THE BLOG
03/30/2006 09:56 pm ET | Updated May 25, 2011

We Raise Fuel Economy Standards Yet China Shows The Way

This week the Administration announced new fuel economy standards for automobiles. For all the concern about our dependency on imported oil and higher fuel prices they are, according to the Wall Street Journal, no stricter than those proposed last year. So much for the President's call in his State of the Union Address to wean ourselves away from our dependency on imported oil.

In sharp and surprising contrast there is China. For all its wildfire economy and cut-rate manufacturing, China has been notorious for its environmental recklessness, polluted air, and gridlocked traffic -- hardly a country you'd expect to be in the vanguard of energy conservation. Yet China has leapfrogged the United States in at least one key area: using tax policy to curb its thirst for oil. Maybe it's time we stop criticizing Beijing and start imitating.

Beginning on this April Fool's Day, China's Finance Ministry, showing that it's no fool when it comes to conserving energy, is slapping a graduated tax surcharge on gas-guzzling autos. For buyers of cars with engines smaller than 1.5 liters, the new tax amounts to just 3 percent of the vehicle's purchase price. But the surcharge jumps in stages from 5 percent to a whopping 20 percent on cars with engines larger than 1.5 liters. And this in a landscape where the automobile industry is becoming a major component of the growing economy.

The government is also widening the scope of its consumption tax on gasoline and diesel fuel to encompass all fossil fuels -- heavy transport and jet oil, kerosene, naphtha, lubricants, and solvents. Jet oil and heavy transport oil, used mainly in ships and boilers, will be taxed at the rate of 0.1 renminbi (equivalent to about one-tenth of a U.S. cent) per liter and naptha, lubricants, and solvents will be taxed at 0.2 renminbi per liter, the same rate as that already imposed on gas and diesel.

Talked about for years, the new taxes have been a long time coming from a government worried about sparking inflation and a revolt among consumers. But the booming economy and equally booming appetite for energy have finally forced Beijing's hand. Its latest moves are aimed at "controlling the amount, and adjusting the structure of energy consumption, and giving consumption taxes a larger role in managing the oil products market," stated the finance ministry. Translation: Clever Chinese consumers had managed to partially negate the effect of the initial gas tax by switching fuels. Taxing a wider range of products enables the regulators to gain more control over oil consumption.

It speaks volumes that this enlightened policy has been adopted by a country with 1.3 billion people who use approaches 7 million barrels of oil a day, while the United States, whose 295.7 million people gulp down some 22 million barrels a day, is content merely to jawbone about conservation -- and without much conviction at that, witness the embarrassingly limp new fuel economy standards.

Why is Washington so reluctant to rattle the status quo? For the simple reason that the "oiligopoly" -- the K Street lobbying crowd and its government cronies -- is in the driver's seat when it comes to energy policy. And the oil patch sure doesn't want to cut demand; it is only interested in manipulating supply and picking consumers' pockets.

Would U.S. drivers be thrilled to pay more tax at the pump? Of course not. Yet it is a viable if politically difficult solution. But all indications are that thoughtful people in this country know that our very survival depends on us breaking our reliance on foreign oil. As the Middle East tinderbox seems to grow more volatile by the day, most Americans understand the perils of relying on OPEC to meet our energy needs. All that's lacking is a coherent U.S. energy policy, one in which our government makes the connection between decreased oil consumption and breaking our dependence on foreign oil.

It's long past time for us to get serious and copy this page from China's book. Let's give our citizens the chance to help the United States regain control of its own destiny. And in the doing, we will go a long way toward altering the world's perception of Americans as profligate, self-indulgent consumers.