Someone’s been letting the teenagers suggest policy again.
Motorists who buy environmentally unfriendly "gas guzzling" cars would
be hit by a new batch of green "supertaxes" that would add thousands of
pounds to the final bill under plans to be announced by David Cameron’s
advisers.
What is it that we’re actually worried about here? Emissions, isn’t it? Great. So, we should be taxing emissions. No, not the potential to emit…we’re entirely indifferent to a gas guzzler doing 5 k miles a year as against a petrol sipper with a tenth of the emissions per mile doing 50 k miles per year. Taxing the actual emissions is really very tough indeed but we’ve got a good proxy: petrol. More petrol used, more emissions, less petrol used, fewer.
Good, so we should be taxing petrol, not cars.
We can go further and ask what that level of taxation should be. As the Stern Review tells us, $85 per tonne CO2. That’s around 10 pence per litre of petrol. Current fuel duty is of the order of 50 pence per litre.
My, my. Looks as if we shouldn’t be taxing petrol any more than we already do. Perhaps, to get to the socially optimal outcome, less than we do already.
So, when do the adults get to start making policy suggestions?
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