We just passed the 100th anniversary of Henry Ford’s first production Model T Ford, widely regarded as the first modern automobile. The day in question, Sept. 27, passed to very little fanfare—our country had a few more pressing economic concerns. Nonetheless, even in our pedestrian bubble, it’s still worth reflecting on where we have gone, and where we have yet to go with Mr. Ford’s transformative invention.
The automobile has come a very long way over the past century—standard horsepower has increased about 10-fold; top speeds of cars in comparable price ranges have more than doubled; we’ve seen the advent of seat belts, A/C, and a variety of modern amenities that compliment Ford’s original creation. But one piece of the puzzle has stagnated among the last century’s innovations—fuel economy. The Model T got between 19 and 25 miles per gallon—the average American vehicle in 2006 got 20.6.
Prices determine demand, and demand drives the innovations that come out of Detroit. There hasn’t been a meaningful catalyst for fuel-efficient vehicles because prices (adjusted for inflation) have been declining from 1918-2005, excepting brief spikes during the Great Depression and the OPEC Crisis. Through this decline, the American appetite for size and power in our vehicles has grown immensely, and small advances in fuel technology have been voided by ever more prevalent six- and eight-cylinder engines. American vehicles have reflected our collective ideals of power and individualism and, until very recently, our economic and military hegemony.
The problems from our consumptive habits are well-known, but they bear repeating—greenhouse gas emissions are causing the planet to warm very rapidly. We have no idea how drastically this will change the face of our world and humanity’s place (or lack thereof) on it. The Intergovernmental Panel on Climate Change asserts that irreversible, catastrophic changes to the earth’s climate will ensue beyond an atmospheric CO2 concentration of 450ppm, and most estimates suggest that we’ll pass this threshold in the next two decades. Furthermore, current patterns of consumption are the cause of the current sixth mass extinction in the earth’s history, in which species of plants and animals are disappearing at about ten thousand times the normal rate of extinction according to some conservationists.
Climate change has been widely accepted for long enough that it’s time to stop talking about it and start acting, and I’m as shocked as anyone to learn that a barrage of moralistic op-eds filling our nation’s college newspapers apparently hasn’t done the trick. Though we’d like be conscientious enough to change our consumptive habits by choice, the numbers paint a very different picture. Climate change is among the most dangerous and most challenging collective action problems humanity has ever faced, and legislation has to induce some of the tough choices that we haven’t been able to make.
So here’s my proposal—a gas tax. Yes, “tax” is a four-letter word in this country and particularly so in the current economic climate. But the reality of the situation is very sobering. Americans didn’t start driving less as anthropogenic climate change gained public acceptance—in fact, we kept buying those 500-horsepower, four-wheel-drive vehicles that only leave the paved road when hopping the curb of a Starbucks parking lot in record numbers. However, we adjusted drastically when crude oil skyrocketed to $147 per barrel in July of this year, and the national average soared above $4 per gallon to the tune of 7 billion fewer miles driven in July 2008 than July 2007. Meanwhile, our demand for big vehicles plummeted, causing Ford and GM to slash production. Fundamentally, money induces changes far more rapidly than any environmental gospel, no matter how compelling.
Recently though, as crude hit a new 13-month low and currently hovers around $70 per barrel, net American miles driven will likely return to pre-spike levels. Similarly, when our tumultuous economy bottoms out, demand for SUVs and large pickups will likely return with its original vigor. A price floor on gas at a national average of $4.15 per gallon would mean that even if equilibrium prices stabilized in the three-dollar range, average Americans would still be paying $4.15 per gallon. Would this be a short-term hurdle to our economy? Of course. But the economic effects of unmitigated climate change in both the short- and long-terms are guaranteed to be far worse. A price floor would be an asset to our economy by lending us the stability that the market has not, and reduce the potential harm of volatile oil prices in the future. Our economy would gradually recalibrate itself to the price change, and in so doing induce Americans to drive less, use public transportation more, and buy smaller vehicles. In addition, this stability would both give Detroit an assurance that demand for smaller, fuel-efficient vehicles is here to stay and help them ramp-up production. Finally, the revenue from this tax could be used to expedite research into renewable energies and carbon sequestration, and a fraction of the money could be put aside to provide working- and middle-class Americans with some amount of income tax relief. This would lighten the burden of the tax floor on those most vulnerable, while creating incentives for everyone to follow more sustainable patterns of consumption.
This price floor isn’t sufficient to mitigate climate change—it’s a first step. Eventually, we’ve got to change fundamentally the language of the climate change dialogue in this country and internationally and recognize that energy-efficient appliances and vehicles don’t save the planet or take emissions out of our atmosphere. They simply hurt it less than their alternatives. But that’s another hurdle for another day—right now, we’ve just got to get the wheels turning.
The author is a Columbia College junior majoring in economics-political science. He is the Co-President of the Roosevelt Institution.
