part because gas taxes are highly regressive (the poor bear a disproportionate burden). Also, the consumption of petroleum products is notoriously price-inelastic (people will still drive, no matter the cost!). But, weighing against this, the gas tax raises valuable revenue, and, as noted by Kevin Drum, higher efficiency standards may actually prompt believe to drive more too!. So I think the best conclusion is: both, please.

1 comment:

Anonymous said...

So you are aware of the burden such a tax places on the poor, and you desire such a tax, for whatever reason?

I am so glad you have a blog, I just wish it got more traffic. If I had any way to help, I would. I think it is important for people to hear what you have to say.

Otherwise they might think leftists who happen to have been Confirmed give a rat's patootie about the poor. And maybe you do, you just value government revenue and comfortable temperatures more.