Gas at $7 Per Gallon? The Cost of Climate Change

Last Updated Mar 9, 2010 12:23 PM EST

A new study from Harvard's Belfer Center for Science and International Affairs warns that reducing carbon dioxide emissions in the transportation sector may require gas prices greater than $7 per gallon by 2020.

"Options now being discussed in Congress cannot by themselves achieve the significant reductions in the transportation sector needed to meet the Obama administration's targets for total U.S. greenhouse gas emissions by 2020," the report concludes.

The problem. We drive too much, and are driving more. Nothing gets us out of our cars like high fuel prices (See Summer of 2008). Thus, we need increased gas prices, combined with sale of more efficient vehicles, to repair our deteriorating environment.

The good news for the economy, however, is that "aggressive climate change policy need not bring the economy to a halt," the report states.

"Even under high-fuels-tax, high-carbon price scenarios, losses in annual GDP, relative to business-as-usual, are less than 1%, and the economy is still projected to grow at 2.1-3.7% per year assuming a portion of the revenues collected are recycled to taxpayers."
Here's a summary of the study, which includes a link to the report itself.

What trade offs are you willing to make to help the environment?

(Gas pump image by Charles Williams, CC 3.0)

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.