April 10, 2007

April 10, 2007 | Commentary on

Gasoline at $6 vs. warming?

It's hard to say which is scarier -- apocalyptic global warming scenarios or the economic impact of some of the proposals designed to prevent them.    

A recent European Environment Agency (EEA) study reported greenhouse-gas emissions from motor vehicles continue rising due to increased driving, despite heavy fuel taxes that boost prices there above $6 per gallon. Even with gas prices more than twofold that in the U.S., Europe falls short of its global-warming goals. 

If $6 a gallon gas isn't high enough to discourage European drivers, what would it take to make U.S. drivers cut back? Those who support legislative efforts like increased gas taxes to combat global warming should come clean to the American people about their proposals' likely impacts on Americans' wallets.

The nations comprising the European Union (EU) signed on to the 1997 Kyoto Protocol, the multilateral treaty to combat global warming by reducing carbon-dioxide emissions. Under this agreement, they're required to reduce their emissions 8 percent below 1990 levels by 2008. The United States hasn't ratified the treaty, due to concerns over compliance costs and the exemptions granted to China, India and other developing nations.

Gasoline taxes were higher in Europe than the U.S. even before Kyoto and average nearly $4 per gallon, bringing the pump price well above $6. In comparison, gasoline in the U.S. is subject to federal taxes of 18.4 cents per gallon and varying state and local taxes, for a total of 42 cents per gallon on average -- putting the price for regular gas in the United States around $2.58 per gallon.

The British, Germans, French, Belgians, Dutch and Italians now shell out $6.55, $6.45, $6.21, $6.44, $7.09 and $6.24 per gallon, respectively, for premium gas. Yet they are driving more, not less. According to the EEA, miles driven and driving-related carbon emissions are on the rise.

Why? Joel Schwartz of the American Enterprise Institute believes that "despite the costs of owning and operating an automobile, people choose automobiles the world over because no other form of transportation comes anywhere close to providing comparable speed, flexibility, privacy and convenience." Even at $6 per gallon, many Europeans -- whose per capita incomes are lower than those in the U.S. -- are willing to cut back on other things rather than cut back on driving. Most EU nations aren't on track to meet their Kyoto targets because of increasing CO2 emissions, and "the main reason for increases between 1990 and 2004 was growing road transport demand," notes the EEA. It expects the upward trend in driving to continue.

But sharp declines would be needed for the Europeans to have any chance of complying with Kyoto. In other words, the taxes that have pushed the price up above $6 a gallon are still not nearly enough to meet Europe's global-warming agenda.

Although the U.S. isn't party to the Kyoto Protocol, several bills introduced in Congress seek to replicate Europe's strategy of setting limits on CO2 emissions. Proponents are big on bluster about saving the Earth but are sketchy as to the cost, especially the price per gallon it would take to get vehicle emissions in line with their emissions targets. But to meet their stringent targets, gasoline usage will have to decline substantially, and if $6 per gallon isn't high enough to accomplish that in Europe, what would it take in the United States?

Supporters of congressional efforts to restrict CO2 emissions should come clean with the American public about the price tag. Given the failure of $6 gas to help Europe's global-warming agenda, that price tag is likely to be astronomical.

Ben Lieberman is a senior policy analyst in the Roe Institute for Economic Policy Studies at the Heritage Foundation.

About the Author

Ben Lieberman Senior Policy Analyst, Energy and Environment
Thomas A. Roe Institute for Economic Policy Studies

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