How oil tariffs can unite strange political bedfellows

How oil tariffs can unite strange political bedfellows
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With the economy in free fall, one might think that falling gas prices — below one dollar per gallon for the first time in decades — would be a godsend for a beleaguered nation. After all, President TrumpDonald TrumpWhite House denies pausing military aid package to Ukraine Poll: 30 percent of GOP voters believe Trump will 'likely' be reinstated this year Black Secret Service agent told Trump it was offensive to hold rally in Tulsa on Juneteenth: report MORE has frequently equated cheaper gas with tax cuts.

Instead, the administration is pleading with Saudi Arabia to raise prices. If the Saudis refuse, the president could impose tariffs on imported oil on national security grounds, as his Republican allies in the Senate have called for.

Climate advocates should welcome this as a golden opportunity to make common cause with an administration they firmly oppose. A strange twist of fate has aligned to make a “strange bedfellows” coalition of red-state Republicans and environmentalist greens on oil tariffs.


How did this happen? The key factor is the risk that a quick, “v-shaped” economic recovery — which we all hope for — could make climate change worse. If — thanks to international machinations — American consumers’ pent-up demand goes into gas guzzlers and suburban sprawl once the crisis abates, it would lock in higher carbon emissions for decades to come.

The way to avoid this outcome is to impose a temporary tariff on oil imports now, while phasing in a national carbon price for transportation during the recovery. This policy would ensure that we don’t “flatten the curve” of the epidemic only to backslide on climate.

The collapse in oil prices was deliberately engineered by Saudi Arabian crown prince Mohammed bin Salman to drive competitors out of the market. Saudi Arabia’s low costs and high capacity, he calculated, would position it to survive a price war. Russia responded in kind. Although low prices may be more painful for Vladimir PutinVladimir Vladimirovich PutinOvernight Defense: Pentagon pulling some air defense assets from Middle East | Dems introduce resolution apologizing to LGBT community for discrimination | White House denies pausing military aid package to Ukraine White House denies pausing military aid package to Ukraine It's well past time for strategic defenses and counterpunches on cybersecurity MORE than for MBS, the soon-to-be president-for-life figured he could withstand any muted protests that might arise.

These stratagems have left American oil producers exposed. Their higher costs and massive debt are unsustainable in a rock-bottom market. Bankruptcies and layoffs have begun in the oil patch, and they could become catastrophic for communities and regions unless the federal government steps in.

But why should Uncle Sam help? Here is an industry that piled on junk-bond debt while denying responsibility for the climate crisis. Why not let it fend for itself?


The answer is that ultra-low gas prices are not only bad for the domestic oil industry in the short run, but also bad for all Americans in the long run. Transportation is the largest source of U.S. carbon emissions. Cheap gas encourages people to drive more and to buy less-efficient vehicles, raising emissions. And once cars have been purchased and commuting habits established, it’s very hard to reverse them.

Every low-mileage car and long-distance commute that gets locked in like this is a missed opportunity to move toward eliminating carbon emissions from transportation by 2050, which will be necessary to avert the worst consequences of climate change. Propping up oil prices while the economy recovers would avoid backsliding that would make the situation even worse.

When the world economy returns to normal, the market will lift oil prices, regardless of what Saudi Arabia and Russia do. With the virus in the rear-view mirror, it will be time to focus once again on moving toward our long-term climate goal. That means raising average gas mileage and ultimately transitioning the entire fleet to low-emissions technologies like electric vehicles. Putting a price on carbon emissions from transportation nationwide would help to do that.

Oil tariffs would lay the foundation for this policy. They can be imposed quickly and without congressional action. Tariff revenues should be recycled into the economy through other portions of the stimulus package to mitigate any negative impact on consumption.

Putting a permanent price on carbon emissions from transportation will take longer and require a different political coalition. Given the enormous increase in the debt that will be required to fund the coronavirus stimulus, there will likely be a desperate search for revenues when normality returns. Establishing a carbon-price policy that would kick in when the recovering economy hits key milestones could create greater confidence in the highly volatile credit markets and attract support from pragmatists in both parties.

The world needs to get to a new normal eventually — preferably sooner rather than later. A climate-friendly economy will have a different mix of jobs and companies than the unsustainable economy we have now. Oil tariffs will encourage consumers not to fall back into old patterns, while a carbon price during the recovery would push them toward new ones and help fund the clean-energy and climate investments we need to “bend the curve” on emissions.

David M. Hart (@ProfDavidHart) is a senior fellow at the Information Technology and Innovation Foundation (ITIF) and director of the Center for Science, Technology, and Innovation Policy at George Mason University’s Schar School of Policy and Government.