3 ms·

Changes to fuel costs aren't totally inelastic. The problem for altering consumer behavior is: 1. The decisions that change fuel consumption - what car to buy

Changes to fuel costs aren't totally inelastic. The problem for altering consumer behavior is: 1. The decisions that change fuel consumption - what car to buy and where to live/work - are taken infrequently, and so make feedback slow. 2. People are bad at weighing costs that don't show up in the sticker price. This is addressable and addressed through incentives applied at the time of purchasing a car rather than purchasing fuel. Issue 1 also applies to business users (automotive and industrial alike), and is inherent to any big infrastructure transition - even with a ban, you'd still have this long lead time. Issue 2 is solvable on the consumer side with proper structuring of incentives. Both the American subsidies for electrics and the European punitive taxes on gasoline cars seem effective at changing public behavior, and have made EVs competitive earlier than they otherwise would have been (hence spurring a lot of private R&D money that would not have flowed otherwise).

dalbasal 9y ago
1. (fuel cost) is the purer version of the carbon tax. In theory (the one behind most of these policies that I'm objecting to), this should be sufficient. As you say, it's slow. I'd also say that it's no good (due to inelasticity) even if we were willing to wait. Say you could turn the American consumer into a Belgian one in 10 years by doubling petrol prices. They'd still drive a bit more due to cities' structure and the country's size, but in little euro hatchbacks they'd save 25% of the fuel/carbon. Maybe I'm exaggerating. Maybe we could cut 30% with a 75% price increase. Either way, that's a lot of pain for very moderate long term gain. Most hard hit would be poorer people who can't afford to "upgrade" their car. I agree on the second point. This is a better policy. Unfortunately, the European punitive taxes are mostly not upfront or even new car specific. This puts most of the burden on old car drivers, with most of the "elasticity" going towards EOLing cars younger and upgrading to newer ICE cars tailored to this new tax regime. Its a slow, inefficient and regressive, but still preferable to fuel/carbon taxes. Simpler would be better. €X upfront subsidy or tax on EVs or ICEs. More emphasis on EVs than efficient ICEs as ICE efficiency is not really en route to where we want to go, 0 emissions. Less economic/policy sophistication. Intervene at the time decisions are made (like you say). Build towards a ban.
- azernik 9y ago
  The policies you're advocating for exist already. European and Europeanized-country car taxes I know of (Danish, Israeli) do indeed apply at time of purchase - and are altered based on vehicle type. For example, Israeli car purchase taxes are 83% plus VAT, but only 30% for emissions-free vehicles; Denmark, meanwhile, has car registration taxes set at around 100% for cheap cars and 150% for more expensive cars, and varies the tax wildly to promote environmental efficiency and safety (originally EVs were completely exempt from this tax, although there's been talk about eliminating that exemption for budgetary reasons). This burden is indeed not specific to new cars, but that's necessary to incentivize faster EOL of old equipment (see also the US "cash for clunkers" program, which addressed a similar policy goal); it is, though, completely upfront and extremely transparent to the consumer, and strongly impacts consumer investment decisions.

dalbasal 9y ago

1. (fuel cost) is the purer version of the carbon tax. In theory (the one behind most of these policies that I'm objecting to), this should be sufficient. As you say, it's slow. I'd also say that it's no good (due to inelasticity) even if we were willing to wait. Say you could turn the American consumer into a Belgian one in 10 years by doubling petrol prices. They'd still drive a bit more due to cities' structure and the country's size, but in little euro hatchbacks they'd save 25% of the fuel/carbon. Maybe I'm exaggerating. Maybe we could cut 30% with a 75% price increase. Either way, that's a lot of pain for very moderate long term gain. Most hard hit would be poorer people who can't afford to "upgrade" their car. I agree on the second point. This is a better policy. Unfortunately, the European punitive taxes are mostly not upfront or even new car specific. This puts most of the burden on old car drivers, with most of the "elasticity" going towards EOLing cars younger and upgrading to newer ICE cars tailored to this new tax regime. Its a slow, inefficient and regressive, but still preferable to fuel/carbon taxes. Simpler would be better. €X upfront subsidy or tax on EVs or ICEs. More emphasis on EVs than efficient ICEs as ICE efficiency is not really en route to where we want to go, 0 emissions. Less economic/policy sophistication. Intervene at the time decisions are made (like you say). Build towards a ban.

azernik 9y ago
The policies you're advocating for exist already. European and Europeanized-country car taxes I know of (Danish, Israeli) do indeed apply at time of purchase - and are altered based on vehicle type. For example, Israeli car purchase taxes are 83% plus VAT, but only 30% for emissions-free vehicles; Denmark, meanwhile, has car registration taxes set at around 100% for cheap cars and 150% for more expensive cars, and varies the tax wildly to promote environmental efficiency and safety (originally EVs were completely exempt from this tax, although there's been talk about eliminating that exemption for budgetary reasons). This burden is indeed not specific to new cars, but that's necessary to incentivize faster EOL of old equipment (see also the US "cash for clunkers" program, which addressed a similar policy goal); it is, though, completely upfront and extremely transparent to the consumer, and strongly impacts consumer investment decisions.