Petrol tax

We are told that all this tax has to be levied for a reason: to account for the impact of cars’ greenhouse gas emissions, now and in the future, and to pay for the construction and maintenance of our roads. But the numbers don’t stack up. In 2009-10, we spent £9.9 billion on the road network, and the emissions were deemed to have cost £3.5 billion. In short, more than £18 billion of that £31.5 billion in taxes – the equivalent of £293 per person – is profit for the Treasury.

Well, quite. As I pointed out when the Stern Review came out, the implication of the social cost of emissions is that fuel duty should be cut by 12 p a litre.

Which is one of the nice things about \”green taxation\”. It points us to an optimal level of tax, one that may well be lower than the one we\’re already paying.

7 thoughts on “Petrol tax”

  1. That of course is assuming that so-called greenhouse gas emissions have any sort of measurable negative effect on the Earth’s ecosystems – which is daily becoming a bigger, “if”.

  2. Suggesting that greenhouse gas emissions have no negative effects on ecosystems is like saying that smoking has no impact on cancer rates, or that blogs on climate change have no negative effects on old right-wing curmudgeons.

  3. Oddly from Matthew Elliot (ha) he seems not to understand quite a few things.

    Taxation has other purposes than maintaining the cost of the roads and paying for pollution. An “optimum level” of tax needs to consider
    other taxes that would have to be levied to pay for public services – for example the army or police force.

    On oil there are other direct costs – there are other negative externalities from our reliance on oil, e.g. the cost of wars (recall Paul Wolfowitz’s comment).

  4. And bearing in mind that the Stern Review was a government-financed pile of dingo’s kidneys, fuel duty should probably be cut by about 35p.

    @Chirpy… Indeed true that greenhouse gas emissions may have some negative impacts on ecosystems, but then again they may have some positive effects on other ecosystems – CO2 is plant food after all. At the moment it’s a known fact that plants grow better if CO2 levels are enhanced (commercial growers often use >1000ppmv in greenhouses) whereas the negative effects are still at the speculation and computer-modelling stage.

  5. On oil there are other direct costs – there are other negative externalities from our reliance on oil…

    Aircraft emissions caused by oil workers off on their fifth holiday of the year, for example. 🙂

  6. Pigovian taxes are economically irrational. Three basic reasons-

    a) There is no way to measure externalities such that all reasonable parties will agree. Let alone unreasonable ones.

    b) Even if (a) could be magically circumvented, the level of taxation which will compensate for the externalities is a different to the level at which they will act as a discouragement to a particular externality-generating behaviour.

    c) The recipients of the taxation monies are not the sufferers of the externalities anyway. It would only make sense if a direct compensatory scheme were enacted between perpetrators and victims of externalities, but that wouldn’t be a tax anyway.

    (a) is particularly significant, and, like so many errors of thinking, can be understood in terms of David Hume’s Is/Ought Problem. Whether or not a particular effect can be counted as a negative, or positive, or neutral externality is dependent on the subjective standards of its (potential) victims or beneficiaries; that is, it is an “ought” not an “is”. Since you cannot objectively define “oughts” you cannot objectively define externalities, because they are the same thing. Consider a street carnival. What are its externalities? One resident may be very annoyed by the noise and hullabaloo, streets closed off, can’t use his motor car, can’t sleep etc. Another may be delighted by the rich cultural tapestry, free party, chance for a dance with a scantily clad carnivalette etc etc. The externality is inherently subjective.

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