November 29, 2020


Supporters of the TCI estimate the initial carbon tax — imposed as an allowance that wholesalers must buy at auction — will add 17 cents per gallon to the price of fuel in Virginia. The Thomas Jefferson Institute for Public Policy had another set of economists examine the proposal, and they project the increased costs instead will be 33 cents per gallon for gasoline and 28 cents per gallon for diesel.

In those areas of Virginia where the gasoline taxes doubled from June 2020 to July 2021 it almost will double again. The Beacon Hill Institute calculated the economic impact on Virginia, since such massive fuel price increases touch every industry, product or service dependent on transportation, at just under $1 billion per year. Assuming those costs find their way to consumers (and most will), it approaches $700 per year, per household.

No one can be sure of the costs until the regional auctions for fuel allowances begin, and each auction will produce a slightly different result. Each year’s auction also will allow fewer and fewer available gallons of fuel, and that dropping supply is a major reason allowance prices will be bid up. In a few years we might envy those Virginians who live near our four neighboring states that are not in this compact.

The billions of dollars collected by the TCI allowance sales will not be spent on highway construction or maintenance. The bulk of the funds will be spent trying to divorce Virginians from their internal combustion engines by subsidizing electric vehicles and charging stations, and promoting alternatives such as bicycle lanes and walking trails. Any subsidies provided to mass transit may just replace the funds being lost through declining collection of traditional fuel taxes.

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