Raising the Floor on Gasoline

It’s time to put a floor under the price of gasoline.


The climate talks going on in Paris this week will determine how many hundreds of millions of people will be displaced by climate change. At stake is whether the planet warms by 4 degrees Celsius, or only about 2 degrees. The effects of a 2-degree rise include about 15-feet of global sea-level rise; a 4-degree increase will lead to about 30 feet of global sea-level rise. This difference represents the displacement of some 700 million people in the 4-degree scenario—about 600 million more people than in the 2-degree scenario.

Boston Under Water
Many US Cities will be partly submerged


Sea-level rise is only one avenue through which global climate change will affect human health. The CDC identifies many others, including increased cardiovascular disease, cholera, mental health effects, and something that should be on all of our minds: increased civil conflict and forced migration. And while some of these effects will take a hundred years or more to develop, there are already, an estimated quarter of a million deaths annually due to increased malnutrition, malaria, and heat stress.


The time to begin transitioning to a post-carbon economy is now, not least because an earlier start is an easier start.


California Governor Jerry Brown is planning to reduce dependence on gasoline by incentivizing people to use electric cars. He is planning to use executive action to get electric utilities to install more electric vehicle charging stations, and the Governor has promised other measures to transition transportation away from gasoline and toward fuel cells and electrics.


But without a significant increase in gas prices, the effects of this effort on greenhouse gas emissions will be blunted. As some drivers move to electric vehicles, the demand for gasoline will decline, and, given a stable—or even increasing—supply, the price will go down. And as the price of gas goes down, other drivers, not interested in electrics, will drive longer in bigger cars.  This problem would be exacerbated if other global forces push down the cost of gasoline. Some predictions now are that gas will become even cheaper than it already is.  Altogether, the gas price could fall far enough to eviscerate the effects of even a large-scale shift to electric cars.


What’s required to prevent this problem is a floor on the price of gasoline—a variable tax that is set so as to bring the average market price up to a level not less than a given threshold, say $2.50 a gallon. If the wholesale price of gas falls, the government will reap a windfall, and if it rises, the consumer will be insulated somewhat by a corresponding decrease in the tax. Even better would be a floor price that rises gradually, say at 3% per year above the rate of inflation, so that in 20 years gas would cost at least $4.50 a gallon. A gradually rising floor price would give consumers the time they need to adjust, add predictability to the market, and would guarantee that the market helps rather than hurts efforts to reduce greenhouse gas emissions.

Graph of gasoline prices over time.
A slowly rising floor price would add stability to gas prices.

Raising the gas tax is controversial, and in particular has been faulted for falling particularly heavily on low-income and rural residents. To mitigate these faults, the revenue from the gasoline floor-price tax could be earmarked for return to all citizens in inverse proportion to their income.  Or it could be used to subsidize the purchase of electric vehicles by low-income residents, or to foster research and development in alternative fuels that would lower their price for everyone.


Climate change is here. It’s time to take seriously the task of reducing carbon use, especially in transportation. A gradually increasing gasoline floor price is like an escalator that will lift us above the coming floods.

Leave a Reply

Your email address will not be published. Required fields are marked *