Carbon tax – don’t forget about ethanol and bio-diesel.

In his essay in The Des Moines Sunday Register (10/5/2014), Richard Doak used the example of British Columbia (BC) as a regional government that has gone out on its own and instituted a carbon tax.  He wrote that the carbon tax as been a success.  The revenue neutral tax has allowed BC to reduce personal and corporate income taxes to quite low levels.  He reported that in BC, “Economic growth is slightly better than the rest of Canada…”
He asked, “Why can’t Iowa be like that?”  Throughout the essay, Doak talked about taxing “fossil fuels”.  What he did not talk about was that fact that the BC carbon tax applies to ethanol and bio-diesel, because both contain carbon that is released into the atmosphere when burned.
When all aspects of production are considered, there is still a question about which fule, gasoline or ethanol, puts more carbon into the atmosphere.  At the time of combustion, ethanol puts about one third less carbon into the atmosphere than gasoline.  So, to the extent that there is discussion in Iowa or the U.S. about a carbon tax, the tax on ethanol should  be about two-thirds of the tax on gasoline.  It should not be zero.
Doak also talks about replacing the gasoline tax with a carbon tax to fund road building and maintenance.  He make the point that a tax on coal and natural gas, used to make electricity, will make users of electric cars pay their share for roads.  In almost any scenario of the future, electric cars will use a very small fraction of the total electricity output and will not come close to paying their fair share of road use.  Most of the cost of a carbon tax on coal and natural gas will be paid by households and businesses.  Doak is right that roads should be financed by users, but a carbon tax is not a good solution.
Link to Register article: