Matt Zeitlin

Jim Manzi argues that an increase in gas taxes and/or a carbon tax won’t necessarily spur innovation in the energy sector. After all, Europe has had high gas taxes relative to the U.S. for a long time and so we would think that any gamechanging innovations would have already happened because of the huge European market:

Consider as an important example that most major Western European countries have had very high gas taxes – typically several dollars per gallon – for decades. But despite the efforts of lots of very smart engineers, the automobile has been a pretty stable technology for these same decades. Raising the price of gas does reduce consumption, and will of course induce some incremental innovation. But Western Europe seems to me to a big enough market so that if a low-carbon technology could be developed globally that was competitive with internal combustion in the face of a ~$5 per gallon gas tax, we already have a big enough end-use market to induce it. Why would increasing prices in America work when it hasn’t for Europe? There might be some carbon price that would radically accelerate innovation across the array of uses of fossil fuels (the limit case is simply outlawing coal and petroleum), but it has never, to my knowledge, been imposed anywhere at scale, presumably because it would impoverish any country that tried.

Ryan Avent speaks for everyone who has been to Europe — or has familiarity with their carbon usage and transportation policy — and points out that Europe’s transportation sector is hugely different from ours:

Clearly that’s not the case. In general, Europeans do drive different automobiles, which tend to be smaller and more efficient. Some of these have been innovative enough in their design to generate raised eyebrows from American tourists (see: the Smart car). In Europe, the scooter is far more popular and differentiated (the scooter with roof is a common sight). Bicycles are also more common and differentiated, and the institutional supports for cyclists are more highly developed (cycle superhighways are old news in Europe).

And then there’s public transport. From buses to trams to trains to high-speed rail, Europe is well ahead of America. When American transit systems go shopping for vehicles, they generally look to European manufacturers. When the District sought a technology that would allow the city to run streetcars without using overhead wires, it looked to France’s Alstom and Canada’s Bombardier (Canadian gas tax rates are considerably higher than those in America). And transit innovation goes beyond vehicle technologies. It includes fare-gathering methods, scheduling, system design and maintenance, and so on.

And this isn’t just a qualitative difference. Not only is it vastly easier to get around using public transportation in Amsterdam than it is in downtown Los Angeles or Houston, but Europeans simply use much less carbon in their transportation sector than we do. And here’s a nice handy chart, using data from the International Energy Agency. This is the per capita carbon emissions in the transportation sector in 2007 of the U.S. and an assortment of wealthy European countries.

Obviously, there’s a huge difference: the U.S.’s per capita transportation emissions are roughly three times greater than the OECD-Europe average. And it’s a disparity that can be greatly explained by the array of policies and the infrastructure that Avent describes. More generally, I think Manzi’s focus on “innovation” — some totally new or vastly more efficient method of energy production — is misplaced. Although it would hardly solve our climate change problems, if we could get the emissions in the transportation sector down to European levels, that would be a huge improvement. More generally, according to McKinsey, there are huge potential gains in energy efficiency that would surely be more easily realized if the cost of energy, and especially carbon, were higher.