December 27, 2018
Justin Gillis argued in an NYT column that higher carbon taxes face too much political resistance to be a serious option in the near future. He points to the difficulties faced by politicians who have proposed such taxes, most recently the rise of the Yellow Vest movement in France in opposition to carbon taxes imposed by French President Emanuel Macron. Gillis instead proposes measures, such as increased public transit options, which will give people an incentive to use less energy.
While Gillis is right about the political opposition to carbon taxes, there are policies that can provide equivalent disincentives. (Gillis does understate the incentive effect. People in Europe use much less energy than in the US, presumably in large part because of the higher prices there.) If we convert car insurance from being largely a fixed cost to a per mile charge, it would have provide a substantial disincentive to driving.
An average insurance policy costs roughly $1,000 a year. If average miles driven per car are 10,000 a year, this would come to 10 cents a mile. For a car that gets 20 miles a gallon, paying 10 cents a mile in higher insurance premiums would provide the same disincentive as a $2.00 a gallon gasoline tax. The nice part about this switch is that it does not mean raising people’s insurance premiums on average, it just changes the way they pay.
We obviously have to do much more than switch to pay by the mile auto insurance to stop global warming, but this is a relatively simple and largely painless measure that could have a substantial impact.
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