It's Time for a Non-Renewable Carbon User Fee for Fuels

July 13, 2015

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by Joanne Ivancic (Advanced Biofuels USA) Advanced Biofuels USA introduced a new idea for capturing externalities of non-renewable fuels at the Congressional Renewable Energy and Energy Efficiency EXPO + Forum held in the Caucus Room of the US House of Representatives Cannon Office Building last week. As part of a presentation by the nonprofit educational organization's executive director, Joanne Ivancic; with handouts at the Expo information table; and in conversations with members of Congress at the event, the theme was "It's Time for a Non-Renewable Carbon User Fee for Fuels."

The Advanced Biofuels USA proposal would

Include the price of greenhouse gas emissions effects in the pricing of renewable and non-renewable fuels; and
Commit serious money to renewable fuel research and infrastructure development.

This week, the White House revised upward their social cost of carbon (an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given year).

Generally, estimates for the climate change effects of non-renewable carbon fuels begin at about $50/ton of non-renewable carbon and increase to over $100/ton when factors such as research and infrastructure changes are included.

While these costs may sound overpowering, they translate into only 3.5% to 7% increases in current gasoline prices; or, eleven cents to twenty-one cents per gallon of regular gasoline. This is less than the volatility we commonly experience in gasoline prices.

More important, as renewable content increases, the fee for the consumer decreases. If renewable content were increased from the current 10% to an achievable goal of 85%, an average motorist would see an annual fee reduction of $74.80 to $17.60.

In addition, in this proposal the fee is designed to disappear as renewable fuels replace non-renewables. For instance, once renewable content increases to 85% and mileage increases become fleet-wide, the income from the fee will fall dramatically. In fact legislation should cancel the fee when income drops below $500 million/year.

The Advanced Biofuels USA proposal responds to calls for market-driven transportation fuel choice. When the true costs of fuel become apparent, consumers will demand higher renewable portions of fuels for transportation, power and heat. This will spur investment, innovation, installation and use of renewable choices.

In the meantime, how should the revenue from the fees be used? In only two ways:

Renewable Fuel R&D: An immediate Apollo type program should be funded with between 50% and 60% of the fees. It should be administered by the National Science Foundation (NSF) and be focused on getting non-food biomass fuels and gases into the pipeline in less than 7 years. A sustainable renewable fuel industry will not only cut petroleum imports and tremendously reduce US oil and gas extraction damage, but more important, create good jobs for Americans in research labs, rural towns, and urban manufacturing plants.
Renewable Fuel Infrastructure: The upgraded fuel pumps, decentralized processing/distribution modules, and temporary rebates to people not able to afford the initial lack of renewable fuel would be funded with between 40% and 50% of the fees. These programs would be run by the states. They know what the needs are and the most effective way to address them.

Collection of this user fee would not require new bureaucracies. Existing consumer point-of-sale fuel and utility tax collections systems (for natural gas) would be used.

More details, along with charts, graphs and tables with more information are here: Carbon User Fee Proposal July 2105 and watch Joanne Ivancic's presentation, here.

Updated Updated Non-Renewable Carbon User Fee for Fuels (Disappearing Gas Tax) August 2019