March 09, 2006
I'm Lovins It
Bad pun, but do read what energy guru Amory Lovins had to say to the Senate Energy Committee yesterday. The upshot: saving energy is far cheaper than importing it; and there are novel policy tools that (at least in theory) could break the current gridlock over energy conservation. To wit:
Size- and revenue-neutral feebates could speed the adoption of superefficient cars far more effectively than gasoline taxes or efficiency standards, and would make money for both consumers and automakers.
We like feebates. A lot. And we're always delighted when Lovins gets a chance to tout them to a high-profile audience.
February 28, 2006
There's been a bunch of comment in the blogosphere today about hiking gas taxes -- with the rough consensus that it's ok environmental policy, tough on the poor, and politically risky (though perhaps not quite as unthinkable as it once was).
So it's interesting to note that Oregon -- often considered a policy innovator among US states -- is in the middle of an experiment that could eventually lead to a repeal of the state gas tax.
Oregon's transportation department is recruiting volunteers to test a system that would charge people based on how far they drive, not on how much gas they use. The trial will test two rate structures -- some participants will pay a flat rate of 1.2 cents per mile, while others will pay a variable rate depending on whether they're driving during rush hour; a control group would continue to pay normal gas taxes. (See here for details, or if you're interested in volunteering.)
The state is interested in this sort of approach for a bunch of reasons, but if I read things correctly, they're mostly worried that gas tax revenues are poised to fall, perhaps significantly, over the upcoming years.
Here's the issue: if gas prices remain relatively high, or keep rising over time, economists project a gradual per-capita decline in gas consumption, as people replace their cars with more efficient ones. And if cars keep getting more and more fuel efficient, then total gas revenues could actually fall, even as the demands on the road network increase. Ultimately, states may be forced to choose between continual gas tax hikes and persistent funding shortfalls for roads -- both of which are bound to make lots of people unhappy. Under a pay-by-the-mile system, however, transportation funding would be keyed to how much people actually drive -- so the state would still keep up its funding no matter how efficient the cars get.
Obviously, shifting from gas taxes to mileage-based taxes has some signficant downsides. First, the gas tax does create a slight incentive for fuel-efficient cars; getting rid of it could put Hummers on a more even footing with hybrids. And second, it's not entirely clear that a falloff in highway funding would be a bad thing. Obviously, most drivers want the roads maintained in good working order; but, in my mind at least, a lot of highway spending seems like it's pretty wasteful.
That said, we've been pretty interested in the pay by the mile idea, despite the potential downsides. Fully developed, the technology could facilitate two innovations that could be far more powerful at promoting fuel conservation than the exisiting gas tax. First, the same technology used to track mileage for taxing purposes could also be used for a more comprehensive congestion pricing system -- which could simultaneously clear up congestion, reduce driving, and promote bus ridership by keeping streets and highways flowing. And second, it could pave the way for Pay-As-You-Drive car insurance, which would have the same effect on driving overall as roughly doubling the cost of gas.
If you want to get really fancy, you could even fine tune the pay-by-the-mile taxes, to increase fees for cars with the worst pollution or CO2 emissions, the most road space (SUVs require longer stopping distances, and tend to use up a little more space on streets and highways), or the worst safety records.
Of course, pay-by-the-mile taxes suffer from one huge drawback: they're much more complicated than gas taxes, not just because they require special technology but also because a properly "fine tuned" system -- one that accounts for all the different externalities of driving, ranging from pollution to congestion -- could be pretty incomprehensible to the average driver. And mileage-based taxes would be vulnerable to all sorts of political shenanigans, as car manufacturers would jockey for special exemptions or rates for certain kinds of vehicles. All of which means that, even though I'm very excited by the tests, I'm not yet ready to support the idea -- and certainly not until we see how drivers really react to the system.
February 27, 2006
The Odd Decouple
This is good news: according to NW Current, more and more utilities are becoming interested in "decoupling" -- which could be the single most cost-effective step I've heard of for encouraging conservation.
Here's how decoupling works. Utility rates are pretty tightly regulated: rate structures are dictated by utility commissions and the like. Traditionally, rate structures link a utility's profits to its sales: the more a utility sells, the greater its profits. But that creates a huge disincentive for conservation: if utilities get people to cut their consumption, they cut into their own earnings. In fact, a private utility that tries to get its customers to use gas more efficiently could actually run the risk of a shareholder lawsuit.
Under decoupling, though, utility rates are structured so that a utility's profit margins can rise when consumption falls. (In other words, a utility's earnings are "decoupled" from its gross sales.) This simple change can make it profitable for utilities to promote conservation. And as a result, decoupling aligns the utility's incentives with the incentives of its customers: everyone has an incentive to use energy more efficiently. Northwest Natural, an Oregon gas company, has been operating under a decoupled rate structure since 2002. One result -- it's shifted staff from marketing (trying to get people to buy more gas) to customer service. Whee!
Decoupling is one of those nifty little ideas with a huge potential payoff for a seemingly insignificant change. It doesn't take much to make decoupling a reality -- it relies on a simple alteration to the rules, rather than regulatory strictures or costly upgrades to technology. So it's nice to see it catching on.
February 16, 2006
Do Mess With Taxes
The basic point here (NY Times, registration required) is pretty good: the idea of coupling a gasoline tax increase with a cut in payroll taxes deserves a much closer look. It makes sense as a policy -- gas taxes should be higher, and a payroll tax cut could help soften the blow. Plus, pairing a tax increase with a tax cut seems to draw far broader political support than a straight-out hike in gas taxes:
The gasoline tax-cum-rebate proposal enjoys extremely broad support. Liberals favor it. Environmentalists favor it. The conservative Nobel laureate Gary S. Becker has endorsed it, as has the antitax crusader Grover Norquist. President Bush's former chief economist, N. Gregory Mankiw, has advanced it repeatedly.
Ok, so it's a good idea. But I can't help myself -- I'm going to pick some nits.
First, I think it's going too far to claim, as the article seems to, that it will be easy to sell this kind of thing to the public. Voters seem to forget about tax cuts: for example, in the runup to the 2004 election -- and despite the administration's efforts to tout their income tax cuts -- US voters were more likely to say that their taxes had gone up over the previous 4 years than down. On the other hand, everyone knows when gas prices go up -- it's emblazoned over every filling station. So people will be reminded of the tax increase every day, but notice the tax cut they only see if they look carefully at their payroll records. That's a pretty good recipe for outrage, unless you work really, really hard to explain to people what's happening.
Second, there are still some regressive effects here. If you're a retired senior, you don't pay payroll taxes -- so you'll see no benefit from the payroll tax cut. But you'll still be hit by higher gas taxes. Same thing if you're unemployed. (Undoubtedly the AARP, among others, will have a few things to say about this.)
Third -- why just gas? I know, I know, oil makes us vulnerable to foreign political shocks, sucks money out of the economy, yada yada. But gas represents only 43 percent of total US petroleum consumption (see here for details); so we should be taxing all petroleum consumption, not just gas. And more broadly, natural gas and coal are both major greenhouse gas sources -- coal even moreso than gasoline. Coal-fired power plants are also bad news for air quality, and put mercury in our fish. And natural gas production within the US is headed in the same direction as oil--down--which means that soon enough our natural gas imports will start sucking serious money from the economy, just as oil imports do now. All of which suggests to me that a broader tax on carbon, or natural resource use, would be better than just a tax on gas -- and might even allow for steeper payroll tax cuts.
And finally -- gas taxes are all well and good. But they're not the be-all-end-all when it comes to promoting fuel efficiency. Pay by the mile car insurance and feebates get even less air time in policy circles than tax shifting -- but arguably would be just as effective, if not moreso, at promoting fuel conservation. Obviously, I'm always glad to see gas taxes discussed in a public forum. But it would be even niftier to see other worthwhile ideas get some attention.
February 13, 2006
Another plot to cripple the Trans-Alaska Pipeline was foiled recently, reports the Philadelphia Inquirer (via Reuters). A Montana judge gets credit for apprehending the plotter, in Idaho, although Oregon and Washington are the main consumers of oil from Alaskan oil.
A year ago, we released the 2005 Cascadia Scorecard, which detailed the profound vulnerability of Cascadia's energy infrastructure (pdf), including the Trans-Alaska pipe.
The latest plot--which involved blowing up propane trucks along the pipeline, among other acts of sabotage elsewhere--doesn't seem to have been as far along as one in 1999 or one in late 2003. (Both described here (pdf), on pages 30-31.)
The larger story, of course, is that Cascadian officials have done little to secure its energy system in the past year. Pending energy security measures in Washington and Oregon may be bright spots on the horizon.
February 10, 2006
To recap -- the Times article claims that, under the system governing vehicle fuel economy in the U.S., selling a hybrid Escape lets Ford sell an additional Lincoln Navigator without running afoul of federal standards. In other words, while buying an Escape may mean that you're driving a more efficient vehicle, it doesn't mean that the average fuel economy of all the Fords on the road will change one whit.
A couple commentors said this is bunk. But I think the article is onto something. Take a look at the fleetwide fuel economy for Ford's light truck fleet over the last few years for which I could get data:
2000: 21.0 mpg
2001: 20.5 mpg
2002: 20.7 mpg
2003: 21.3 mpg
Now, remember, the CAFE standard for light trucks over this period was 20.7 mpg -- that is, the average mpg for all the light trucks that Ford sold had to be 20.7 or more, or the federal government would levy a fee on each vehicle. From the numbers, it's pretty clear that Ford has been doing its level best to keep its light truck fleet at or near 20.7 each year -- maybe a little above or below, but not enough to incur any penalties (under CAFE rules, exceeding the standards in one year lets you dip below them in subsequent years).
So how does the company fine-tune its vehicle sales to fall right at the CAFE standard? By tweaking its pricing, offering deeper discounts to ramp up sales of higher-mileage pickups and SUVs, while still selling as many hulking SUVs--vehicles with terrible gas mileage but huge profit margins--as it can without running afoul of the standards.
My point here is that the introduction of the 35 mpg Escape, by itself, probably doesn't change this dynamic. Ford is legally required to maximize its profit -- otherwise it faces the threat of a shareholder lawsuit. So it's got an incentive to use whatever means it can to keep the high-profit SUVs moving off the car lots. And that means that selling more Escapes won't necessarily boost the overall efficiency of the vehicles Ford sells. Higher gas prices might boost fuel economy; stricter standards might as well. But as nifty as the high-tech hybrid Escape may be, buying one won't guarantee that Ford's overall mileage is moving in the right direction.
Obviously, the existence of the Escape has spinoff benefits. Among them, it undercuts the car-makers arguments that major improvements in vehicle efficiency are technically impossible. Hybrid SUVs show that the feds could probably lift CAFE standards for light trucks above 30 mpg without forcing automakers to do much, if any, R&D. True, the big auto manufacturers could always say that they can't afford to make trucks more efficient. But they can't say that they don't know how.
But there's yet another perverse market effect hidden in the Escape. CAFE has two tiers, with a higher mileage standard for cars than light trucks. To the extent that the Escape (a light truck) attracts buyers who'd otherwise go for a Taurus (classified as a car), it could tilt Ford's overall mix away from cars and towards trucks -- which, paradoxically, could lower the average fuel economy for Ford's entire vehicle fleet. (Sheesh, this stuff is weird.)
So, all this goes to say that a system can have unpredictable results that undermine the best intentions of any one individual. That's not a reason to throw up one's hands in despair -- but it is a reason to think that changing the system is even more important than making the right kinds of purchases.
February 08, 2006
One Less Car = One Less Parking Spot
At the risk of making this blog too Seattle-centric, I thought I'd point out this nifty article in today's Post-Intelligencer about the city's efforts to promote alternatives to the car -- everything from walking to biking to transit to ride sharing to van pools. And there's ample reason to be concerned about rising car traffic, particularly downtown--not just on environmental grounds, but on financial ones. Cars, you see, take up lots of space in a crowded city; and storing them all is expensive, and takes up real estate that could be put to far better uses. From the article:
In the next 19 years, the city expects 22,000 new housing units and 50,000 new jobs.
Assuming the same percentage of people continued driving alone to work, the city estimates it would have to build 20 city blocks of 10-story parking garages downtown.
That's a lot of parking.
Also note the upside-down state of transportation finances. Funding for the bus system is nowhere near where it needs to be to accomodate all the new riders the city is hoping for. And meanwhile, city officials still seem hell-bent on spending billions for roads, some of which will just make downtown's car problems worse. Obviously, the city deserves a lot of credit for its low-cost efforts to promote alternatives to the car; but in the bigger picture, you have to wonder if they've got their priorities straight.
Oy. I used to think that the introduction of hybrid SUVs was generally a good thing -- with even greater potential for saving fuel than hybrid cars. But this New York Times article brings up a point I simply hadn't considered: buying a fuel-efficient SUV makes it possible for car companies to sell big gas guzzlers without incurring any penalties under federal CAFE (i.e., corporate average fuel economy) standards. From the article:
[E]very Toyota Highlander hybrid S.U.V. begets a hulking Lexus S.U.V., and every Ford Escape — the hybrid S.U.V. that Kermit the Frog hawked during the Super Bowl — makes room for a Lincoln Navigator, which gets all of 12 miles a gallon. Instead of simply saving gas when you buy a hybrid, you're giving somebody else the right to use it.
This is vexing, to say the least. And it underscores a point that's hard to overstress: when it comes to saving energy, a broken system can trump individual virtue. That is, any time a conscientious and enlightened consumer decides to do something selfless, our energy system pushes back a bit. Use a little less gas, and the oil market responds by letting someone else tank up a little more cheaply. Buy an efficient vehicle, and you make room under CAFE standards for someone else to buy a wheeled behemoth. And so it goes.
Of course, I don't mean to suggest that it's completely futile to make efficient buys -- not by a long shot. But particularly when it comes to energy, the collective good done by environmentally conscious consumers is typically less than one might hope. To me, this underscores a simple point: changing your own behavior is a good idea, but changing the system is far, far more important.
The Church, Sweden, and Tom Friedman
In the US, January 2006 was the warmest January on record--and the records extend back to 1895. So it's apropos that today also heralded an unusual alignment of actors, all striving to address climate change (and accomplish some other things too).
Sweden vows to one-up President Bush's pledge to break America's addiction to oil. The Scandinavian country of 9 million pledged to end its dependency on oil by 2020, for economic as well as environmental reasons. Ambitious, to say the least.
NY Times columnist Thomas Friedman argues strongly for a high federal gas tax--as a matter of national security. [Pay subscription required.] Friedman quotes a foreign policy expert saying, "We have a Marshall Plan. It's our energy policy. It's a Marshall plan for terrorists and dictators."
And perhaps most importantly, a group of 86 major US evangelical leaders signs onto an initiative to combat global warming. Among the supporters are such influential leaders as Rick Warren (megachurch pastor and author of The Purpose-Driven Life), Ted Haggard, (pastor of New Life Church and president of the National Association of Evangelicals), and Duane Litfin (president of Wheaton College).
The group's statement is worth reading. It argues that, "Love of God, love of neighbor, and the demands of stewardship are more than enough reason for evangelical Christians to respond to the climate change problem with moral passion and concrete action."
The Cascadian leaders joining the pledge are...
- Dr. Jay A. Barber, Jr., President, Warner Pacific College, Portland, OR
- H. David Brandt, Ph.D., President, George Fox University, Newberg, OR
- Brent Hample, Executive Director, India Partners, Eugene OR
- Jennifer Jukanovich, Founder, The Vine, Seattle, WA
- Brian O'Connell, President, REACT Services; Founder and Former Executive Director, Religious Liberty Commission, World Evangelical Alliance; Mill Creek, WA
- William P. Robinson, Ph.D., President, Whitworth College, Spokane, WA
- Richard Stearns, President, World Vision, Federal Way, WA
- John Warton, President, Business Professional Network, Portland, OR
February 06, 2006
Ever closer to PAYD
Pay-as-you-drive auto insurance keeps coming closer. There are now at least three different technology companies in the market with pay-as-you-drive systems. These are not yet insurance plans available to Cascadian consumers. They're products--little electronic gizmos that connect to GPS and/or wireless networks and/or the USB port on your home computer--that insurance companies can adopt to collect data for PAYD insurance plans.
Each product is a bit different and each has its own answer to privacy concerns. I'm not endorsing any of them.
A Waterloo, Ontario company is launching a pilot soon for its iPAID system.
An Atlanta, Georgia company is aggressively promoting its product called DriverScore.
And a third firm called Sensomatix reportedly has a product on the market, too, though its website doesn't yet describe it.
Getting the policy details right--protecting privacy and incentives for fuel-conserving vehicles--will be the giant issues in this space. Not whether the technology sweeps into the market.
State transportation and insurance agencies, are you listening?