It’s axiomatic that if you really want to keep people from buying something you just tax the shit out of it. Cigarettes would be one example where an acutely dangerous product underlying an vast public health emergency was progressively made expensive enough to make its consumption financially painful if not prohibitive.
Climate change is an emergency, too, albeit one that’s felt rather more collectively. It’s often remarked that the only way we’re really going to get control over it is through taxation, essentially. Carbon taxes. Make climate change personally expensive.
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One example of this is directly taxing gasoline, something that’s common across much of the Western world, including the United States. In many nations, gas taxes have been rising, but, according to a paper published today in Nature Energy, many other governments subsidize gasoline consumption instead. In fact, the gas tax global mean fell 13.3 percent between 2003 and 2015 as gas consumption has shifted toward countries that maintain gasoline subsidies or that have very low taxes.
The current paper, which comes courtesy of political scientist Michael Ross and colleagues at the University of California Los Angeles, is concerned with a fundamental problem that extends beyond gas taxes themselves. This is the inherent murkiness of assessing and verifying energy taxes, generally.
“Self-reporting by governments is often incomplete and unreliable,” Ross writes. “Many taxes and subsidies are indirect, or hidden in the budgets of state-owned enterprises; moreover, the real value of taxes and subsidies changes over time due to inflation and currency fluctuations. Some countries announce reforms but either fail to enact them or nullify their impact with countervailing policies, as in the case of Brazil. Others try to remove gasoline subsidies quietly to avoid dissent.”
So, Ross and colleagues took a simplified approach to quantifying energy taxes and subsidies by looking at gas-pump prices in different countries—a highly accessible metric—and comparing those to a global benchmark price. The result is a picture of implicit gas taxes/subsidies. “The price gap method allows us to measure what the IMF calls ‘pre-tax subsidies’, which represent the difference between the retail price and the international supply cost,” Ross and co. explain.
The results can be seen below, where the red line represents the global benchmark price for gasoline. Lines above indicate taxation, those below indicate subsidization.
Image: Ross et al
The highest gas taxes are mostly found in Europe and North America, while the highest subsidies are found in oil-rich countries located in the Middle East and northern Africa. Countries with subsidies are most often those that depend economically on oil exports. Redistribution of state wealth, essentially
The current paper covers only pre-tax subsidies, which is a limitation of looking only at gas pump prices. Post-tax subsidies, which account for the high costs of environmental harm absorbed by a nation on behalf of the fossil fuel industry (undercharging for global warming, that is), are another matter. A paper published recently in the journal World Development came up with global post-tax subsidy total in 2015 of over $5 trillion, or nearly 6.5 percent of global GDP.
So, what now? Taxation is a powerful and cost-effective tool for limiting greenhouse gases, but it only works if half the world isn’t actively working against it. Politics circa 2017 aren’t exactly primed for boosting gas taxes anywhere, but we at least have a metric now to prevent nations from subsidizing gasoline consumption in secret.
