February 28, 2005
Measure: What Matters
There's a great article in today's Washington Post on Oregon's Measure 37, the voter-approved initiative that is threatening to unravel the state's anti-sprawl laws.
To recap, Measure 37 requires the government to compensate anyone whose land value has been reduced by Oregon's successful growth management programs--making those programs vastly more expensive and complicated to implement.
To me, the most interesting point made by the article is that Measure 37 claims seem to be creating bad blood among neighbors: farmers who are trying to keep development pressures at bay in order to preserve their livelihoods are being undermined by those who want to cash in on suburban sprawl. And because of the way the measure was written, only people who've owned their land since 1973 -- when Oregon's growth management act came into effect -- can make Measure 37 claims, effectively creating a privileged group of landowners. In effect, the law created a new entitlement program, but one that particularly favors those who already own a lot of land.
As the Post article shows, it will be as fascinating as it is disconcerting to see how the new law will play itself out.
For Economic Growth, Regulate Here
There's an emerging understanding that environmental regulation can be good for the economy. Retrograde policymakers who oppose regulation as a hindrance to business--such as many of those who prevented the US from joining the Kyoto Treaty--may have misunderstood the fundamentals of the problem.
In today's issue of the Washington Post, Michael Northrop unleashes a barrage of evidence (subscription required) that, in dozens of instances, greenhouse gas reductions are actually boosting economic performance and corporate profits. Multinational corporations like IBM, DuPont, Kodak, Alcoa, Shell, and British Petroleum are reducing their emissions and saving a bundle through energy-efficiency.
Britain too, is aggressively trimming its carbon-dioxide emissions, as well as the "energy intensity" of its economy (the amount of energy needed to produce its GDP). British economists are forecasting big gains in national wealth, even while environmental impacts decline.
All this is good news, but it won't be enough unless the US and other nations begin taking climate change seriously. As Northrop puts it:
Concerted action is unlikely to occur as long as administration officials and some members of Congress continue to use worn-out arguments against limiting carbon dioxide releases, even as hundreds of multinational corporations and smaller businesses are proving them wrong.
According to the Seattle P-I, Washington State legislators have introduced a bill that would raise taxes on vehicles to help pay for streets and highways.
Now, part of me likes this idea. As it currently stands, cars and trucks don't pay their own way. The state gas tax doesn't even cover the cost of building, maintaining, and operating the state's road network. To break even, the state department of transportation consistently relies on general tax revenues to supplement gas tax receipts. Finding new ways to make drivers pay for the true cost of driving should make the system fairer, and ensure that people who don't drive much aren't forced to subsidize those who do.
So in theory, I should like the general idea of raising taxes on vehicles. But the problem is that, in this case, I find the specifics a bit disheartening.
First off, the bill would create a flat annual "vehicle fee"--essentially a tax for owning a car or truck--of $20. Most of the public costs of vehicles, however, come from driving them, not owning them. Under this scheme people who rarely drive would pay the same rate as people who drive a lot--meaning, essentially, that the more you drive, the more other people subsidize your driving.
Plus, a flat tax of this sort winds up being regressive: it's irrelevant to the well-off, but an extra burden to the poor. Washington already has one of the nation's most regressive tax systems, and a flat tax on vehicles just makes matters worse.
Second, the bill proposes a vehicle weight tax -- essentially charging more for vehicles that weigh more. The rationale for this is fairly clear: heavier vehicles create more wear and tear on the roads, increasing road maintenance costs. But here, too, what matters is not just how heavy a car is, but also how much it's driven. If two vehicles weigh the same amount, but one is driven 3 times as much as the other, then the one that's driven more creates 3 times the damage--but under the bill's scheme, they'd both pay the same amount of road maintenance tax. Again, people who drive less wind up subsidizing those who drive more.
And there's yet another problem with the way the bill structures the vehicle-weight tax. Heavy vehicles cause much, much, much more damage than do light vehicles. In fact, [beware: math ahead] a good rule of thumb is that road damage is proportional to the vehicle's weight per axle, raised to the fourth power. That means that a vehicle that supports two tons per axle creates sixteen times as much damage as one that carries one ton per axle. (Note: the actual damage can vary from the cube of axle weight for the sturdiest highways, to the fifth power of axle weight for poorly constructed roads.) In practice, this means that virtually all of the wear and tear on most roads can be attributed to very large vehicles.
But the tax, as proposed, would charge a flat rate of 1.5 cents per pound. So given two vehicles, with one twice as heavy as the other, the heavier one pays twice the tax -- but creates 16 times as much road wear. The overall effect, again, would be unfair: people who own light vehicles, and drive them short distances, would pay a disproportionately large share of the tax relative to their contribution to highway wear and tear.
(There are two other parts of the tax proposal: an increase in the gas tax--which I think is a good idea--and a "street-utility service district" which I would have to think about some more.)
In an ideal world, it seems to me, vehicle taxes would be based on some combination of fuel consumption, miles driven, axle weight, emissions, noise, safety, and congestion considerations. That would do the best job of internalizing the true costs of driving. Taxing vehicle miles--which isn't even on the table, apparently--is a key to creating a fair tax (as Alan argues here), since to a large extent the impacts of driving accrue on a per-mile basis.
In theory, the vehicle weight tax could be seen as a step in the right direction, since it creates a disincentive -- clearly, not enough, but perhaps better than nothing -- against heavier vehicles.
The problem, though, is this: once these sorts of things get enshrined in law, they're very hard to change. It could be decades or longer before you get a chance to revise them. Which means that in this case--as in so many others--we owe it to ourselves to get it right the first time.
Tillamook vs. Monsanto
The dairies comprising the Tillamook County Creamery Association are voting today on whether to accept a board decision to phase out the growth hormone Posilac (rbGH), according to a report in today's Oregonian.
Tillamook's board wants to protect the integrity of its brand, which has come under increasing fire from customers suspicious of the growth hormone. Many of the dairies--under the approving gaze of Monsanto, the company that makes Posilac--regard this as an unfair abridgement of their right to dairy as they see fit.
Monsanto argues that Posilac carries no health risks for people or cows, and notes that the drug was approved by the FDA. But, as the Oregonian article reports, "The FDA approved Posilac's use in 1994 in one of the most oft-criticized decisions in its history because agency employees with former ties to Monsanto were involved."
In the end, the dairy industry will follow its customers. Fortunately, Tillamook's customers have been clear: they are not convinced that bovine growth hormone is safe. And, when it comes to meddling with the food supply, people want safety proved first.
I posted on this a few weeks ago, but the snowpack in the watersheds that feed greater Seattle is substantially--and worryingly--below normal. The graph should make the trends clear enough:
The dotted line is "normal". The yellow line represents the disastrously dry weather year of 2000-2001--the year that summer hydropower production dipped so low that manipulative energy traders were able to wreak havoc on California's power markets. The green line is this year, as of yesterday.
So we're now officially running below 2001--which, I should note, was the second driest year of the last 75.
Now, past performance is no guarantee of future results; that's as true of weather as of stocks. But it's going to take a whole lot of snow over the next couple of months to avoid another dry, dry summer.
The Eugene Register-Guard has a good article (and sidebar) today on the proposal to build a liquified natural gas port at Coos Bay, Oregon. Liquified natural gas is safe and clean, except in the very unlikely but not impossible event of a well-planned and executed attack. Then, it becomes a massive threat. Each average-sized marine LNG tanker holds as much energy as 50 Hiroshima-sized bombs.
We discuss the issue in Cascadia Scorecard 2005 (1 Mb pdf, see page 32 and associated citations). Two other proposals for Cascadian LNG ports mentioned in CS05 are on the lower Columbia River. Three additional proposals, not mentioned in the book are at Humboldt Bay in northern California, at Kitimat in northern British Columbia, and at Cowichan on Vancouver Island. (Tip of the hat to Guy Dauncey for information on the latter two.)
Cascadia Scorecard 2005, III
One astute reader of the Cascadia Scorecard 2005 poses a good question. The reader wonders:
what the "benefit" is of publishing maps that blatantly expose our energy vulnerabilities which Alan says are "virtually impossible to defend against determined attackers."I realize that you are trying to open our eyes to the tremendous need we have of weaning ourselves from fossil fuel dependencies, but do you really think that painting a "bulls-eye target" on our present-day energy resources is a sane solution, in today's global terrorism society?
We thought about that, too. We thought about it a lot. Here's why we did it:
Terrorists have long targeted energy systems in other parts of the world, with attacks on oil tankers and pipelines. They've specifically mentioned oil infrastructure as the "lifeline of the crusader community." Cascadia Scorecard describes a threat that is largely unknown to northwesterners but is old hat to jihadists. So we're definitely not giving them an idea they didn't already have.
The Northwest's energy vulnerability is a matter of public record. Anyone with a library card and an Internet connection has access to far more information about the region's energy vulnerabilities than we described in Cascadia Scorecard. In fact, that's all we used to do our research on energy vulnerabilities.
We were careful in preparing the report to tell readers only enough to understand the threat, not enough to misuse the information. Our maps, for example, are intentionally imprecise and schematic. They wouldn't be much use to anyone with malicious intent.
What are your thoughts?
February 25, 2005
Fun With Math
In a recent post, I mentioned that the U.S. economy is highly energy-intensive. That is, the energy used to produce $1 of wealth in America can produce $2 in Germany and nearly $3 in Japan. So, all else being equal, high oil prices take a heavier toll on the U.S. economy than in more energy-efficient countries, simply because we need more energy to do business. (By the way, oil prices just bumped up past $50 a barrel.)
But there's yet another reason why high oil prices hit harder in the States than elsewhere. On the global market, oil is priced in U.S. dollars. Obviously then, Americans feel every oscillation in prices because crude is denominated in the same currency as our paychecks. That's not necessarily true in other countries.
The dollar has been in a long-term slide against other major currencies including, most notably, the euro. Currently, a dollar buys only about 76 euro-cents. So markets have upped the price of oil (in dollars) to compensate for the greenback's eroding value. That's one reason why oil prices are rising.
Here's a hypothetical, loosely based in reality. Imagine that in 2000, $1 = 1 euro and the price of oil is $40 a barrel. So Europeans pay 40 euros. But by 2005 the dollar slips to $1 = 0.8 euros. Now, if the price doesn't change, Europeans can buy oil for just 32 euros a barrel. But the market adjusts to compensate for the anemic dollar and the price goes up to $50 a barrel. Now Europeans are paying 40 euros a barrel again, the same as before. But Americans are shelling out $50. (And the same thing happens for oil purchasers who use the yen or pound or any other currency that hasn't weakened along with the dollar.)
So who is worse off? Americans. Obviously.
But it's not at all obvious to Fox News commentator and perennial Europe-basher John Gibson, who today wrote:
If the slide of the dollar has reduced [oil's] value about a third, that might mean the oil producers need to get another third if they're getting dollars to make up for the slide. If that's the case then the real price of oil is about a third less, which means it's about 35 bucks a barrel in adjusted bucks. So who does this hurt most? People buying oil with expensive euros, that's who.
Um, sorry John, but you got it exactly backwards. The people it hurts most are Americans.
Has Spring Sprung?
Meanwhile, next door in Washington, the Seattle Times reports on the signs of spring, like hikers at Hurricane Ridge, emerging mountain wildflowers, blooming cherries and dogwoods, and Seattle temperatures setting records at 64 degrees Fahrenheit.
Gas prices have edged up over the past month, passing $2 a gallon in Seattle earlier this week as an east-coast cold snap pushed up crude oil prices.
But no matter how high the market price goes, gas (and driving in general) is still too cheap.
See, for example, the chart below, from the Victoria Transport Policy Institute (from page 6-4 of this pdf). Much of the cost of driving a mile -- costs for air pollution, noise, congestion, and the like -- are "external costs", meaning that they aren't paid by the driver, but by other people. [Click on the graph to enlarge it]
The chart above doesn't even account for major categories of external costs -- such as the cost of securing petroleum supplies. Estimates from the mid-1990s (cited in this pdf document also from VTPI) put the United States' economic and military costs (never mind the human costs) for securing access to Mideast petroleum at somewhere between $6 and $60 billion annually. Surely those costs have gone up substantially in the wake of 9/11.
Of course, if drivers had to pay for all those "external" costs -- either as taxes on gasoline or on miles driven -- they'd drive less. But until those costs are internalized, people who drive (myself included) are enjoying a free ride.