Market Stability--The Holy Grail of Green

Many months ago I wrote about the need for a floating gas tax to stabilize fuel prices, allow predictability and incentivize eco-friendly developments.  Now Ford chairman Bill Ford agrees.

Earth2tech reported:

“If prices are gyrating wildly,” he said, it becomes extremely difficult to know whether the company is planning the right vehicle or technology (if you’re operating under the assumption that automakers should supply what the market demands, and that there’s a lot less demand for fuel-sippers when gas is cheap). Ford noted that in the EU, diesel fuel “became an easy decision” for drivers after the government decided to make it much cheaper than gasoline.

When major environmental regulations were passed in the early 1970s, there was a lot of hand-wringing over how it was going to destroy the economy.  Now, with cap-and-trade, similar arguments are being made. Senator James Inhofe said yesterday, about EPA's declaration of greenhouse gases as harmful to human health:

This move by EPA will unleash a torrent of regulations that will destroy jobs, harm consumers, and extend the agency’s reach into every corner of American life.

But it turns out, in capitalism, the rules of the game don't matter, as long as they are predictable. So Obama should implement cap-and-trade, and those companies that can adapt and thrive in the new regulatory environment will survive.  And those that cannot, will not, but others will take their place.  I predict that with the attitude expressed by Bill Ford, Ford will survive...and the others should not.  

Tax Gas Now

To stimulate the green technology, repair infrastructure, fund transit and save the world, tax gas now.  At this moment, the price of gasoline, our carbon based friend, is $46.28.  At this price, green energy technologies like wind and solar are not competitive.  Energy efficiency improvements on houses do not make economic sense because energy is just too darned cheap. Thus continues our dependency on oil which is contributing to global warming and funding our frenemies in the middle east.  What to do? 

Tax gas now.

Here's how to do it:

First, set a price of crude where energy efficiencies will make economic sense.  Then set a floating tax which will tax up to that price point--i.e. up to that price point, the difference between the market price of oil and the set point will be tax revenue,  after that price point, there will be no need for the tax because the market price of oil will be high enough for green to make economic sense, like, say, last summer.  Finally, use the "carbon" tax on crude to fund green initiatives from green jobs to incentives for green builldings. 

But what about the economy? The trillions in stimulus (which are coming) will have to come from somewhere, might as well be a tax on crude which directly links to the problem. 

UPDATE: My friend Chris Hill at Construction Law wrote a very cogent challenge to the economics of the plan.

UPDATE: The Oil Drum had an answer--lower income taxes to compensate for gas tax.