Blogs, environment, politics, technology and the kitchen link, often all in one post!

Saturday, March 03, 2007

Taxation six plus times more efficient than regulation

Econbrowser on CAFE standards:
Overall, Jacobsen estimates that a one-mile-per-gallon increase in the required average corporate fuel efficiency would increase the average fuel-efficiency of all new cars sold by 2.5%. However, since most of the older cars would still be on the road, Jacobsen estimates that during the first year, total U.S. gasoline consumption would decline by only 0.8%. He estimates the costs of this 1 mpg tightening of CAFE would be $20 billion in the first year, with these first-year costs shared about equally between U.S. consumers and producers. For comparison, Jacobsen claims that a gasoline tax could accomplish the same first-year effect at an efficiency cost of significantly less than $1 billion.

Over time, the fuel savings from tightening CAFE would of course increase, but even after 10 years, Jacobsen concludes that that a gasoline tax could accomplish the same thing at 1/6 the cost.

That's not even including that gas taxes produce revenue which can be used to reduce horribly inefficient taxes on labor and capital.

For the n'th time Kitchen Linker says Pigou means less planning, more growth, a cleaner environment, nor that OPEC pays part of any gas tax.

No comments: