I yield to no-one in my enthusiasm for a nice fat carbon charge (with a tariff), and I am far from a Pigovian tax grinch. But I’m afraid Harold is implicitly too enthusiastic about its climate potential in the vehicle fuel context. Gasoline consumption is quite inelastic to price changes (of course, if it’s revenue you want, go for it). One reason for this is habit, and another is the national identity myth deeply fixed in Americans’ lizard brains: “what makes us who we are, when it comes right down to it, is our God-given right to drive alone anywhere we want, without traffic lights, and park free when we get there.”
Equally important is the robust fact that in order to drive less but still get anywhere, you need another way to do it. Almost all of these ways are public goods of one kind or another: no matter how motivated I may be to not drive, I cannot buy myself a walking street or a bicycle route that’s pleasant and interesting and safe to use, much less a tram route. I can choose to live in a pedestrian-friendly, dense, neighborhood in some cities. But not in most, and even if that neighborhood has jobs and housing both, it’s a long shot that I will have one of the jobs in it, so the large-scale land use patterns and infrastructure around me, another thing I can’t change by private market behavior, will matter a lot.
Sure, let’s try to push gasoline prices up a couple of bucks, especially because climate is not the only externality they aren’t representing. The car habit is toxic to all kinds of social capital; if you wear a two-ton iron suit whenever you go out, another part of your lizard brain, the one that makes you afraid of anyone not like you, kicks into gear without the constant braking provided by being out and about on your feet among those people. But let’s not oversell it, nor forget the importance of the complements of “driving less” that can only be provided by government.