Of Gas Prices and Carbon Taxes

Iain, I found your post on how higher gas prices have reduced travel very interesting. In the short term, what you present is a good first guess and it tells us what would happen in the first year of a carbon tax. But I think there’s another level worth looking at.

Some percentage of auto travel — commutes to work for example — is difficult to change in the economic short run (the period before changes can be made in land, labor, capital, and entrepreneurial ability/smarts). It seems to me that changing any of these factors (getting to the long run, in other words), will take quite a while when it comes to automobile travel. It takes over 25 years — longer in desert areas — to turn over the nation’s vehicle fleet. It also takes significant time to change land use patterns, create new transit networks, deploy new, more efficient technology, and make telecommuting more common. Thus, it seems possible to me that the relationship between gas prices over a long period and travel may differ significantly from what we’ve observed in to date. This may suggest very different long-run values, in either direction, for the relationship between gas prices and travel/emissions. This, in turn, suggests different values, in either direction, for the size of a carbon tax needed to reduce emissions. Any thoughts?