ARCT - Adjustable Rate Carbon Tax?

I have an ARM, adjustable rate mortgage. I decided to invent a new acronym - ARCT - Adjustable rate carbon tax, applied to the consumption of fossil fuels.

Here's how the game works, considering oil specifically.

The U.S. decides to limit oil consumption to current levels for the next say 4 years. That's about 21 million barrels of oil per year. After 4 years the oil will be limited further by a 3% decline per year. I make up the numbers but they can be designed based on our projected need for decline.

All oil consumed in the U.S. will have an "excise tax" applied to oil imports and internal production. This tax is set at a fixed level every quarter year. It is set based on a formula designed to predict the relationship between cost and demand. Each quarter the formula is adjusted based on new information and a new level set.

Say oil now is averaging $50/bbl, and the magic formula says we need $80/bbl oil to keep consumption constant. Then we apply a $30/bbl tax on top of the market price. Poof, we have $80/bbl oil.

Now say perhaps world demand drops, and the market price drops to $35/bbl over the quarter, and consumption starts rising. Then the next quarter might apply a $45/bbl tax.

Perhaps an oil crisis will occur, and market prices rise to $75/bbl, while we have $45/bbl taxes. Under a crisis we might lower our taxes for the rest of the quarter, but if the price+tax is $90/bbl and consumption is not being greatly harmed, then no adjustment will be made until the next quarter.

I think there may be terrible room for market manipulation. For example, oil producers might conspire to get market prices up near $80/bbl near quarter's end, knowing the tax will just be reduced and they can make more money. For now, assume such actions can be minimized.

I don't really know how high prices have to go to start reducing consumption. I've personally talked with people who will keep their SUV, even with $10/gallon gasoline, and do little to reduce their consumption.

The economy has no real "shunning" power to excess consumption. Money is free to buy almost anything short of human slavery. If 10% of the people will not conserve under any prices, then the rest just have to compromise more. That's the reality of market economics. If I'm only willing to pay $100 for World Series Tickets, and scalpers can sell then for $500, then I'm out of the market.

There will be many who WANT to continue consuming, but will be priced out of the gasoline market. Between purchase costs and insurance and maintenance and fuel, I imagine many people are already priced out of driving cars. That is, some people may go years on the edge, taking older cars and using credit cards to fund their maintenance and fuel, slowly falling into a hole they'll never get out from.

Personally I can see much of the costs of owning a car are more "fixed costs", those that don't decrease with more used. There's estimates on cost per mile, and usually around $0.30/mile, but really it should be a function of miles driven/year.
Perhaps: Cost/year = $2000 + $0.15/mile. (Statistical average)
So if I drive 10,000 miles/year, it'll cost $3500 or $0.35/mile
And if I drive 5,000 miles/year, it'll cost $2750 or $0.55/mile
Under such a formula, I'm either encouraged to drive more miles to take advantage of the low per mile costs OR share the car with someone else to share the costs.

Certainly many people are not in an easy position to share a car. My roommates, for example, each have their own cars. They drive their cars to work during the day, and are out in the evening, and so the only time I might be able to borrow them would be at night, when things are closed and I can't do errands anyway.

I've considered offering to share costs equally for small access, at least during winter months, but in order for it to be useful to me they'd have to be able and willing to NOT use their car on days that I need one. That is, they'd need to be able to take a bus or bike to work for example. Now they both might benefit by lowering their car costs. However the inconvenience of all alternatives to cars are so high that they'd most likely discount the possibility.

Certainly there's numerous retired people in my neighborhood, many surely with cars sitting in their garages all day, at least sometimes. They also might benefit by some cost sharing. However they, I imagine, prefer the convenience of the car being available anytime, and dislike the risk of someone else wrecking their car, and generally have car costs well budgeted and don't need any savings.

Overall it seems clear to me that decreasing the number of cars must have an effect of decreasing the number of total miles driven. Under my prescribed carbon tax, the higher prices are supposed to reduce consumption.

I suppose in addition to a oil/gas tax, a vehicle tax itself can also make cars less affordable.

It is elitist of me to have a goal of reducing the number of cars.

AND car sharing can actually INCREASE total miles driven. I think about someone who can't drive. Instead his parants have to drive to his place and drive him around, and drive him back. Extreme case. Say he needs to go to a 3 hour meeting two mile away. His dad lives 10 miles away. So his dad drives 26 miles once to drop him off, and 26 miles again to pick him up. That's 52 miles driven for a 4 mile trip!

Of course any smart person would realize a 4 mile walk can be done in an hour, while his dad is not only wasting gas, he's wasting his time as well! He might not always think that way when he has "time to burn", but when it is repeated over and over, alternatives must be considered.

We live in extravagant times, and nature will teach us otherwise sooner than we think.

Higher prices all around are necesasary. How can we EVER properly price a nonrenewable energy source?

I haven't gotten at all into the possible alternatives. I expect smaller, lower powered cars could be developed for lower fuel costs. Perhaps electrical powered cars could run on city streets without great batteries, and some sort of running connection, like light rail. I expect in time ethanol/hydrogen fuels could be more competitive if they use renewable energy sources like solar/wind/hydro.

Overall, I think given a vast reduction of energy needs, renewables could compete with high taxed fossil fuels. I hope so, but I just can't see it within our current demands. There's no transitioning to alternatives without higher costs and lower demand. I believe that 100%.

Back to my elistism, if I support higher prices, I support pricing people out of the market. Ideally investment in mass-transit can transition us from cars being a necessity back to a luxury.

Back to neighborly sharing, I admit I am a coward. I can afford a car myself. I don't like feeling of "begging" for sharing. AND perhaps it also demonstrates another level of failure. If I had a relationship with my neighbors that was purely limited to using their vehicle, they can feel used. I apparently don't care enough to keep in contact with neighbors without needing something.

It's easier to see the failing than to take the time to change them. I like the "high speed" life, even without regular access to cars. To slow my ambitions and connect to neighbors seems overall overwhelming.

Certainly I see however hard it is for me to connect, people on the bottom, trying to balance work, family, and money are on the edge and will equally feel unable to reach out to neighbors.

On the other hand, children at least are connectors, and parents have other reasons to know their neighbors.

It is easier to just say "Let's use mass-transit" and everyone's happy, but really I know mass transit is also costly and can't be accepted to do everything.

I admit, if I want to give a public message about higher costs, I have to be willing to offer a vision for how we'll do it.