Gas Pump Carbon Tax

The University of Michigan just published a recent study regarding consumers’ ability to withstand a carbon tax on gasoline.

If you are an avid environmentalist, you may already know which policy tools are available to help mitigate greenhouse gas emissions. One beloved by economists worldwide is the carbon tax. This tool increases the purchase price at the consumer level for all carbon-emitting fuel sources. A carbon tax is just like any other flat tax (think cigarettes). Essentially, a certain dollar amount is tacked onto the cost of gasoline at the pump, causing the overall price of gas to rise for consumers. The notion is that, with rising prices, individuals will be inclined to adjust their driving habits and/or look for alternate mode of transportation. As a result, greenhouse gas emissions should fall.

The study showed that consumers identified a threshold of five dollars per gallon. Any tax which would increase gas prices above this number is considered unaffordable and would necessitate drastic lifestyle changes.

The suggested carbon tax, according to this study, is forty dollars per ton of carbon emissions. This translates to roughly a thirty-six cent increase in the price of gasoline per gallon. According to the research, a tax of this magnitude would cause gasoline to become unaffordable for 10% of the population while 90% of the population would remain relatively unaffected.

Assistance and relief programs have been batted around as ways to address the tax burden on that 10% of the population. Overall, it seems that extra governmental spending to bolster the transportation budgets of some low-income families is a small price to pay for abating greenhouse gas emissions.

Anna Graff


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