This article was written in collaboration with the Center for Economic and Policy Research (CEPR).
Algernon Austin is their Director for Race and Economic Justice.
Pandemic-related problems and Russia’s war with Ukraine have led to a steep increase in gasoline prices. These higher gas prices are causing anxiety for many and are eating away at the meager incomes of low- and moderate-income families. Politicians are promoting a number of ideas to provide consumers with some relief. A very popular idea—a gas tax holiday—is a bad idea.
The need to take action against climate change has become increasingly urgent as its effects are already upon us. The hurricanes hitting the US are becoming more intense. We are experiencing more extreme heat, more flooding, and more wildfires. While climate change is harmful to everyone on the planet, in the US, low-income households of all races and households of color will suffer more than average. More generally, the White House Office of Management and Budget estimates that climate change could eventually end up costing the US economy $2 trillion a year. The Intergovernmental Panel on Climate Change’s latest report can be summarized as saying, “Without swift action, we’re headed for trouble.” We aren’t helping if our strategies to reduce gas prices ultimately worsen climate change. We should be looking for strategies that reduce greenhouse gas emissions along with the pain of gas prices.
Here are half a dozen better ideas to address high gas prices that won’t fan the flames of climate change. Any of them could also be complemented with more direct policies to help inflation-strained household budgets by restoring some still-needed pandemic enhancements to the Child Tax Credit, Earned Income Tax Credit, and SNAP benefits.
Make Public Transit Free
Public transit is a more fuel-efficient means of transportation than private gas-powered vehicles. The more people use public transit, the less gasoline they consume. Making it easier and more convenient for people to travel by train and bus helps commuters save money on gasoline and cut their greenhouse gas emissions. The more a region shifts people from driving to public transit, the more they reduce demand for gasoline and put downward pressure on gas prices. Reducing the number of drivers can also reduce traffic congestion, which wastes gasoline.
Not every city has adequate public transit, and the pandemic weakened ridership across the country. Rather than wasting money with gas tax holidays, policy makers should instead invest in strengthening or starting public transit systems and making them free. These systems will be a long-term benefit to their communities and the planet.
Cities and regions can provide immediate relief by eliminating fare collection on public trains, buses, and ferries. Before the recent price spikes for gas, many cities and regions were already embracing fare-free public transit as a popular measure that makes transit travel more convenient and increases ridership, with benefits tending to go most to lower-income households that need it most. Big ridership gains have followed. Imagine if more places made their public transit free and encouraged drivers to save money by switching to public transit. That would directly reduce the cost of commuting for transit riders and simultaneously reduce greenhouse gas emissions.
This is not a radical idea. Connecticut recently made all public transit fare-free. Kansas City (MO), Albuquerque (NM), Chapel Hill (NC), and Worcester and Lawrence (MA) have eliminated fares. Alexandria (VA) and Boston (MA) have made some bus routes free. By increasing ridership, these policies both provide immediate relief to household budgets and bring communities closer to a future with less greenhouse emissions in the long-term.
The federal government can help this trend by providing more support for public transit systems and by making it easier for large transit authorities to use federal funds for operations to backfill foregone fare revenue. Investment in new facilities like train stations and better buses is also important. Federal authorities could fund 80 to 90 percent of transit capital projects just like they do for highways. That would ease costly requirements for matching funds from local authorities.
Tell Drivers They’d Save Money by Driving the Speed Limit
The faster a person drives over 50 miles per hour (MPG), the more gasoline their vehicle burns to cover the same distance. For example, the Department of Energy’s calculator estimates that driving a Ford F150 at 75 mph instead of 65 mph can be equivalent to paying an extra $0.85 per gallon at the pump. For a Toyota RAV4, the same additional speed can add an extra $0.93 per gallon. For a Honda Civic, it can add $1.12 per gallon.
We suspect that much of the general public is not aware that they could save so much per gallon if they slowed down. Policy makers should educate the public about how speeding makes their commute more expensive. Auto companies could be required to inform drivers how much extra gas was consumed for each trip driven at high speed. If people burn less gasoline by slowing down, they will also produce less greenhouse gas emissions (and reduce automotive accidents and fatalities).
Encourage Remote Work
If people are not driving to work, they are not spending money on gasoline to get to work. Eliminating commutes can save on transportation costs and help to put some downward pressure on gasoline prices. Of course, not everyone can do their work remotely. But if those who can work remotely drive to work less often, there will be less demand for gas.
Because of the pandemic, many people are already working remotely. But a number of employers are bringing employees back into the office. Policy makers could encourage employers to hold off on returning to the office, at least until gasoline prices return to more typical levels.
Encourage Shorter Work Weeks
Some workers have to be in the office. But not everyone who has to be in an office needs to be there five days a week. Four slightly longer workdays can be equal to a five-day workweek. Doing this would eliminate one day of driving to work for many workers. They would spend less on commuting and produce fewer emissions.
Encourage Electric Vehicles and Charging
Electric vehicles save gasoline and reduce emissions, especially when electric power grids use renewable power such as wind and solar. There are a lot of important public incentives and infrastructure investments that can encourage electric vehicles, such as the recent funding in the federal bipartisan infrastructure act. Building on these policies can make a big difference in reducing the demand for gasoline in the long term. Policy makers need to make sure that electric vehicles and charging stations are made accessible for low-income communities so the benefits to household budgets extend beyond more affluent families.
Pay People Not to Drive
Another environmentally-friendly way policies can help lower gasoline prices is to pay people not to drive. Dean Baker has proposed that the government pay people to drive less (along with free public transit). Baker wrote:
If someone drove 15,000 miles last year and can reduce their driving to 10,000 miles this year, we would send them a check for $1,000. This is also approximately what they would be saving on gasoline if the price is $4 a gallon and they get 20 MPG in their car. That should be a pretty good incentive to drive less.
This idea still has its rough edges and should be integrated with incentives that make it easier for people also to shift to electric vehicles. But the point is that policy makers should be exploring the best mechanism to provide direct household relief to encourage less driving.
Baker states that there would undoubtedly be cheating in a simple odometer-based program, but notes that there is cheating in lots of programs right now. For example, if we were to fully fund and staff the IRS, we could recover $1 trillion worth of tax cheating each year by the wealthy and large corporations. That would more than cover any cheating from paying people not to drive.
Why Gas Tax Holidays are a Bad Idea
Gas taxes fund transportation infrastructure. The infrastructure in the US is in bad shape and will need more investment to become more resilient in the face of worsening storm surges, heat, and flooding. Low-income people and people of color are most hurt by our failing infrastructure. Meanwhile, gas tax holidays aren’t particularly well targeted: they provide less relief to the urban poor, who tend not to drive as much in the first place. Additionally, gas tax holidays do not reduce greenhouse gas emissions and are likely to encourage people to drive more.
Moreover, it is doubtful that gas tax cuts would be fully passed on to consumers. Big Oil and its distribution networks have a strong financial interest in keeping prices high so they can pocket the windfall from reduced gas taxes. As the Brookings energy expert Samantha Gross states, “Other entities in the value chain, the oil companies, distributors, the gas stations themselves could take some of that [tax reduction] back.”
To sum up, gas tax holidays take money away from badly needed infrastructure investments and largely transfer that money to oil companies, distributors, and the wealthy. Also, they slow down the transition away from gasoline-powered travel, which is necessary to achieve our climate-change goals. The closer you look, the less there is to like.