Tuesday, May 16, 2006

Bold Idea #3: Gas Tax + Grand Challenges in Renewable Energy

My third bold idea to change America is: Gas Tax + Grand Challenges in Renewable Energy.

I think we should have a $2 gasoline tax. This would accomplish two things: reduce demand for gasoline and fund research to move beyond it. Why don't we want to use oil? Three main reasons: it restricts human rights in the oil producing countries, it has negative environmental impacts and leads to global warming and it is a finite quantity that is going to run out at some point.

Tom Friedman wrote recently about the negative impact on human rights in his First Law of Petropolitics article. This builds on other research that has shown the negative impact of oil wealth on democracy in developing countries. The fact that this oil wealth does not lead to economic improvement has been called the Paradox of Plenty. Examples abound, but Chad and Iraq show what can happen. And as Tom Friedman likes to say, when we buy oil we are funding both sides of the war on terror.

The second reason to move off of oil is to improve the environment. Each gallon of gasoline gives off 20 lbs of carbon dioxide when burned which is a green house gas that leads to global warming. Burning gasoline also leads to air pollution and smog.

The third reason to move beyond oil, is that it is a finite resource. At some point we are going to need to get off of it, so why not now? The alternatives are going to need some time to be fine tuned and become economically competitive, so why not speed up that process now so we don't have to worry about any precipitous fall offs in the future? This will also create jobs for the future. The world will need a post oil fuel, and the country that develops the scientists to develop it and the entrepreneurs to sell it will create many good jobs for the 21st century.

A gasoline tax is the best way to reduce gasoline usage. Some like CAFE standards to force the automakers to improve fuel efficiency in cars, but as this Congressional Budget Office report shows, a gas tax is even better to reduce gasoline usage. CAFE standards and ideas like tax breaks for hybrids have a tendency to become abused and not lead to the reduction in gasoline that you are looking for.

Some worry that a gasoline tax would unfairly burden the poor. There is some truth to that. But there is also truth that the poor are unfairly burdened by the problems that oil causes. They are the ones fighting in wars to keep access to it, they will be the ones most impacted by global warming, they are most affected by the air pollution it causes. But, part of the gas tax could be redistributed to the poor, either via lower taxes/higher rebate in the income tax, or by funding universal health care or other services that will benefit the poor.

Even with an increase of $2, gasoline would still be cheaper than in many European countries.

Surprisingly, there is even political support for this idea. According to a poll 3 months ago,

55 percent said they would support an increase in the tax, which has been 18.4 cents a gallon since 1993, if it did in fact reduce dependence on foreign oil. Fifty-nine percent were in favor if the result was less gasoline consumption and less global warming.
If the money would be used to reduce foreign dependence and lessen global warming, a majority of Americans would be for it. And that is without any politicians making a pitch for it. Spin it like Tom Friedman does and call it a Patriot Tax, explain the benefits and the numbers will go even higher.

According to the EIA, the US uses 420 million gallons of gasoline a day for motor vehicles. For a year that works out to 420 million gallons * 365 days = 153 bil gallons. If we were to tax it $2 a gallon that would work out to $300 billion a year in revenue.

That $300 billion would be used to fund the second part of this bold idea: the Grand Challenges in Renewable Energy. This would be modeled on the Grand Challenges in Global Health set forth by the Bill & Melinda Gates Foundation.
The initiative takes as its model the grand challenges formulated more than 100 years ago by mathematician David Hilbert, a list of important unsolved problems that has encouraged innovation in mathematics research ever since. Similarly, the Grand Challenges in Global Health initiative aims to engage creative minds from across scientific disciplines - including those who have not traditionally taken part in global health research –- to work on 14 major challenges. The challenges range from creating new vaccines to developing accurate methods for measuring health status. But they share one essential element: Their solutions could lead to breakthrough advances in global health.
Similarly, this one would first identify the major challenges of sustainable energy and then fund individual projects that seek to address those challenges.

Another good example of how it could be setup is DARPA's successful Grand Challenge for autonomous cars. Or the Tour De Soul which featured competitions with entrants for using the best energy-efficiency techniques and less carbon-intensive fuels.

Give the smart scientists some goals to shoot far, some recognition for success, some money to make it happen and be prepared to be awed by what they come up with.

I am not sure exactly what the challenges should be, but here are some ideas:
Generate 2,000 gallons of ethanol from one acre of land.
Create a 4 seater car that can get 100 mpg.
Create a solar panel that can capture 40% of the solar energy that reaches it.
Create a wind mill that can generate electricity for under 5 cents a kWh.
Create a battery with an energy density twice as high as current lithium ion batteries that can recharge in an hour.

To improve the environment, to prepare for a post oil world, and to reduce the power of corrupt oil producing regimes we need to reduce our consumption of oil with a $2 gasoline tax. This will fund the grand challenges in renewable energy to come up with the energy sources of the 21st century and the jobs that go along with it.

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