Reducing Oil Prices Without Ruining the Environment: Pay People Not to Drive

From my Twitter feed it seems that Sarah Palin has been resurrected. All sorts of centrist-liberal types are yelling “drill baby, drill!” as a response to Russia’s invasion of Ukraine. They have been pushing for ignoring environmental regulations and even directly subsidizing fracking.

While that is no doubt music to the ears of the fossil fuel industry, this is going backwards about as quickly as we can in our effort to reduce greenhouse gas emissions. There is an alternative route, we can pay people not to drive. That one might seem a little silly, but it beats paying people to wreck the environment.

The way this could work is that ask people to submit a form to the IRS indicating how many miles they drove last year. We also have them submit a picture of their odometer reading as of today. They send in another photograph at the end of the year. Then they are entitled to a payment of 20 cents for each mile that they reduce their driving this year compared to last year. (We adjust the calendar so that it is for a 12-month period.)

If someone drove 15,000 miles last year and can reduce their driving to 10,000 miles this year, we would send them a check for $1,000. This is also approximately what they would be saving on gasoline if the price is $4 a gallon and they get 20 MPG in their car. That should be a pretty good incentive to drive less.

To make the shift to less driving easier, the federal government can also pay to make bus transportation free and vastly expand service. (The way to do this is to have the federal government pick up 90 percent of the cost, with the states having to pay the other 10 percent. The red state governors will of course all refuse to go along, so we just send the money to blue states.)

If we could reduce driving by 20 percent (640 billion miles per year), this plan would cost the government just under $130 billion a year, roughly 2.2 percent of the federal budget. If we add in another $40 billion for bus subsidies, it comes to $170 billion a year or 2.9 percent of the federal budget.

This would save us a bit less than 2 million barrels of oil a day. It would take quite a while to build up to this level of additional production, even with ambitious subsidies to the fossil fuel industry.

I know everyone is jumping up and down that people will cheat. What else is new? We have some ability to put limits on cheating, first and foremost by subjecting people to random audits, just as we do with taxes and did with the Paycheck Protection Program during the pandemic shutdowns. Also, any obviously absurd claims will be inviting inspection. If someone claims they drove 50,000 miles in 2021, they can expect a visit from an auditor asking how they ended up driving that far in a single year.

There undoubtedly will be people who get away with substantial amounts of cheating, but that should not be an excuse for not adopting an environmentally friendly way of reducing the price of oil on world markets. We tolerate massive amounts of cheating in other areas of our tax code, such as the expenses claimed by businesses. It would be ridiculous to get bent out of shape that someone may get $50 or $100 that they shouldn’t on this provision.

The key point here is that we don’t have to wreck the planet to show Vladimir Putin we are tough. We can instead do policies that would make sense even if he hadn’t invaded Ukraine.

This first appeared on Dean Baker’s Beat the Press blog.

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC.