Why connect a carbon tax to transportation infrastructure maintenance?

First, transportation accounts for about 50% of fossil fuel CO2 in Washington State; so it makes sense to direct 50% of carbon tax revenue to transportation. For a carbon tax of $30 per tonne CO2, that means about $1.15 billion per year, which sounds like a lot but in fact is just about perfect because…

Second, there is a huge unmet need for transportation maintenance in Washington State. The 2012 Connecting Washington report identified almost $800 million a year over the next 10 years in unmet needs just for maintenance of existing highways, roads, and bridges. Restoring transit funding to 2008 levels would bring the total to $1 billion a year over the next 10 years. Additional readings here include:

Finally, it makes political sense to connect carbon taxes and transportation infrastructure. Business, organized labor, and voters across the state place a high priority on maintaining the transportation system; but voters (especially in Western Washington) are concerned about the environmental impact of transportation spending, meaning that this is one of the few areas where environmental groups have political clout. We can leverage that political clout into a win-win outcome.

11 responses to “Why connect a carbon tax to transportation infrastructure maintenance?”

  1. >First, transportation accounts for about 50% of fossil fuel CO2 in Washington State; so it makes sense to direct 50% of carbon tax revenue to transportation.

    EPA says about 0.009 tons of CO2 emitted per gallon of gas, so at $30 per ton CO2 this would be a carbon tax of 27 cents per gallon of gas.

    Washington State already collects about 37.5 cents per gallon of gas in taxes, so, if it weren’t for the other subsidies being provided to the oil industries, users of gas have “already paid their taxes” on the gas they use – IF you assume $30 per ton of CO2 – which I personally think is WAY too low.

    Compare this situation to coal:

    1 ton coal makes about 3 tons CO2 = about $90 CO2 damages per ton of coal (at the low assumption of $30 per ton CO2)

    1 ton PNW coal delivered costs its users (almost exclusively large dirty electrical utilities such as Puget Sound Energy) about $10 per ton.

    IE the economic value to society of coal is about 10X LESS than the economic damages it causes to human society through damages to the environment – note that CO2 costs DO NOT reflect any existence value or social preference values that say “we would like to KEEP our environment thank you very much.” – rather the CO2 costs simply state the *economic* damages caused to human society by increasing CO2 – crop loss damages, forestry damages due to bark beetle, increased need for irrigation, etc.

    Now let’s take this one step further and try to calculate the economic “advantages” of coal ports in Washington State – where we are shipping the economic advantages TO CHINA – or leading military threat in the future – in exchange for a handful of jobs:

    Long-term jobs per coal port is about 20. Let us generously assume that these jobs pay $100,000 a year – not likely! That then represents $2,000,000 per year of economic value to Washington State per coal terminal. Now, how much coal per terminal? One suggested terminal says it is planning to ship 50,000,000 tons of coal per year. That represents an economic CO2 damage of $4,500,000,000 per year – ie over $4,000,000,000 dollars per year per coal terminal of environmental damages for less than $2,000,000 dollars of jobs. Or an economic loss to economic benefits ratio of over 2,000 to 1. The economic destruction caused by a coal terminal is about 2,000X its economic benefits.

    Now let us calculate how many jobs are being shipped to China along with that coal:

    China uses about 3 billion tons of coal per year, and has a population of 1.33 billion, or it uses about 2 tons coal per year per person. We will assume for simplicity that most of this is going to industrial production. IE 2 tons coal per year equals one productive job in China.

    So, One Washington State coal terminal equals 25 MILLION jobs exported to China. (not to imply that all these jobs are being lost in the PNW.)

    What is the economic value to China of these jobs? Well the average GDP per person in China is about $8,000. Take this times 25 million workers. This means China is making $200,000,000,000 in jobs per $2,000,000 in jobs in Washington State. IE Coal ports are 100,000 times a better deal for China than Washington State – in terms of economic value being “created” by shipping the coal [ignoring entirely the environmental economic losses].

    Note that Washington State has about 42 million tons total Transportation CO2 per year. One Coal Terminal equals 150 million tons CO2 per year –

    IE ONE COAL TERMINAL EQUALS ABOUT 4X THE CO2 POLLUTION OF ALL THE VEHICLES IN WASHINGTON STATE!

    In summary:

    1) Even with carbon taxes, it will be hard to get people to change their gas vehicle behavior very much – not that we shouldn’t try – its just that coal is a much larger problem.

    2) Even when we consume coal locally it is an extremely bad deal for society.

    3) When we ship coal to China it is such an extremely extremely bad deal that any politician who is supporting such a deal ought to be labeled the “Benedict Arnold” whom they TRULY are!

    4) Even One Coal Terminal represents HUGE environmental damages compared to all the cars and trucks in Washington State.

    Conclusions:

    If you live in the Puget Sound Energy service area, buy “Green Electricity” to signal your opposition to coal.

    Oppose the use of coal in all places and all forums PARTICULARLY in the Pacific Northwest, and

    DOUBLY-PARTICULARLY *OPPOSE* PNW Coal Terminals!

  2. Since the coal is from outside WA state and being shipped out of WA state a carbon tax can’t effect coal exports much under the interstate commerce clause of the U.S. constitution. We tax the pollution from the trains and port emissions but that is it. We can fight the coal trains in other ways though. A lot of what the coal trains do requires local and state approvals. Also we can take part in the existing scoping hearings which I strongly support doing. Very little of the coal is for WA state use. (We have one coal electricity generator and a few industrial users remaining in WA state.) Of course some of our electricity is generated by burning coal in other states. I’m curious of a state carbon tax can affect that. Each coal terminal will be equal to many times auto use in WA state because it represents exports to multiple nations. Again, I support doing everything possible to stop the coal trains. That includes putting pressure on our politicians and taking part in the hearings, but ultimately will probably require civil disobedience .

    Yoram. If fossil fuel transport is going to be subsidized. why not use funding from one of the most regressive taxes to do it? And if you give transportation this huge new revenue stream, then you can be sure some of the existing revenue streams will continue to be used for this purpose making sure that fossil fuel transport use is subsidized more than it is now. Also I’m not at all sure that a carbon tax which subsidizes fossil fuel transport will get the votes. And I’m damn sure you it won’t get the grassroots activists you need. In other words a carbon tax that fund transport is not going to make it as an initiative cause you are cutting off your grassroots support.

    In terms of constitutionality – you can frame as the a tax rebate, not just for the poor but for everyone. Refundable tax credits are constitutional in WA State. But if you want to spend it in a progressive way, how about using it to improve energy efficiency in existing residences. That is MORE progressive than a cash rebate because you can buy several dollars worth of benefits in the form of energy savings for each dollar spent. And if you spend equally per person, that multiplier makes it super progressive.

    YB: My understanding of the legality of dividends differs from yours, so we’re at a bit of an impasse there, but I agree that it’s an attractive option in many ways. As for transportation infrastructure, (1) Do you really want to see the state’s roads and bridges fall apart? (2) If a carbon tax that funded some transportation infrastructure reduced overall carbon emissions, wouldn’t that be a step in the right direction? After all, the point is to reduce carbon emissions, right? (3) If you dividend the money from a carbon tax, people will use some of that money to buy cars and gasoline and plane tickets, so why are you arguing for a dividend instead of (say) putting all that money into clean energy projects?

  3. As an economist, do you really assert that the contribution of a tiny increase in personal income to fossil fuel consumption is equivalent to a subsidy to fossil fuel consumption infrastructure? As someone who pays attention to practical politics do you really not see that adding an entire new revenue stream to fund such infrastructure will make sure there is more of it than continuing to use the gas tax for that purpose? As you have said, the bare necessities of transport infrastructure will get funded somehow. Why make that huge fossil fuel subsidy larger than is avoidable? And you still have not addressed the problem of adding a new regressive tax to what is already the most regressive tax structure of any U.S. state and making it worse.

    If not form of cap-and-dividend is constitutional, then I made a proposal. Spend it on improving residential efficiency and to a lesser extent funding residential renewables. That will lower utility bills for Washington State residents by more than the carbon tax increases auto fuel and utility prices. The problem with your “working families tax credit” is that it only helps the poor. The regressivity of a carbon tax hits more than the poor, so the compensation should not be exclusively for the poor.

    A carbon tax with the revenue diverted to help lower utility bills by funding residential efficiency would be very popular. You could use 25% of it to fund residential scale renewable energy as well – solar PV and Solar hot water. But no more than 25% because in terms of financial payback, payback time is longer than for efficiency, and in many cases non-existent. (Yes I know: residential PV and residential solar hot water can more than pay for itself in some cases. But in many it can’t and the payback time is always longer than for efficient. 3 to 1 is about the right ratio of efficiency investment to renewable investment in a case where we are trying to compensate for a regressive funding source.)

    YB: Our proposal has other tax rebates (e.g., a property tax rebate) that will provide benefits beyond the Working Families Rebate. But if you want provide some details about energy efficiency programs that could be funded that would be great, especially if there’s strong evidence that they work well. In all of this, keep in mind that we’re trying to appeal to folks beyond the environmental community; some of them will be skeptical of new government programs, and many of them will be keen on funding transportation infrastructure maintenance.

  4. If you decide to throw the environmental community under the bus by using a carbon tax to massively subsidize fossil fuels, I’ll bet you won’t get a lot of grass roots people circulating your petitions. Think the people who hate government will pick up that slack?

    YB: If a carbon tax reduced fossil fuel use, that’s not “throw[ing] the environmental community under the bus”. In my book it isn’t a subsidy either. Anyway, I’m going to end this conversation so that others can chime in.

  5. A carbon tax already has a problem with less than 100% elasticity. If most of the carbon tax subsidizes fossil fuel infrastructure you end up with a really tiny reduction in emissions. If it turns out that a dollar in fossil fuel infrastructure subsidies increase consumption by more than a dollar in operating costs reduces fossil reduces consumption than you may end up with zero reduction in fossil fuel consumption. Again you are increasing operating costs, day to day costs of pollution. But you are subsidizing pollution infrastructure. That is a really awful tradeoff.

  6. Though McKibben is still having trouble getting the public to DO THE MATH, to most who have studied these economic arguments before, more discussion of carbon “enviro-economics” is blasé and realize that economically and environmentally, pricing carbon has been critically needed for over 30 years.

    But since we also know that we US citizens have little patience for calculating benefits that do not fit our “modern” immediate gratification instincts (and has been so over-conditioned by the media to discount future environmental costs), perhaps CarbonWA should start turning towards co-opting labor and construction associations to show that for ONLY 37 cents per gallon and 1c per KWh, Washington voters could “pave the way” (by working on roads and grid improvements) to Washington’s (all electric) transportation energy future and like the Seven Dwarfs… “even whistle a little while we work!”

    Could it be mathematically proven that Washington’s solar capacity, which fundamentally must include wind, hydro-power, PV, CSP and biomass, could technically be expanded enough to drive our entire future transportation system?… or nearly so? In 1980, many solar advocates and industry leaders believed the US would use its 10-year solar technology lead to by now be exporting trains of solar panels to Germany, Japan and the rest of the world… not coal! If 4000 or so jobs at the GP(c)T in Birch Bay are the issue, perhaps CarbonWA should inform the mayors of Bellingham, Lynden and Ferndale that recent Chinese labor statistics (though possibly exaggerated) claim that 3 million people in China work in clean energy jobs (solar mfg, wind turbine mfg, smart grid reconstruction etc.) and they have a goal to build their renewable energy labor force to 8 million by 2020…. all this mostly with technology US industry (with the help of government grants) had kick-started over 30 years go.

    Certainly our only remaining option is not to trade US carbon for global environmental (climate) chaos! The recent mass public turnout at the Great Pacific (coal) Terminal (GPcT) EIS scope hearing might be an encouraging indicator that “the times, they are a chaingin’ and what CarbonWa needs to do is sell the public something they may be wanting to (or at least now be willing to) hear anyway.

    Even if the carbon tax does not prove to be capable of decarbonizing Washington’s transportation future 100%, at least the public might count fewer bridge creaks, road quality accidents and flats caused by rut bruised tires as immediate benefits. Certainly the State could generate at least 4000 job doing this instead of exporting 4X–10X its annual emissions count to China.

Join My Email List