Citizens Deserve a Serious Energy Policy
Green Taxes Make 'Bad' Goods Better
Here are some sections of a recent article on energy taxes. Why is the United States falling so far behind Europe in fuel efficiency? After the September 11 attacks, shouldn't the US have tried to move away from dependence on foreign oil? Instead, wimpy politicians have failed to work on this subject.
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by Craig MorrisPrices should not be confused with costs. Green taxes exemplify this basic rule of economics well. While energy prices in the United States are lower than in the European Union – gasoline costs around half as much – Americans nonetheless spend just as much on energy as Europeans because they waste so much. The disparity in prices is so great that some – such as the Global Governance Project in its paper "Implementing the Kyoto Protocol Without the United States: The Strategic Role of Energy Tax Adjustments at the Border" from March of 2003 – speak of unfair competition due to U.S. corporate welfare subsidies for large corporations.
with additions by The Progress Report
With prices that low, who is interested in conserving? Indeed, as the Energy Park at the World Fair 2000 in Hannover, Germany stated: "If the current average gas mileage of American cars were increased to the level of German cars, the annual savings would equal the annual total consumption of petroleum in Africa, China, and India together." Note the wording: Americans do not have to drive any less; they can just switch to some of the European cars that get superior miles per gallon.
What will motivate automakers to provide more efficient cars to U.S. purchasers? A higher price for gasoline, achieved by removing some of the artificial price-lowering distortions in the U.S. economy, will help.
The green tax movement in Europe is already strong, but growing even further. Green taxes in the EU range from the tax on tourism in Majorca, where a charge is levied per hotel night based on number of stars the hotel has, to the recent "ecotax" is Germany, which added a few cents to each liter of gas sold and a similar amount to other forms of energy.
The revenue generated from green taxes need not be used exclusively for environmental purposes. In Germany, for instance, the ecotax has mostly been used to offset the tax burden on labor; German employers have to pay half of their employees' health care and pension plan installments, and these non-wage costs have been rising. Raising the price of energy reduces consumption, which is in itself good for the environment.
And indeed, the German "ecotax" has led to lower consumption of gasoline since it was introduced a few years ago: 1.2 percent less in 2002 and 1.8 percent in 2001. Sales of more efficient cars and efficient technology have risen. More people are traveling by train. Prices may have risen, but costs are stable thanks to lower consumption.
I recently spoke with Anselm Görres, Chairman of Green Budget Germany, about the German experience with the 4.6 cents per liter of gas (about 18 cents per gallon) that Germans called the ecotax.
Craig Morris: Mr. Görres, the green tax is not especially popular in Germany. Why?
Anselm Görres: People do not understand that they pay the green tax to themselves. In the final analysis, it doesn't cost a cent. Whatever you pay extra for gas, you get back when health care and pension plan taxes are lowered. And if we didn't have the green tax, we would certainly see other taxes go higher. In the end, the green tax not only does not cost us anything; it even saves us money because we move to more efficient technology and do not have to import as much oil.
You shift the burden within the overall system, without having to raise the tax rates overall. In fact, we can even try to lower the overall tax burden while we shift the taxes.
Morris: And the bad ones are – aside from non-wage labor costs – the sales tax because it does not make a distinction between good and bad behavior?
The sales tax is one of the very bad taxes. In Germany, the high sales tax is one of the reasons why the black market is booming.
Green taxes are the rule in almost all European nations. And on March 21st, a resolution was passed in Brussels to raise the minimum tax rates on energy for all EU countries, including the 10 new eastern European members. With the stroke of a pen, green taxes were adopted in ten eastern European countries. The green tax is a pan-European fact, not a German exception.
Morris: Do you see a connection between the war in Iraq and green taxes?
Yes, in several respects. I am not one of those who believe that the USA only waged this war for oil. It is one important factor among many. But to the extent that it is a reason, it is not a good one. We can't be waging wars so we can waste energy endlessly. The more we industrialized nations wean ourselves from oil, the less we will be tempted to try to dominate oil-exporting nations, who should be taking care of themselves.
Second, environmental protection requires global instruments. The USA has clearly expressed its contempt for the global instruments we spent so much time and effort trying to create in the past few years, be it the Kyoto Protocol or the International Court of Justice or the recent disdain of the UN. We need to have respect for the UN. It's the only global instrument we have. We need to strengthen our international institutions, not only for the sake of the environment, but also for the sake of peace.
Also see Patriotism Means Ending U.S. Dependence on Foreign Oil by Robert Redford
Warren Faulk's essay on energy independence, which originally appeared at The Progress Report over a year before the 9/11 disaster
Is it American, or anti-American, to keep citizens addicted to foreign oil? Tell The Progress Report:
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