Strategic View: Should We Wish for High or Low Gas Prices?
While it’s easy to blame paltry U.S. gas taxes on auto executives and the craven politicians who work for them, in fact low gas prices are wildly popular in the United States, particularly among the poorer half of the income distribution. What we environmentalists often have missed in the debate over policy is the pressure felt by struggling U.S. families teetering over a frayed social safety net. Gas taxes are extremely regressive, meaning the poorer you are, the higher the percentage of your income that is affected. Energy costs eat up 15 percent of the poorest households’ income, compared to only 3 percent for average households. So the obvious coalition to lobby against higher fossil fuel taxes is an unholy alliance of big oil, auto companies, and poor people.For environmentalists, it’s obvious: we should wish for very high gas prices. The benefits of higher prices at the pump were also clear to the National Surface Transportation and Revenue Study Commission, whose report to Congress last year called for raising the federal gas tax five to eight cents a year for several years and then indexing it to inflation. The U.S. Transportation Secretary immediately renounced the findings, but that was long ago in pre-Obama 2008.
The European enthusiasm for high gas taxes has led to more efficient cars and greater use of mass transit. Yet US federal gas taxes are stuck at 18.4¢ per gallon. Add that to the weak state excise taxes, averaging 20-30¢ per gallon, and the U.S. has some of the cheapest petrol this side of Venezuela.
Clever greens are figuring out ways to recast the politics of pollution taxes. Green for All and the Apollo Alliance are forming diverse networks that connect improved environmental policy to economic justice and opportunity. Better energy policy may require finding other regressive taxes to cut, offsetting higher taxes on polluting fossil fuels. The most promising choice is the payroll tax funding social security. Unlike income taxes, which poorer people don’t generally pay, the payroll tax is 12.4% (split between employer and worker) starting on the first dollar of wage income – but only for the first $106,800 of earnings. And those rich enough to be living a life of leisure don’t pay a penny of this tax. It’s very regressive.
Exempting the first, say, $10,000 of low-income workers’ wages from social security taxes would be the equivalent of a $620 tax cut. A $1 per gallon federal gas tax (funding social security) would soak up $620 from someone driving 12,400 miles per year at 20 miles per gallon.* With a payroll tax cut and a gas price increase, a low-income worker could simply keep doing what they are doing, having no net impact on their pocketbook or the funding of social security. However, these higher relative prices for gas would immediately create incentives for all drivers to consider more energy-efficient vehicles, and less costly alternatives such as biking, carpooling, trip combining, walking and mass transit.
So yes, higher gas taxes are still a great idea, and they can make life better for struggling working people, not worse.
* Maybe less. If gas prices don’t rise by the full $1, the $620 tax burden is split between the driver and the station owner.
Dominion Resources – Greenhouse Gas Emissions Reduction
WHEREAS
In 2007, the Intergovernmental Panel on Climate Change found that that “warming of the climate system is unequivocal” and that man-made greenhouse gas emissions are now believed to be the cause with greater than 90 percent certainty.
In October 2007, a group representing the world’s 150 scientific and engineering academies, including the U.S. National Academy of Sciences, issued a report urging governments to lower greenhouse gas emissions by establishing a firm and rising price for such emissions and by doubling energy research budgets to accelerate deployment of cleaner and more efficient technologies.
In October 2006, a report authored by former chief economist of the World Bank, Sir Nicolas Stern, estimated that climate change will cost between 5% and 20% of global domestic product if emissions are not reduced, and that greenhouse gases can be reduced at a cost of approximately 1% of global economic growth. The report also warned that “the investment that takes place in the next 10-20 years will have a profound effect on the climate in the second half of this century and in the next.”
U.S. power plants are responsible for nearly 40 percent of U.S. carbon dioxide emissions, and 10 percent of global carbon dioxide emissions.
According to a 2008 benchmarking study by Ceres, Dominion ranked 13th in absolute greenhouse gases emitted in 2006, responsible for about 55 million tons of carbon dioxide equivalent.
Coal is the most carbon-polluting type of power generation. Coal-fired plants accounted for 46% of Dominion’s generating capacity in 2007, and Dominion has planned an additional 585-megawatt coal power station for Wise County, VA. This project, and Dominion’s Salem Harbor Station in Massachusetts, are facing opposition from local and national groups.
A majority of U.S. states are involved in initiatives to reduce greenhouse gas emissions, and at least 11 states in which Dominion operates or is planning to operate have enacted renewable energy or energy efficiency portfolio standards. Likely new Obama Administration regulations may halt construction on potentially half of the nation’s proposed coal plants.
New York Attorney General Cuomo is investigating whether five energy companies, including Dominion, failed to disclosed climate change related financial risks to investors.
In the Carbon Disclosure Project’s most recent annual survey of the S&P 500 (released 2008), 37% of utility respondents disclosed absolute greenhouse gas emission reduction targets, and 52% disclosed intensity reduction targets. Some of Dominion’s peers who have set absolute reduction targets include American Electric Power, Entergy, Duke Energy, Exelon, National Grid and Consolidated Edison. Those with intensity targets include CMS Energy, PSEG, NiSource and Pinnacle West. Xcel Energy and FPL have both.
RESOLVED
Shareholders request that the Board of Directors adopt quantitative goals, based on current technologies, for reducing total greenhouse gas emissions from the Company’s products and operations; and that the Company report to shareholders by September 30, 2009, on its plans to achieve these goals. Such a report will omit proprietary information and be prepared at reasonable cost.
Alliant Energy – Greenhouse Gas Emissions Reduction
WHEREAS
In 2007, the Intergovernmental Panel on Climate Change found that that “warming of the climate system is unequivocal” and that man-made greenhouse gas emissions are now believed, with greater than 90 percent certainty, to be the cause.
In October 2007, a group representing the world’s 150 scientific and engineering academies including the U.S. National Academy of Sciences issued a report urging governments to lower greenhouse gas emissions by establishing a firm and rising price for such emissions and by doubling energy research budgets to accelerate deployment of cleaner and more efficient technologies.
In October 2006, a report authored by former chief economist of The World Bank, Sir Nicolas Stern, estimated that climate change will cost between 5% and 20% of global domestic product if emissions are not reduced, and that greenhouse gases can be reduced at a cost of approximately 1% of global economic growth. The report also warned that “the investment that takes place in the next 10-20 years will have a profound effect on the climate in the second half of this century and in the next.”
U.S. power plants are responsible for nearly 40 percent of the country’s carbon dioxide emissions, and 10 percent of global carbon dioxide emissions.
Seventeen U.S. states have established statewide emissions reduction goals and a majority of U.S. states have entered into regional initiatives to reduce emissions. As of September 2007, the U.S. Senate is considering at least seven proposals calling for a national cap-and-trade system to regulate and reduce greenhouse gas emissions.
In May 2007, Standard and Poors indicated that energy efficiency is likely to emerge as a major part of the solution to climate change and warned that, “utility margins may be affected, if revenues and profits decline along with consumption,” unless policies are changed to provide incentives for utilities to reduce consumption of electricity.
In June 2007, Fitch Ratings stated, “until carbon capture becomes economic, [demand-side-management] may be one of the more effective ways to reduce CO2 emissions, particularly if the utility has decoupling mechanisms in its rate design to make it volume-insensitive.”
In a July 2007 speech to the National Association of Regulatory Utility Commissioners, Department of Energy Secretary stated that, “There is no doubt that new energy sources must be developed. But there is also a clear and growing recognition of the role that prioritizing energy efficiency must play”. He also urged regulators to realign incentives so that utilities are financially rewarded for efforts to reduce electricity consumption.
Alliant Energy is proposing to build a 630 megawatt coal-fired power plant in Marshalltown, Iowa, which will emit several million tons of carbon dioxide per year.
RESOLVED
Shareholders request a report [reviewed by a board committee of independent directors] on actions the company is taking to design new incentives that will provide financial returns for the company to reduce greenhouse gas emissions by improving its customers’ energy efficiency. The report should be provided by September 1, 2008 at a reasonable cost and omit proprietary information.
