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July 20, 2005
Smart Subsidies
Yesterday, Matt pointed to a Times article saying that new hybrid technologies were being pumped into the acceleration side of things rather than going to increase fuel efficiency. That's not going on everywhere, sure, but the Accord hybrid and a few others are using the increased power to, well, increase power. This is essentially what happened in the 80's when the advances that had been going to cut fuel consumption were, with Reagan's freeze on CAFTA standards, plowed into engine muscle, at least by American companies. The Japanese kept going for efficiency and, well, you know how that turned out.
Matt uses this as evidence for why we should let the market take care of oil or, if we insist on meddling, have something straight forward like a gas tax. I'm not so sure. As I've said in the past, gas taxes are enormously regressive, hurt those who (for reasons of employment or whatever) can't change their transportation patterns, and will make all manner of good more expensive because they cost more to move and produce, making it double regressive. And this is all in the platonic land where we could actually pass a gas tax.
What the study does show is that subsidies for hybrid purchases are no longer a good idea. So let's not have them. Don't subsidize hybrids. Subsidize fuel efficiency. 30mpg and over gets a small subsidy, 40 gets a larger one, 50 nets you even more cash, and 60 makes you rich. Because, in the end, what we want isn't technology itself, but better fuel efficiency. And we can incentivize that directly.
July 20, 2005 in Energy | Permalink
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» Feebate Time! from Electoral Math
Third, Ezra's right. Gas taxes are political infeasible, terribly regressive, and an increase wouldn't force a move to hybrid cars until gas prices reached at European levels. [Read More]
Tracked on Jul 20, 2005 6:02:06 PM
» The State of Subsidies from sustainablog
There's a very interesing discussion going on at Ezra Klein in response to a post on subsidies for hybrid technology (which seems to be moving in the direction of increasing "muscle" as opposed to improving fuel efficiency). [Read More]
Tracked on Jul 21, 2005 11:43:26 AM
Comments
Subsidizing fuel efficiency itself is a good idea, and (conservatives rejoice) lets the market decide how best to achieve fuel efficiency. However, subsidization of a particular technology like hybrid engines or fuel cells does have value, particularly in the early stages. In the case of fuel cells, for example, initial efforts to develop wide use of the technology are more concerned with just getting people to use it than with any particular fuel consumption issues. Once fuel cells begin to be widely adopted, then the environmental benefits begin to manifest themselves. Initial subsidies are necessary when development of a new type of technology is more important than any immediate fuel efficiency concerns.
Posted by: Matt F | Jul 20, 2005 3:57:11 PM
Matt -- Very true. It just seems clear that, with hybrid technology, we've passed that point.
Posted by: Ezra | Jul 20, 2005 3:59:03 PM
Subsidizing research is a different thing entirely than subsidizing a purchase.
I certainly agree that the way to go is to focus on results, rather than methods. An example of this is the catalytic converter. We have no idea if a better, more environmental method could be made to reduce emissions, because rather than mandate a result, we have mandated a particular method. Innovation is squashed in such an environment.
Posted by: Dave Justus | Jul 20, 2005 4:17:31 PM
Subsidies are really unnecessary and unwarranted. The rising price of energy will motivate people without any additional government expense.
Posted by: Robert Zimmerman | Jul 20, 2005 4:46:32 PM
What really counts in fuel demand is average fleet fuel efficiency. It takes a long time (5-7 years?) to affect this number significantly, so incentivizing higher gas milage in the early parts of this replacement cycle makes good sense. Later in the cycle, incentives don't make much sense, since the impact is low.
We could probably double average fleet fuel efficiency in 10 years with just the technology now available. That is a lot of oil.
I'd put negative incentives into the mix as well. A fat tax on Hummer-like gas hogs at purchase, coupled with positive incentives for ranges of good performers (as you suggest) would greatly change the the time when demand was reduced. This would also lessen the impact on the government budget since the hogs would be paying for the incentives for good milage vehicles.
And don't forget that SUV's and trucks MUST be included in this reform. It is lunacy to think that current exemptions for these make any sense whatsoever. The pickup truck exemption was originally for farm use, but has outlived any rationale.
I still don't know that the argument for hydrogen fuel cells makes any sense. Are there any links that show that obtaining the hydrogen (which is energy intensive) can be done economically if oil is less than $100/barrel?).
The cost of infrastructure to distribute hydrogen would be enormous as well, it seems. Maybe that makes sense for non-personal transportation needs to further reduce oil demand - but I'm from MO on hydrogen for cars.
Posted by: JimPortlandOR | Jul 20, 2005 5:13:51 PM
I like the idea of subsidizing efficiency, as well -- but would this apply to motorcycles as well as cars? :)
Posted by: Kimmitt | Jul 20, 2005 5:18:15 PM
Further thought: Does it make sense to create a need for tanker trucks to be driving around our cities carrying hydrogen to 'gas' stations in an age of terrorism?
I sure wouldn't want to live within a couple blocks of a service station that regularly had hydrogen tankers parked while unloading. Or to be sharing bridges, tunnels, and crowded freeways with them either.
A hydrogen tanker near you is a WMD.
Posted by: JimPortlandOR | Jul 20, 2005 5:20:46 PM
I believe you mean CAFE, not CAFTA, yes?
Posted by: Brian | Jul 20, 2005 5:56:43 PM
I particularly like the concept of feebates.
Tax gas-guzzlers, and use that money to make fuel efficient cars cheaper. Two birds with one stone (but please don't throw rocks at birds!)
Posted by: MGR | Jul 20, 2005 6:14:54 PM
Feebates are a good idea, but right now their effects would fall disproportionately on US automakers. So you have to have some pseduo-bailout carrot (like, say, nationalized health care) for the Big Three to go with the feebate stick.
Posted by: Nick Beaudrot | Jul 20, 2005 6:31:24 PM
Remember the gas tax is more regressive on the West Coast than the East Coast where there are more public transportation options and driving can be considered a "luxury" in some senses.
Posted by: fulsome | Jul 20, 2005 6:41:18 PM
If you want to reduce gas usage by taxes, tax gas directly. If you want to reduce oil imports, tax imported oil directly. Any other solution that is aimed at something like fuel efficiency which has an imperfect relationship to annual consumption creates distortions without aiming at the true target.
Subsidizing efficiency is indirect and wasteful. If I am incented to buy a 40 mpg car and am not incented to reduce my 100 mile commute, then I still will use a lot of gas every day. Another person who buys a Hummer and drives it 3,000 miles per year should not be penalized for excess gas usage -- he is not really using much gas.
Also, people who complain that taxing gas will disproportionately affect people who use a lot of gas are really missing the point -- that is not a problem, that is the main desirable feature.
Posted by: EdSez | Jul 20, 2005 7:04:58 PM
If you want to reduce gas usage by taxes, tax gas directly.
Exactly! Edsez has it right. The problem, Ed, is that the left cannot stay on target. There is no doubt that increasing the price of gasoline either with hight oil prices or increased taxation would encourage efficiency and curtail usage....the actual targe. However, taxing gasoline directly as we do now with road taxes causes whining on the left because it taxes those who actually use the roads and isn't soaking the rich and furthing the class warfare.
Posted by: Robert Zimmerman | Jul 20, 2005 8:42:50 PM
What about losing the subsidy/tax break on large expensive vehicles ?
Posted by: opit | Jul 20, 2005 9:05:35 PM
"I sure wouldn't want to live within a couple blocks of a service station that regularly had hydrogen tankers parked while unloading. Or to be sharing bridges, tunnels, and crowded freeways with them either.
A hydrogen tanker near you is a WMD."
Hydrogen is something less than twice as explosive as gasoline. Gasoline is VERY explosive--that's why its such an efficient fuel source. Its an important issue, but the doomsday aspects of hydrogen storage has been overblown. I might be more worried about the wet streets from water emissions or overhumidification of local area climates though.
Posted by: Steve Mudge | Jul 20, 2005 10:05:16 PM
I might be more worried about the wet streets from water emissions or overhumidification of local area climates though.
I can see it now...pea-soup fogs of early industrial London come to 21st century Los Angeles!
On the 'fuel cell' subject, I read an interesting argument some years ago for Boron fuel cells instead of Hydrogen...lots of good points re: safety, storage, distribution, availability, etc. I think the biggest con is that internal combustion engine technology could not be adapted, and a new engine type would be required.
For now, I second the vote for promoting motorcycle usage. I paid $4200 for mine, get 42 MPG, get to use the HOV lane alone, get to go between the cars when they stop, actually enjoy my commute, and can almost certainly kick your car's ass no matter what you drive.
Happy Ride to Work Day!
Posted by: Aron | Jul 21, 2005 1:55:56 AM
Most motorcycles get good fuel economy, but have pretty bad emissions of NOx and other smog forming elements (at least here in Canada - but regulations are changing soon). If that was addressed, they could help.
Posted by: MGR | Jul 21, 2005 2:00:35 AM
I might be more worried about the wet streets from water emissions or overhumidification of local area climates though.
Are you worried about wet streets now? Burning hydrocarbons (such as petrol or diesel) produces water as well as carbon dioxide. A kilo of hydrogen gives the same energy yield as 2.8kg of gasoline (about 3.5 litres, or roughly three-quarters of a gallon), and produces... err... nine kilos of water as exhaust; 2.8kg of gasoline yields about 4.2 kg of water as exhaust if completely combusted (otherwise some of the hydrogen ends up as polycyclics, etc, but never mind that). Compare that with every square mile of San Francisco receiving about three and a half thousand tons of water (as rain) every day.
Really, this is not a serious issue.
Posted by: ajay | Jul 21, 2005 5:14:54 AM
See, if this were a Yahoo message board, I'd hit the recommend button for you, Ez.
I tend to view energy consumption in terms of gallons of gas used divided into miles covered. I bicycle to and from my office (N NJ to NYC, 25 mi round trip, on average 4 days a week; I take a bus on other days). I use a small-displacement motorscooter that gets approx 90 mpg for local errands, like take-away food, trips to the farmers market, liquor store, etc). I use my car for other purposes (long-distance travel, cargo errands, etc).
Taking into account all the miles I travel, dividing that number by the number of gallons of fuel I personally use, I come up with a relative fuel economy number of somewhere in the range of 38 mpg for my primary (in terms of miles covered) vehicle, a 4-cylinder Subaru wagon. Now, granted, I'd like my car to get more than a net of 25 mpg (as measured with the above formula), and my next car will be much more fuel efficient. But It'd be interesting to have Americans calculate their total personal transportation energy usage, and then index the numbers to determine how much more fuel efficient Americans need to ease our burden on imported oil.
People get home energy use audits. Why not personal transportation energy use audits?
Posted by: jim | Jul 21, 2005 10:16:50 AM
Interesting info ajay--thanks for the enlightenment.
Posted by: Steve Mudge | Jul 21, 2005 10:42:58 AM
For a while there was a proposal in the Mass. legislature to have a sliding scale sales tax on new cars, so that the most fuel efficient paid a low sales tax and the gas guzzlers paid a heavier tax (as I recall, it was meant to be revenue-neutral overall and there would have to be a big sticker on the car telling people what the sales tax would be). I can't remember if the efficiency determination was made within classes of cars (such as economy, full size, etc.) or overall.
Posted by: Doh | Jul 21, 2005 4:34:49 PM
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Posted by: peter.w | Sep 17, 2007 2:47:16 AM
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