Saving the World

With the COP21 having recently come to an end, and some sort of agreement actually being signed, I believe it is safe to say that there is a growing concern for our world and how we can possibly make it live a bit longer. There are obviously a number of people, organizations and even governments that are thoroughly committed to doing something about it. Some obvious names for each could be Elon Musk, IUCN and Costa Rica. I find it quite amazing that a country today is able to subsist fully on natural energy, and although it is not possible for many, they should look to Costa Rica for inspiration.

The thing that bothers me with these big eco meetings is that you have the two biggest polluters, USA and China, not really doing all that much. To a certain extent I can still forgive China, as their rise to power has been recent and sudden, and they actually seem to be taking it all quite seriously this time. USA on the other hand will always continue to disappoint. They have been the biggest polluter for so long, yet do nothing to change things.

Well, I have found the solution for the USA. The primary source of CO2 pollution is obviously the burning of fossil fuel, and Americans just love their cars. Granted, they do not necessarily have the same public transport system as one might find in Europe or some of the major Asian cities, but why must they continue to drive such huge gas guzzlers? The reason for this is that, well apart from being big (and I suppose the obesity issue could be another nice post), their cars are cheap and fuel is cheaper. As a European it is really frustrating to see the prices charged in the US for cars, motorcycle and fuel.

Let’s start with fuel. Looking at the global prices at the pump early December 2015, we find that in the US a liter costs $ 0.61 on average and in the UK $ 1.62 on average. It is a pretty nice comparison, as you can see that a person in England will be paying a liter of petrol $1 more than their American cousin. That is something like 165% more. This price difference is not the result of it costing the English that much more to extract the oil and refine the oil, no it is purely down to taxes. In fact, if we look at the two prices again, the actual product makes up the same cost, and so that extra dollar they pay in England is simply taxes.

So to start really making an impact on the pollution in the US, they should begin to tax the petrol in the same way as they do in Europe. Sure, it will hurt the consumer in the beginning, and people will have to make some pretty quick adjustments, but the country would also considerably increase their tax income. In 2014 there were 518 billion liters of petrol sold in the US. If a $1 tax was to be added per liter, obviously the consumption would see a rapid decrease, but even at half that amount it would imply an income of $ 250 billion in new tax revenues. That is not an insignificant amount, and it could be used to help out industries that might suffer from this change in consumption. The emissions figures would also drop considerably, which is really what we would like to achieve.

But things don’t have to end with this, even though it would be a huge step in the right direction. As much as there is a huge discrepancy between petrol prices in the US and the rest of the world, there is an equally large one in the vehicle pricing. However here the reason for the difference in pricing is not purely down to taxes as it was for fuel, it is also very much the case that manufacturers set much lower prices in the US to ensure that they sell. The competition has driven prices way down meaning that profit per unit is much lower there than in Europe. It sometimes even goes to the point of selling units at a loss simply to stay in the market, which is then offset by ever rising prices in Europe. It has become very much a case of Europe subsidizing part of the US vehicle market. So not only does Europe pay a much higher price for fuel, but they also then pay to subsidize the US vehicle market.

So what is he actual situation like? Well it is fairly hard to make direct comparisons from one market to another, but since we compared US and UK petrol prices let’s try and compare vehicles between these two markets to at least get an idea. An indicator would be the average new car price for 2014, which was $ 33’560 in the US and $ 43’770 in the UK. That is basically $ 10’000 more per vehicle in the UK! Granted, there will be models with a much smaller difference, but there will also be models with a much bigger difference. In fact, if we also looked at motorcycle prices we would find difference equal in $ terms, but what would equate to 100% higher prices in the UK.

Just like with petrol, imagine then if we priced cars in the US the same as in Europe by simply adding a $10’000 tax to each car sold. Since in 2014 there were 7’935’161 passenger cars sold in the US, that would result in an additional $ 79 billion of additional tax income. Again, as with the petrol consumption, this added cost would no doubt drive down sales, but there should still be something like an added $ 50 billion. Keep in mind also that there would be a sudden interest in getting considerably more economical cars, there might actually be an increase in new car sales.

I know this is all impossible, but taking these two simple actions would actually result in some huge improvements on many levels.

• Instant decrease in pollution
• Accelerated development of electric and other zero emissions vehicles, as well as other fuel economic cars.
• Sudden new market around electric vehicles
• Huge increase of new tax income of some $ 300 billion/year which could be spent on

o    Improve public transport

o    Develop alternative energy sources

o    Provide aid to economies suffering from drop in traditional car sales

Instead of being last in the class, the USA could suddenly become the global leader in the development of alternative energy solutions, and convincingly join in the effort of reducing pollution for the future.

So, sounds like a win-win all around to me!