Transportation watchers were happy to hear the President’s call in last night’s State of the Union Address to “put tens of thousands of Americans to work building a 21st century transportation system.” With promising transportation technology on drawing boards across the country, more federal transportation funding could both immediately create jobs, and produce longer-term economic efficiencies.
But the President’s suggestion for funding that investment attracted less attention—maybe because it was slightly coded. Just before the applause line, the President said he wants to “change the way we manage our oil and coal resources, so that they better reflect the costs they impose on taxpayers, and the earth.” That’s an indirect reference to a carbon tax, or something close.
Fossil fuels are one of many kinds of products that produce so-called “externalities”—costs to society that aren’t reflected in their market price. Cigarettes are another example—secondhand smoke harms the public, and smokers themselves tend to rack up huge health care bills. Governments tax smoking heavily, both to help discourage it and to fund health care and anti-smoking campaigns.
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Likewise, the environmental impacts of greenhouse emissions aren’t, Obama and others believe, reflected in the price of fossil energy. To make oil and coal “better reflect the costs they impose” would mean some form of government-imposed price increase. Economists have long argued this would shift private resources to cleaner applications, and estimates on the revenue from a national carbon tax have ranged from $1.2 to $1.5 trillion.
Directing even a portion of those funds towards transportation investment and technology research would have a huge impact. The entire Department of Transportation budget request for 2015 was $90.9 billion, and across agencies like the Federal Highway Administration and the Federal Transit Administration, the total devoted to research was about $2.3 billion. That money helps develop innovations like vehicle-to-vehicle communication, but the current budget leaves some promising areas, such as maglev trains, underfunded.
WATCH: To hear what Elon Musk thinks of carbon taxes:
All of this probably rated understatement in the State of the Union because Obama has already spent years trying to put a price on carbon, and largely failed. Back in 2010, for instance, the administration failed to pass a cap-and-trade system with similarities to a carbon tax. Instead, the White House has relied on tightening EPA restrictions by executive order—though in an elaborate workaround, last year’s finalized EPA rules did make carbon cap-and trade an option for states to meet greenhouse emissions targets.
That workaround aside, rules don’t generate much revenue to fund innovation. And arguably, by being less flexible than market mechanisms, they encourage the sort of cheating that Volkswagen was recently caught in. But with the President opposed by both House and Senate, it’s unlikely we’ll see a different approach become law any time soon.