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We're already trying 61% fuel tax - why would anyone think 22% could be a "one-page solution to climate change"?

Over at P3, Willard links to an that NPR/planet money article claiming economists can fix climate change with the price system alone. A quote:

"Jacoby's colleague John Reilly told me the price of gasoline might rise by 25 cents a gallon in the first year. Over time, that would increase. By 2050, Reilly figures the carbon tax would add about $1 to the price of every gallon. Across the economy, prices of energy-intensive goods and services would rise. This would encourage people and businesses to be more efficient."

A whole dollar per gallon by 2050! Oh dear. Compare: in the UK, a litre of petrol is £1.30 - that's £4.92 a US gallon. 61% is tax i.e. 79p per litre or £3.00 per gallon. ($5.11 at current rates).

In the US it's something like $3.70 per gallon. So a dollar tax...? It's currently 18.4 cents. A dollar tax would take that up to $4.52 - i.e. the tax would be ~22% of the fuel cost (at current prices, which is what I presume they're comparing to, i.e. it'd be the equivalent of today's dollar in 2050).

Yes, we've seen some efficiency gains, as has the rest of Europe, from having higher fuel duty. But that's from massively higher tax than even the 2050 amount suggested in that article. If we're not seeing the magic of the market produce low carbon outcomes at 61% duty - and haven't done, as fuel taxes have been this high in many countries for a long time - why would anyone think a 22% tax would be so effective?

Without effective infrastructure transition planning - rather than the shambolic approach we're still taking - fuel inelasticity won't change. People need to get to work, organisations need to consume transport - and transport input cost for most business is so low, taxes would have to be raised insanely high to impact on them.

So high fuel taxes have been tried in many countries and most of Europe - much higher than the US appears to deem politically acceptable even by 2050. That clearly won't work alone. Taxes, yes - but if anyone thinks taxes alone can solve this problem, they're dreaming.

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