Massachusetts is considering another money grab in the name of carbon. A few years ago the Governor announced higher parking rates, in the name of carbon. This time Boston Mayor Marty Walsh ordered up a report calling for a $15 per day tax on nonresidents driving into the business district, in the name of carbon. It’s not a reasoned study. It’s a sacrifice to the cult of carbon.
The “social cost” of carbon is somewhere between zero and a few hundred dollars per metric ton of CO2. Obama’s EPA said $37 and British Columbia uses a similar value. Two Stanford graduate students said $220. Trump’s EPA said $1. The exact figure depends on value judgments as well as facts. Only to make the math easy, I’ll use $100. That’s on the high side but not the highest number out there.
What that means is if you add up all the harms due to emitting CO2, as calculated by people who take climate change seriously, you’ve done $100 of damage to the Earth and its present and future inhabitants each time you emit a ton of CO2. (Or $37, $220, or $1.)
Here are some things that emit a ton of CO2:
- Burning 100 gallons of gas in any type of vehicle
- Burning 100 gallons of oil in a power plant
- Breathing for 3 years
A gallon of fuel is $1. Exhaling is 10 cents per day.
This says gas should cost at least a dollar per gallon (or $0.37 or $2.20, or $0.01). The reason is an economic concept called negative externalities. An externality is the effect on third parties of something you do. Like hog farms in North Carolina spreading pollution.
There’s another economic concept that matters here: utility. That is the intangible value people place on things. I like the outdoors. I watched the acquisition of signal from New Horizons on New Year’s Day. North Carolina residents don’t like to be downwind of sewage lagoons.
“Internalizing” an externality by charging for it forces people to do a cost-benefit analysis. If we make people pay a dollar for every dollar’s worth of damage they do, the market will find a good solution. The hog farm will clean up or pay you to move away, whichever is cheaper. You won’t drive unless your trip is worth more than your car’s exhaust fumes.
Asking people to pay more than the cost of the externality does more harm than good. You’ve destroyed $200 of my value to keep me from doing $100 in damage to you. Better to make me pay you $100 and let me keep the other $100.
You can argue, and most people do, that the dollar per gallon should be a tax and not a price. What if we added a dollar in gas tax? Since gas used to be a dollar more expensive we know the answer. A handful of people stop driving and some people buy smaller cars or drive less. Some people. Gas is only expensive for the poor. If you make above median income, your car is much cheaper than your time.
Paying the social cost of all the carbon emitted by cars would make little difference in our day to day lives.
Now back to Boston. The city wants to charge you $5 to drive in, $5 to park, and $5 to leave, on top of all existing fees and taxes. That commute might burn a half gallon of gas inside the city. $15 per half gallon is $3,000 per ton of CO2.
That charge is 15 to 150 times as much as mainstream estimates of the cost of carbon. As a carbon reduction measure Boston’s proposal does more harm than good.
This is not a fact-driven policy. It’s a money grab by a religious cult that says all things are good if done in the name of carbon.
The utility of driving vastly exceeds the externalities. American transportation planners need to recognize this basic truth.
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