Higher Gas Tax, Not Ethanol Subsidy

Jan. 25, 2007: Marketplace—Forget Ethanol, Raise the Gas Tax

Summary: "SCOTT JAGOW: In the State of the Union, President Bush said he wanted to mandate the use of certain gasoline alternatives like ethanol and force higher fuel economy standards for cars. I called up our economics correspondent Chris Farrell to get his thoughts on the Bush energy plan. In a nutshell, good intentions but the wrong approach.

CHRIS FARRELL: Do you really think that the government is in the best position to determine that ethanol is the right alternative fuel? What I would much rather see, what I would have really liked to have seen, now it would have been a moment, but if the President had said, ‘you know what, I’m going to join the Pigou Club. . .’ "

Pigouvians urge a much higher gas tax to allow market forces and inventors to solve the problem of excessive petroleum consumption. Think about how smoking rates tend to decrease as cigarette taxes rise, and you’ve got a good argument for raising gas taxes as well.

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  • Don Lewis

    Ethanol is the way to go and the Government is on the right track. Big Oil would have you believe otherwise. All the energy balance stuff is selfserving BS.

  • CDurnell

    You may believe the ‘energy balance stuff’ is BS, but you can’t escape the fact that there are 115,000 Btu/US gallon of gasoline while there are only 84,000 Btu/US gallon of ethanol. You may not have to take the pessimistic 0.78:1 oil-to-ethanol ratio of David Pimentel; but even if you use the 1.31:1 figure from the Argonne National Lab study, you’re at BEST going to see a 4% reduction in the amount of petroleum energy used if current engine displacement trends are maintained. Just switching your Flex-Fuel Tahoe from gasoline to E85 ain’t gonna save us much in petroleum usage. You could argue that we could use domestic fossil-fuel reserves like coal or natural gas, but all you’re really doing there is replacing peak oil by mid-century with peak coal by mid-century.

    The key to biofuel (specifically ethanol) usage is to improve engine efficiency. E85 has an octane rating of 110, so it can make use of a smaller displacement/high compression engine design which could serve to bring E85 combustion efficiency to parity with 85-octane gasoline without performance loss. See the Saab 9-5 Aero BioPower concept or the work of Cohn and Heywood at MIT (http://web.mit.edu/newsoffice/2006/engine.html).

  • Jerry

    Raising taxes will help people conserve more. I feel whether it’s bio, gas or ethanol, by simply using less we are all better off.

  • Richard

    Raising taxes is the pipe dream of the green dreamer with zero percent chance of happening.
    The right is with oil and the left is supposedly with the little guy who’s already grossly overtaxed.

  • Bill

    LOL, Talk about a dumb idea, tax em even more, LOL, yeah lets just tax the hell out of fuel so that the people who truck your food and other items to stores have to raise the cost of transporting it all and the stores all have to raise prices, lets make the tax so high that a box of capt. Crunch costs 15 dollars and a weeks worth of food costs a family 300 dollars.

    Democrats, can someone tell just what good they are?

  • Nathan Campbell

    The oil companies REALLY don’t want you to know how ready your current car is for E85. Cars have been designed to be ethanol resistant since the early 90s. The cars that are currently on the road are suited for running E50 (50% gas, 50% ethanol) with NO modifications. I have been running ethanol in my 95 Toyota Celica GT for over 5000 miles. I have seen no problems and think that more people should be more aware of the benifits to using ethanol. E85 is simply a superior fuel to standard gasoline. It truly is 110 octane and SIGNIFICANTLY increases horsepower. I have also only seen a very slight decrease in average MPG which leads me to the conclusion that the combustion of ethanol is actually more efficient then the simple BTU comparison. Higher octane leads to much faster acceleration, which causes the car to reach cruising speed quicker. This means that the engine is able to idle sooner than it does running pure gasoline and idling uses less fuel. For cars with a manual transmission, like my car, drivers are able to take this a step further by shifting into neutral. I find myself coasting in neutral a lot. Also, ethanol performs better at highway speeds (80MPH+) and no reduction in fuel economy is noticeable. Ethanol is a reasonable option for the present, and any talk of flex fuel vehicles is just Detroit trying to get you to buy a new car that you don’t need.

  • Justin

    I agree with Nathan, however Flex Fuel vehicles do have a couple of things that your regular vehicle doesn’t have:

    1) Steel fuel lines (complete). Rubber cannot be used with alcohol.

    2) Rubber Seals cannot be used, it has to be a different seal or a synthetic rubber seal.

    3) Flex-Fuel vehicles have different spark tables to take a “little” advantage of the higher octane fwir. Basically they just advance the timing.