On the Issues: Gas Tax Revenues, Emissions and International Trade, and More

Twice a month, we’re compiling the most relevant news stories from diverse sources online, connecting the latest environmental and energy economics research to global current events, real-time public discourse, and policy decisions. Keep reading, and feel free to send us your feedback. Here are some questions we’re asking and addressing with our research chops this week:

As coal, oil, and natural gas prices surge, can policymakers find ways to take advantage of the high energy prices?

Recently, the average price of gas in the United States rose above $5—a record high in nominal terms. (In real terms, prices were higher in 2008 and the early 2010s.) In response, policymakers in New York and elsewhere are enacting a gas tax holiday, and the Biden administration is reportedly considering suspending the federal gas tax. But in energy-producing states, high prices offer an opportunity to invest in an equitable energy transition to a net-zero future. A new blog post from RFF Fellow Daniel Raimi suggests that states can invest “their oil and gas revenues into long-term savings funds, allowing state governments to fund services with a permanent and predictable stream of investment returns.” Such investments are especially prudent in the face of climate change. “There’s no better time than right now,” Raimi argues, “to update fiscal policy and provide a firmer foundation for future generations.”

How can tough-to-decarbonize sectors be encouraged to reduce their emissions while remaining competitive in international markets?

On both sides of the Atlantic, policymakers are debating legislation that aims to encourage ambitious climate goals while maintaining a level playing field for international trade. Last week, eleventh-hour concerns unexpectedly led the EU Parliament to reject a change to its carbon market that would have set up a vote on an EU-wide carbon border adjustment mechanism (CBAM). Lawmakers have scheduled a second vote later in the month. In the United States, Senator Sheldon Whitehouse (D-RI) and three other senators introduced the Clean Competition Act, which includes a carbon tariff on selected imports. Both the US and EU CBAM proposals aim to not only foster international cooperation on emissions reductions, but also protect domestic firms from unfair competition with firms in countries that have lower carbon taxes. At an RFF Live event last week, Whitehouse spoke with RFF President and CEO Richard G. Newell about the Clean Competition Act. “We have the opportunity to both lower carbon emissions and create a structure to lower emissions,” said Whitehouse, “while at the same time stepping into a field of contest that we are very much sure to prevail in.”

What policies and regulations can help make transportation services more equitable?

The Biden administration has proposed a set of guidelines for the construction of electric vehicle charging stations using funding from last year’s Bipartisan Infrastructure Law. Experts believe that the guidelines will improve the accessibility and reliability of charging networks by creating a national standard for the stations. Pushes for improvements in accessibility and reliability of public transportation also have gained momentum: in response to inflation, and to boost low-emissions modes of transport, Germany is offering a €9-per-month travel pass on their public transport network. Mayor Michelle Wu of Boston used her first 24 hours in office to push for free transit, while other US mayors have been pursuing plans to eliminate or reduce fares. In a recent episode of the Resources Radio podcast, UCLA Assistant Professor Regan Patterson discusses how policymakers could use regulations to address issues of environmental justice and equity in mobility services and the US transportation system. “Transit is essential for those who keep our cities running,” says Patterson. “Can we treat public transit as a public good, and therefore have it free for everyone?”

Expert Perspectives

Relaxing Visa Restrictions on Foreign Workers Could Help with Reforestation and Climate Change Mitigation Efforts

Managed forests can help mitigate climate change by pulling carbon dioxide from the atmosphere and sequestering it in forest biomass and long-lasting wood products. Massive reforestation will help these efforts along—and that involves planting many millions of trees. However, a shortage of temporary foreign workers presents a major challenge to reforestation goals.

“Tree planting may already be constrained by tight labor markets,” says RFF Nonresident Fellow David Wear in an issue brief. “Most tree planting in the United States is done by guest workers under H-2B visas, which have long been constrained by annual caps. Especially in a full-employment economy, substantially increasing tree planting and other forest management activities may require addressing these labor supply issues, such as by relaxing visa caps.”

Comment Period Closes for New Climate Disclosure Rule from the US Securities and Exchange Commission

In March, the US Securities and Exchange Commission (SEC) released a proposal that would require publicly traded companies to make various climate-related disclosures, including their greenhouse gas emissions, emissions-reduction plans, and certain risks that climate change poses to their business. The window for submitting comments on the SEC proposal closed today. Over the past several weeks, scholars at RFF have examined the disclosure rule and its implications in a special series on the Common Resources blog.

Upcoming Event–the Energy Transition

On June 27, RFF and the RFF-CMCC European Institute on Economics and the Environment (EIEE) will host an event in tandem with the annual summer conference of the European Association of Environmental and Resource Economists. Register for the June 27 event, a workshop about the energy transition and how to approach related policies in a way that helps correct existing and transition-induced inequalities, featuring EIEE’s Massimo Tavoni and Elena Verdolini.

Nudging Behavior Toward Climate Solutions

In a new episode of Resources Radio, Princeton University Professor Elke Weber discusses how people’s choices matter for climate change and how those decisions get incorporated into policy analysis. “It’s so important that we understand how we deal with all of these obstacles to making wise decisions,” says Weber, “because the existence of our species on this planet depends on it.”

Climate Philanthropy and Transformational Change

On Wednesday this week, Resources for the Future (RFF) hosted a Policy Leadership Series event with Andrew Steer, the president and CEO of the Bezos Earth Fund. Born out of a $10-billion commitment from Amazon founder Jeff Bezos, the Earth Fund is a philanthropic organization that funds efforts to address climate change and protect nature. In conversation with RFF President and CEO Richard G. Newell, Steer summed up the state of the energy transition: “The question is, is it going in the right direction? Yes. Is it going fast enough? No.”

#ChartOfTheWeek

Data sources: Texas Comptroller of Public Accounts for revenue. Federal Reserve Bank of St. Louis for inflation adjustments. Accessed June 2, 2022.

Surging gas prices have led to higher gas tax revenues for state governments. This Chart of the Week shows revenues for Texas. What’s crucial to note in the chart is the volatility of the revenues. “Researchers have argued extensively that prudent policymakers ought not to rely too heavily on oil and gas revenues to fund general expenditures, as annual funding for schools, roads, or other basic services shouldn’t be subject to such extreme whipsaws,” says RFF Fellow Daniel Raimi.

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