Cascadia Scorecard Weblog

Japan Gets PAYD

Here's a little something I'll be keeping an eye on:  Japanese insurance company Aioi has started to offer pay-by-the-mile car insurance. (See page 2 of this pdf.)  This is an especially nifty development, since it means that Aioi will be working out some kinks in the technology (the company will verify mileage with a device installed in policyholders' cars) which might help PAYD make the leap across the Pacific.

As we've said many times, pay-as-you-drive insurance (or PAYD) offers huge advanatages. Overall, the system is fairer than the all-you-can-drive insurance that most of us buy:  people who don't drive much tend to incur less crash risk, and they wind up subsidizing people who do a lot of driving.  Even the policies that give a little price break for low-mileage drivers still make the people who drive the least subsidize everyone else.  And not only is PAYD fairer to low-mileage drivers, it also creates an automatic disincentive for extra driving:  just as an all-you-can-eat buffet makes it more likely that you'll gorge yourself, all-you-can-drive insurance makes it more likely that you'll drive more than your really need.

We've long been hoping that some auto insurer will offer PAYD in our part of the world.  In 2003, Oregon even passed tax incentives to sweeten the pot. But so far, no company has taken the bait.  And that's pretty understandable -- PAYD suffers from the "first mover" problem, in that the first company to offer PAYD not only has to create a new market for this kind of insurance, it also has to work out all of the technical kinks in tracking and verifying policyholders' mileage. 

But if US insurers can build on Aioi's technology, much of the technological part of the first mover problem gets solved.  And if Aioi can figure out how to market PAYD in Japan, it just might convince US insurers that there might be the same kind of business opportunity on this side of the Pacific.  Neat!

Gas Fees: The Good, The Bad, and The Curious

I'm not sure, exactly, whether this news is promising or disappointing: the San Jose Mercury News reported last week that environmental advisers to Governor Schwarzenegger are calling for a new fee on gasoline that would help pay for incentives to reduce climate-warming emissions.

The good news here is that they're considering fees on gasoline in the first place. 

The bad news is that the proposed fees are tiny -- just 2.5 cents per gallon, which isn't enough to affect consumption more than a nominal amount.

The good news is that the fees will go to a good cause: there are a lot of inexpensive ways to reduce emissions, so the fees, as small as they are, could do a lot of good -- especially considering that California uses about 15 billion gallons of gasoline per year, so a 2.5 cent per gallon fee would raise $375 million per year. 

The bad news is that opponents are already up in arms, blasting the idea as an unnecessary new tax on gas.

Of course, there's also a curiosity here that's worth noting.  The proposed gasoline fees are similar to the "public goods charge" already levied on electricity bills.  But it seems as though the outrage about new "taxes" is largely reserved for gasoline; fees on electricity get a pass.  Which suggests that gasoline holds a special place in the American psyche -- we pay close attention to anything that can make gas prices go up, but let similar price increases in other parts of the economy slide by unnoticed. 

One possible explanation for this is that we're a car oriented culture, and that we've come to prize cheap, unlimited mobility.  I think that's only partially true.  To me, it seems that we pay so much attention to the cost of gas because it's the only commodity whose price is regularly and consistently advertised on busy streets. Day to day, most people get much more information about gas prices -- which stations have cheap gas, what the recent price trends have been -- than about anything else they buy.  The way that gas is advertised has made us super-attentive to its price. 

Which makes me wonder what the world would be like if the harmful side effects of gasoline (money shipped out of the local economy; greenhouse gas emissions; cost of foreign entanglements; etc.) were advertised as broadly as its price.

Of Green Mayors and Red Queens

Not much new here, really, but still worth noting: from the Seattle P-I, "Seattle sets own Kyoto goals for emissions."

To me, the thing that's most noteworthy is the admission that, if greenhouse gas emissions are really going to fall in a city like Seattle, a lot of the reduction will have to come from the transportation sector.  Seattle's electricity is already, at least nominally, climate-neutral.  Some gains can probably be made in industrial energy efficiency, and in buildings heated with gas or oil.  But the big story is likely to be in highway transportation:  cars, trucks, and buses.

Which leads to a few thoughts.  First, Nickels is making a risky promise, since it's pretty hard for a city -- with its relatively limited range of policy tools -- to get people to use less gasoline and diesel fuel.  The city government can ramp up the efficiency of its own vehicle fleet, including buses.  But that only goes so far; the large majority of the transportation fuel in the city is consumed by private vehicles. 

And while the city can take lots of steps to foster more compact, transit- and pedestrian-friendly neighborhoods -- which are generally far more fuel efficient than sparsely populated suburbs -- it's probably going to have to attract lots of new residents to do so.  (You can't create a dense neighborhood without adding people.)  But that puts the city in a bind: adding new residents could add to the city's emissions tally, even as creating compact neighborhoods reduces it.  So in terms of total (not per capita) emissions, the city could wind up running faster and faster to stay in one place -- kind of like the Red Queen in Alice and Wonderland.

The city is making its goals all the more difficult to reach, given its support for some major road projects (replacement of the Viaduct with a tunnel, plus widening the SR-520 bridge across Lake Washington).  If the transportation planners are correct, bigger roads will generate more car trips (that's what they're for, after all).  Increased traffic capacity comes with benefits as well as costs, of course; but one of the costs is to make it a lot harder to meet Mayor Nickels's emissions goals.

Of course, there are some things that the city can do to encourage people to drive less.  But most of them have to do with making it more expensive to drive -- tolling roadways in the city, taxing parking, and the like.  Those are reasonable policy options -- there are cities in the world that do those sorts of things.  But they'll be tough to pass in what is, to a large extent, still a car-oriented metropolic.

My second big thought here is that -- perhaps -- Seattle shouldn't focus on reducing climate-warming emissions from within the city itself.  This isn't necessarily an obvious point, and there may be no easy way to make this happen in practice.  But there could be easier, and more cost effective, means to reduce such emissions outside the city than inside it.  For example, Seattle city light could work with other utilities in the region to help them become climate neutral.  That could make a big difference to the region's net climate impact -- but it's not the same thing as reducing Seattle's own emissions, which is apparently the bar that the mayor has set for the city.

The mayor's set the city a big task, and I applaud him for it.  But it's going to be tough going -- it'll require a lot of creativity, and perhaps some creative accounting, to get the job done.

Inelasticity? It's a Stretch

It may come as a bit of a surprise:  despite rising gas prices over the past few years, total consumption of highway fuels in the US has actually increased, rather than fallen.  Some have seized on this phenomenon -- prices and consumption rising in tandem -- to suggest that changes in gas prices have no discernible effect on how much gas we actually use. 

The idea that gas prices have no effect on consumption doesn't accord with economic theory, to put it mildly.  And this Excel spreadsheet (courtesy of Charles Komanoff and the ever-informative Todd Litman) sheds some light on what's really going on.  Apparently, even as US gas prices have risen, so have population and GDP.  And GDP growth tends to push consumption levels up -- in fact, over the short term, gas consumption seems to be more responsive to changes in GDP than to changes in prices.

The spreadsheet tries to tease apart the two competing forces, and finds that -- all else being equal -- each 10 percent rise in gas prices is, in fact, accompanied by a 1 percent decline in gasoline sales within a year. Which suggests that, had gas prices remained stable over the past few years, consumption would have risen even faster than it did.

It should come as little surprise that, over short time horizons, substantial gas price hikes only reduce sales a small amount.  People have only so much flexibility to reduce their gas consumption over the short term -- a fact that economists have understood for years. 

But what remains to be seen is whether a sustained increase in gas prices will be accompanied by deeper declines in sales, as people begin to change houses, jobs, or cars to account for higher transportation costs.  That's what economists predict will happen; but  we'll just have to wait to see how well reality matches up with theory.

Cars for the Poor: Strange Bedfellows

UPDATE: I apparently got much of this post wrong.  See this followup post for more details.

This article from the libertarian-leaning Northwest Meridian applauds the Brookings Institution's Margy Waller -- who advocates for big-government programs to subsidize car ownership for people at or near the poverty line.

Strange bedfellows indeed.  The small-government Meridian presumably likes the idea because they feel that transit is expensive, big-government meddling.  Waller welcomes support from all corners, since as she says in this Washington Monthly article:

"[P]oor central-city residents find themselves living further and further away from economic opportunities. Evelyn Blumenberg, a professor of urban planning at UCLA, found that car-driving residents of the Watts section of Los Angeles have access to an astounding 59 times as many jobs as their neighbors dependent on public transit. Even more isolated are the car-less low-income families that now live in the suburbs—nearly half of all metropolitan poor."

Now, somewhat to my surprise, I find Waller's argument on this point fairly convincing:  the fact that many poor folks don't have car really does seem to make it hard for them to find a job.  So, despite my general belief that automobiles are already too heavily subsidized, extending car ownership to the poor and near-poor seems like it could have some substantial benefits in raising their economic prospects.

But my support for Waller's ideas only goes so far.  In fact, I think some are downright nutty.

Waller's biggest-ticket proposal -- which she discusses at length in the Washington Monthly article -- is for the federal government to subsidize commuting to work, through a system of tax credits that would cost a whopping $100 billion each year.  If I read her correctly, the value of the subsidy would be tied to the cost of commutes; that is, longer commutes would come with larger subsidies.

Obviously, Waller is well-intentioned here; she wants to help people cope with a major, and rapidly growing, daily expense.  Recognizing her good intentions, however, isn't the same thing as endorsing her ideas: to me, this is simply one of the most counter-productive, bass-ackwards transportation proposals I've seen for a while.

First, there's this:  why commutes?  Yes, commuting can be expensive, and that can make it more difficult for people to get jobs, and to hang onto them once they have them.  But low income folks face lots of equally necessary expenses -- medical care, child care, and so on -- that can be a barrier to employment.  With so many different and competing needs out there, shouldn't low- and middle-income folks themselves be able to decide for themselves what they'd like to do with a tax credit?  Waller's exclusive focus on the costs of commuting seems strange, and unresponsive to the reality that the cost of transportation isn't the only barrier to landing and keeping a good job.

And then, there's this:  if you pay people to do something, generally speaking they'll do more of it. So if you subsidize commutes -- giving people who commute longer distances a bigger subsidy -- people will inevitably wind up commute longer distances.  They'll choose jobs that are farther away from their homes than they otherwise would; and they'll choose homes that are farther away from job centers.  The result:  more miles driven, at the most congested times of day.  And that means more pressure for new roads; more CO2 emissions and air pollution; more petroleum imports; and perhaps most ominously, more sprawl, which will lock metro-area residents into the same kinds of development patterns that have served the poor so badly in the first place. 

In fact, much of the $100 billion annual commuting subsidy would simply be capitalized into land values, particularly of the most sprawling neighborhoods.  Housing that's inexpensive because it's relatively inaccessible to jobs would gain in value, as the expected value of the commuting subsidy gets incorporated into the purchase price of each house.  I haven't done any serious analysis of this. But my experience with farm subsidy programs tells me that the end result of this sort of subsidy will likely be an aggregate increase in housing prices of somewhere on the order of a trillion or so dollars.  (That's right, Waller's proposing a trillion dollar subsidy for sprawl!)  Much of the gain will be concentrated in the most sprawling housing units with the highest commuting costs.

And then, there's this:  adjusting the subsidy to the cost of the commute means that many folks will opt for a more expensive commute.  So even if you *could* walk or bike to work, the promise of a larger tax bonus might entice you change your commuting habits, or even your job.  Which would mean that, at an aggregate level, commuting to work would probably become more expensive than it is right now -- an economic distortion that would make our already-inefficient transportation system just that much more wasteful.

To me the whole idea of subsidized commutes seems poorly thought through -- and fails to recognize that even well-intentioned ideas can have all sorts of unintended, and unwanted, consequences.

Biofuels Bonanza

Three stories around Cascadia mark the spread of biofuels: biomass for heating schools, biodiesel for heating homes, and a new cross-border biodiesel project for trucks.

Brush fires in the school
The AP recently reported on a Forest Service program, Fuels for Schools, that sends the slashed brush and limbs from forest thinning to heat schools in several states including Idaho and Montana. Replacing oil furnaces, biofuels reduce cost, air pollution, and dependence on foreign oil. I'm all for finding new uses for waste products. But is this really a good idea?

We keep hearing that decades of fire suppression have built up dangerous amounts of fire-prone underbrush in the region's forests. That's probably right. Still, it's not too implausible that thinning could get out of hand, leading to a different sort of ecological imbalance. Rampant thinning may also remove soil nutrients that forests needs to thrive.  And, as we've seen with Oregon's and Washington's school funding, using wood to heat schools could create perverse incentives to thin excessively in order to give schools cheaper heat.

Still, on a limited scale, Fuels for Schools' proven benefits likely outweigh the uncertain costs.

Biodiesel for your home
The Seattle PI reports that local biodiesel fans can now put "powered by biodiesel" bumper stickers on their homes. Two Seattle companies are offering 10 to 30 percent biodiesel heating oil. As expected, it doesn't save you money and hasn't been completely proven not to damage regular furnaces, but the companies say customers are very interested.

Cross-border biodiesel
A new cross-border biodiesel project called Bio-49 Degrees will replace some of the diesel in Puget Sound Energy and BC Hydro utility trucks with biodiesel from waste vegetable oil. Much of the biodiesel will be processed and distributed by students learning the trade at two technical colleges in Bellingham and Burnaby. The cross-border collaborative is another example of governments realizing that environmental issues follow bio-geographic, not political boundaries. Air quality in Bellingham, for instance, is affected more by Vancouver than by Seattle.

Gas: Still Cheaper than Roads, Insurance, and Parking

An interesting article from the Washington Post finds that taking Metro -- DC's light rail system -- into downtown may not save suburban commuters all that much money.  Even with gas at $3 per gallon, the savings on fuel, plus wear and tear on vehicles, are offset by increased spending on transit fares.  You really only start to save if you can use transit often enough that you can ditch one of your cars; otherwise, it's a bit of a wash.

It's a useful piece of analysis, as far as it goes -- though since DC's Metro tends to be more expensive than transit systems in the Northwest, the lessons may not be transferrable.  Still, the most important part of the analysis is what's left out:

• Parking:  The article doesn't look at downtown parking costs.  That's all well and good if you get "free" parking (that is, parking that someone else pays for).  If you don't, deciding not to drive downtown could save you a bundle:  if my experience with DC is any guide, parking is way, way more expensive than gas.
• Insurance:  The article counts car insurance as a fixed cost -- which is basically right. Under the current way we pay for insurance, reducing the amount you drive doesn't necessarily reduce what you pay for car insurance.  However, if you could pay for car insurance by the mile, rather than in an "all you can drive" plan, taking transit could also save insurance costs -- which are substantial.
• Congestion and Road Space:  Road space only seems free.  But if traffic is clogged, every car on the road delays every other driver backed up behind it.  Those delays have a real-world cost -- but the driver who's imposing them doesn't have to pay.  However, if drivers actually had to pay a toll to use the roads -- and if the tolls were high enough to keep traffic flowing -- then they'd save even more by taking the train instead of driving.

The big lesson for me here is that, as a society, we've arranged things so that very few of the costs of driving accrue by the mile.  We pay for insurance a couple of times a year, and rates are only partially adjusted to account for how far we drive.  We pay for "free" parking as lower wages, higher real estate costs, and higher prices for goods and services.  We make other people pay with their time for the congestion we create, rather than paying tolls to use the roads. 

All these decisions -- and they really are decisions -- to externalize the costs of driving have this concrete result: even in one of the most congested regions of the country, one with an effective and popular transit system, it can still make financial sense to drive rather than take the train.

Driving Reign

A few weeks ago, President Bush encouraged Americans to conserve fuel by cutting back on non-essential driving.  Unlike some, I think that it's actually helpful to use the bully pulpit this way.  I just don't think it's terribly meaningful: people respond far more to prices than to jawboning.  And as  Brookings Institution scholars Robert Puentes and Bruce Katz point out, the sprawling layout of American cities makes an awful lot of our driving "essential," for all practical purposes:

[W}hat the President doesn't get when he asks Americans to curtail their "non-essential travel" is that a half-century of government policies have fueled and subsidized the growth of sprawling, haphazard metropolitan communities and have dramatically increased the amount of "essential travel" required for people to live their daily lives. Driving may not be the best option, but it is often the only option for Americans to get around.

Americans venture out in their cars to find housing they can afford because housing opportunities closer-in are thwarted, while new developments on the suburban fringe are subsidized. Taking transit, biking, or walking to the corner market or to jobs located off the highway exit is neither safe nor feasible because of policies that segregate uses and cater to the car rather than the pedestrian. Federal and state policies make highways easy to build and relegate transit and other alternatives to second-class status.

These policies come with a huge hidden price tag for families, in the form of higher local taxes (to pay for needed infrastructure) and the ever-rising costs of buying, driving and maintaining cars.

Neil Pierce has similar thoughts in today's Seattle Times. 

It's a Gas Gas Gas

Wouldn't you know it -- as soon as the New York Times puts its editorials behind a subscription-only wall, they publish something worth reading:  semi-libertarian John Tierney waxing rhapsodic about gas taxes (sorry, the link is subscription only).

To summarize, Tierney argues for a 50 cent per gallon gas tax, with all receipts used to fund private Social Security accounts.  This, he says, would simultaneously reduce gas consumption, pollution, congestion, and all the other costs that drivers impose on the rest of society, all while enhancing retirement revenue.  And if gas taxes revenues are split evenly among all citizens, the poor (who drive little) will get far more out of the deal than they put in.

Now, I'll ignore his Social Security proposal -- which isn't a real proposal, just a sketch of an idea -- except to say that I'm skeptical, but (hopefully) open-minded.  But what's important to note here is this:  Tierney is calling for gas taxes to be used for something other than transportation.  And that seems like a really big deal to me.

Traditionally, gas taxes are earmarked for roads and highway spending:  the federal gas tax is devoted almost entirely to transportation projects.  Likewise, Washington state's gas tax receipts must be spent on highways.  It's in the state constitution, even. 

All of which means that gas taxes are mostly used to build new roads and "improve" old ones -- which encourages more driving.  That's good news for oil companies, auto manufacturers, and for people who really like to spend time in their cars; but obviously bad in lots of other ways.

Now, the thing is, gas taxes are fairly unique in this regard. Sales taxes aren't earmarked for programs to increase sales; income taxes aren't earmarked for programs to enhance income; so why are gas taxes, and gas taxes alone, treated as a dedicated funding source that can only be used to increase driving and, indirectly, gas consumption?  It doesn't make much sense -- and, obviously, it's a major reason that our society spends so much money on roads and transportation generally.

It doesn't have to be that way.  There's no reason that gas taxes can't be treated as just another general revenue source, just like sales and income taxes; or that they can't be earmarked for something other than transportation.  That, rather than his thoughts about Social Security, seems to be the important thing to take away from Tierney's article.

The Nature of Trend Watching

High gas prices may be grabbing headlines, but there's another trend worth watching: the Northwest's faltering ecosystems. Our (in)attention to ecosystem health is an example par excellence that we should measure what matters. All too often the converse is true: we let what matters be dictated by what we can measure.

Biological systems are enormously complex and are inherently dynamic. So precise up-to-the-minute trend data is usually not available. And because we can't measure and report on ecological conditions in a timely fashion that keeps pace with the demands of the 6 o'clock nightly news or the frenetic blogosphere, we often simply ignore the state of our ecosystems.

But for a change from fast news to slow news, consider today's news reports on the state of biological systems in the Northwest.

The Seattle Post-Intelligencer reports today that a joint study from the Center for Biological Diversity (CBD) and Friends of the San Juan Islands shows that 957 species in the Puget Sound area are at risk of extirpation. In addition to habitat loss, the principal agent of harm, the report fingers the usual suspects: "Pollution, climate change and invasions by non-native species..." (Read CBD's press release here.)

And in California, the San Francisco Chronicle reports that an attempt to expand the range of southern sea otters is now considered a failure. Members of the southern sub-species, now restricted in range to California, were unable to achieve viable population stability after being relocated to San Nicholas Island near Santa Barbara. Of the 140 otters transplanted there roughly 15 years ago, only 32 remain today.

In Oregon, the Eugene Register-Guard reports on the findings of a study by the Xerces Society for Invertebrate Conservation. Xerces demonstrates that forest insect outbreaks, an increasingly nasty problem for Northwest forests, cannot be addressed by logging or thinning the forests. In fact, cutting may actually make the problem worse. That's germane to the awful situation for forestry in British Columbia, where the mountain pine beetle is steadily wrecking havoc on the province's interior forests. A good piece on the economic implications for BC appeared recently in The Tyee.

None of these trends changes in a meaningful way on an hourly or daily basis. Each of them takes years to develop, the aggregate of many days of slow trends compounding, but their effects are far reaching. Will Puget Sound's biodiversity continue to diminish? Are the southern sea otters long for this world? Will the Northwest's forests--and forest economies--fall victim to a plague of insects?

The answers to these questions matter, but they are not easily quantifiable and they do not fluctuate often enough to warrant regular reporting. So we tend to lose sight of their significance and even the direction of the trends.

It's not that gas prices and economic trends don't matter--they certainly do--it's that our society's obsession with new data is blurring our vision. We see only the daily headlines, not the long term slow trends that may have a greater effect on the future for our children, our place, and even ourselves.