By utilizing domestically discovered natural gas, we will both reduce our dependency on imported oil and also demonstrate to the world to do the same.
By Amit Mor

What’s a politically and economically progressive, ecologically conscientious person to think about the recent spike in gas prices? On the one hand, commentators like Thomas L. Friedman are always telling us, higher taxes at the gas pump are an efficient means for forcing people to drive less – and thus reduce both hazardous pollution, as well as the carbon emissions responsible for global warming. On the other hand, say those who want to shrink the widening economic gaps that plague many Western societies – and certainly Israel, higher fuel prices hit the less well-off disproportionately, as a higher percentage of their income goes to transportation costs.

Using economic incentives to make people cut down on driving is a fine idea, so long as there are alternative modes of transportation available. When that isn’t the case, you have a situation like that in Israel today, where demand for gasoline has remained relatively rigid, even as the price has risen to its highest level ever. Experience shows that if comfortable and convenient public transportation were available, many people would leave their cars at home. Once the train lines between Tel Aviv and, respectively, Haifa and Be’er Sheva, were upgraded, for example, Israel Railways saw an annual increase of some 10 million passengers per year. In the same vein, when the light rail in the capital is inaugurated later this year and a rapid train line between Tel Aviv and Jerusalem is finally built, there is every reason to believe that consumers will flock to utilize them.

In Israel, excise and value-added taxes together comprise more than 50 percent of the price we pay at the pump for gasoline and diesel fuel. (It is the excise tax, which the government raised by 20 agorot at the beginning of the year and then reduced a month later, that has been the subject of much of the recent debate here. ) This puts us at the average level among European and other OECD states with the world’s highest fuel prices. In America, by comparison, where most states have low excise taxes and no VAT, gas costs one-third of what it does here – which is why commentators like Friedman can talk about using surcharges to discourage driving.

The question of whether to tax individuals directly, through income tax, or indirectly, through such means as VAT and excise taxes, constitutes an important social and economic issue. Taxation can serve as well to offset some of the damage caused by the use of gasoline and diesel, both major emitters of pollutants such as nitrogen oxides and particulate matter. These contribute to such health problems as cancer, heart disease and asthma. Burning these fuels also produces carbon dioxide, the principal greenhouse gas, which causes global warming and climate change. So it is appropriate that the users of transportation help to pay for some of the damage it creates. But in Israel, increasing the already high surcharges on fuel is unlikely to reduce carbon emissions.

In the realm of taxation, something that could lower emissions would be raising the sales taxes on larger and less efficient cars. And indeed, Israel did introduce, last year, a “green transportation policy,” by which more environmentally friendly new cars are taxed at a lower rate than gas guzzlers. The formula on which the tax is based actually takes into account both the domestic pollutants and the carbon dioxide emitted by the automobile in question. The differential, however, is not sufficient to have greatly affected consumers’ purchase decisions. With a standard sales tax of 75 percent, the cost of a new car is so high in Israel that paying a few thousand shekels more will not discourage many who can already afford it from buying the latest SUV. The incentive must be much higher to change people’s buying decisions.

The decision two years ago to lower to 10 percent, through 2014, the sales taxes on zero-emission cars is likely to have more impact. It offers industry an incentive to produce electric cars and the public an incentive to buy them, and indeed, plug-in electric cars will be available here by late in the year.

But even the phrase “zero-emission” is misleading because, although the use of electric cars would have the positive effect of making the air of our cities cleaner, the net effect of battery-powered cars is to move the point at which emissions are produced from the car to the generating plant.

What’s necessary, then, is for Israel to turn to cleaner fuel sources, for both electricity generation and transportation. One such source is natural gas, which emits far lower levels of pollutants than coal, especially relevant in the wake of the recent discovery of offshore gas reserves. And in fact, Israel is undergoing the fastest shift in the world to natural gas for power generation, with the use of natural gas to produce electricity expected to rise from 40 percent to 70 percent in the next decade.

Second-generation biofuels, which will be produced from organic waste and even algae, may also serve as a clean alternative to gasoline in coming years. But at present, it is natural gas that offers the most promise for cleaner, economical transportation. In addition to using it to produce the electricity that charges battery-powered cars, it can be employed directly as a transportation fuel. Millions of cars and commercial vehicles worldwide are already being fueled by compressed natural gas, and it can also be converted into methanol – a liquid fuel similar to gasoline but cleaner, which can be used in existing cars with only minor modification to their engines.

By utilizing our domestically discovered natural gas, we will both reduce our dependency on imported oil and also demonstrate to the world to do the same. After all, today, 70 percent of the oil consumed in the world goes to transportation. In the future, a larger share of the electricity in Israel will be produced by renewable energy, especially solar energy, that can be used to charge plug-in electric cars, allowing an oil-free, clean transportation. Providing the conditions that will allow for such a significant technological change is one of the major challenges facing us today. But it is one that can be met in the foreseeable future.

Dr. Amit Mor is the CEO of Eco Energy, a Herzliya-based energy and environmental financial and strategic consulting firm