Is Environmental Economics (the blog) having an impact?

January 20, 2006, John wrote:

OK, I'm starting to get it. We should raise the gas tax to $1/gal but, if we can tax mileage, that would be better (in terms of efficiency). I dig it (that's 70s cool talk for our youngish readers)! But I'm not getting over the $700 million up front costs, and that's just in NC, anytime soon.

May 8, 2007, I wrote:

...I have a proposal--I'll call it a fuel efficiency payment.  Here's how it works:  All cars are subject to an annual fee based on miles driven.  The fee will be per mile driven and will be inversely proportional to the EPA calculated city fuel efficiency figure.

Here's how it would work.  Each year, drivers will be required to have their mileage checked at an authorized service facility.  Based on the EPA certified city fuel efficiency rating provided by the EPA for the specific type of car, the car owner will pay a fee (call it F) per mile driven. The fee will be equal to the inverse of the EPA fuel efficiency figure.

You think we just sit around our office and spout economics with no real impact?  Read on...

Here's how it would work.  Each year, drivers will be required to have their mileage checked at an authorized service facility.  Based on the EPA certified city fuel efficiency rating provided by the EPA for the specific type of car, the car owner will pay a fee (call it F) per mile driven. The fee will be equal to the inverse of the EPA fuel efficiency figure.

December 27, 2008 the Democrat Herald reports:

A year ago, the Oregon Department of Transportation announced it had demonstrated that a new way to pay for roads — via a mileage tax and satellite technology — could work.

Now Gov. Ted Kulongoski says he’d like the legislature to take the next step.

As part of a transportation-related bill he has filed for the 2009 legislative session, the governor says he plans to recommend “a path to transition away from the gas tax as the central funding source for transportation.”

What that means is explained on the governor’s website:

“As Oregonians drive less and demand more fuel-efficient vehicles, it is increasingly important that the state find a new way, other than the gas tax, to finance our transportation system.”

According to the policies he has outlined online, Kulongoski proposes to continue the work of the special task force that came up with and tested the idea of a mileage tax to replace the gas tax.

The governor wants the task force “to partner with auto manufacturers to refine technology that would enable Oregonians to pay for the transportation system based on how many miles they drive.”

The online outline adds: “The governor is committed to ensuring that rural Oregon is not adversely affected and that privacy concerns are addressed.”

When the task force’s study and test were in the news in 2006 and 2007, critics worried that the technology could be used to track where vehicles go, not just how far they travel, and that this information would somehow be stored by the government.

In more than one interview with the Democrat-Herald and others, James Whitty, the ODOT official in charge of the project, tried to assure the public that tracking people’s travels was not in the plans.

The task force’s final report came out in November 2007. It was based largely on a field test in which about 300 motorists in the Portland area and two service stations took part over

10 months, ending in March 2007.

A GPS-based system kept track of the in-state mileage driven by the volunteers. When they bought fuel, a device in their vehicles was read, and they paid 1.2 cents a mile and got a refund of the state gas tax of 24 cents a gallon.

The final report detailed the technical aspects of the program. It also stressed the issue of privacy.

“The concept requires no transmission of vehicle travel locations, either in real time or of travel history,” the report said. “Accordingly, no travel location points are stored within the vehicle or transmitted elsewhere. Thus there can be no ‘tracking’ of vehicle movements.”

Also, the report said, under the Oregon concept of the program, “ODOT would have no involvement in developing the on-vehicle devices, installing them in vehicles, maintaining them or having any other access to them except, perhaps, in situations involving tampering or similar fee evasion activities.”

Equipment for the Oregon test was developed at Oregon State University.

Whitty said last year it might take about $20 million to establish that the mileage tax is commercially viable. Eventually, GPS devices would have to start being built into cars, and fueling stations would have to be similarly equipped.

The gas tax would stay in force — Kulongoski has proposed that it be raised 2 cents — for vehicles not equipped to pay the mileage tax.

We'll take the conspicuous absence of a mention as silent confirmation of our brilliance. 

Comments

[odograph]

1.) So is the impact a perceived change in future policies? (As opposed to say some kind of net and real improvement in the world around us?)

2.) The GPS systems seem an odd 'win' for the environment. (They actually offer relatively less penalty for driving guzzlers those miles.)

[Carlos Ferreira]

It's certainly more efficient to charge for the output (Km travelled) than by the input (litre of fuel bought). An input tax in "blind" to the car's fuel efficiency and emissions. Even better than that would be to install a C02-o-meter at the very end of the car's tailpipe, and enter all car owners in the CO2 trading scheme. It would, at least, get over the worries about being tracked wherever you go. But is it feasible?
The monitoring costs would probably be prohibitive, as would be the enforcement costs. What is the optimum level of non-compliance admissible? What I mean is a program as complicated as this has some very large costs. These costs are a vertical sum over the Marginal Abatement Cost curve; failure to account for them will result in a sub-optimal solution.

I submitted a 10-page assignment on monitoring and compliance a couple of months ago; please check the chart 3, at the beginning of page 5 to see what I mean:

http://www.scribd.com/doc/8688185/Encon-Env-Policy-Ass-b

[Carlos Ferreira]

Not sure I understood you, odograph.

A scheme as this one can be used, as pointed, along with an emissions standard, charging drivers the inverse of their cars emissions.

Also, concerning real improvement and policy improvement, I suppose the former is pretty much a consequence of the later.

[odograph]

Yes Carlos, a GPS system could be combined with a car's emissions data to account externalities, but that's not the way it's being used:

"As Oregonians drive less and demand more fuel-efficient vehicles, it is increasingly important that the state find a new way, other than the gas tax, to finance our transportation system."

It is to rebalance costs away from the higher gasoline consumers.

[David Zetland]

I don't get it. Holding gas consumption equal, you want to tax the Prius owner MORE than the SUV owner? Because they "use" more road?

Well then, you have to tax WEIGHT, because heavier cars cause heavier wear (I think trucks are account for 80% of road wear), BUT heavier cars use more gas -- so we are back to square one, i.e.,

Holding mileage equal, the Prius driver will pay less tax than the SUV driver.

Let's stick with the gas tax (carbon tax, fine).

[odograph]

BTW, the really perverse thing about the GPS program is that as yet total US fleet mileage has barely budged.

While California is looking for inducements (credits and HOV stickers) for high mileage cars, Oregon is putting in disincentives.

It is NOT like they've got a high-mileage fleet to worry about.

[Wy]

Uh ... why in the name of Al Gore would you want to 'rebalance costs away from higher gasoline consumers'????

If the goal is to reduce CO2 (which is directly attributable to gasoline consumed) and wear on roads (which is correlated with gross vehicle weight - it takes more gasoline to move a bigger vehicle, and bigger vehicles cause more road wear) ... a raising the gasoline tax towards a funding target (for maintenance + CO2 offsets) based on previous year revenue is the least transaction cost way to go.

It's not very fancy, however. And the whole concept of non-inflation-indexed cents per gallon taxes ... just means inadequate funding for maintenance over a long term as the number keeps slipping away from the real costs.

[Hydra]

"It's certainly more efficient to charge for the output (Km travelled) than by the input (litre of fuel bought). An input tax in "blind" to the car's fuel efficiency and emissions. "

HUH? How's that again? How is the mileage tax less blind to fuel efficiency and emissions? Isn't the fuel tax, in fact, hypersensitive to excess HP and weight?

I suppose it is possible to have a car that is initially efficient, but maintained so badly that it eventually has bad emissions, but woudn't that also imply the car was getting worse mileage and paid more fuel tax? With a mileage tax a well maintained car and a polluting wreck would pay the same tax.

How is a mileage tax calculated inversely on the (entirely hypothetical) EPA mileage estimates any different from a fuel tax, other than creating a whole new (and addtional) industry to monitor it, and being a lot less accurate?

If it turns out that we have fewer, more efficient vehicles, driving less mileage, then all we need to dois adjust the fuel tax to the new realities.

I don't see that the mileage tax buys anything, either environmentally or economically.

Hydra

[robertdfeinman]

I proposed a variation on the gas guzzler tax. When you buy a vehicle the difference in EPA mileage and some benchmark is used to calculate a tax.

So if the benchmark is, say, 35mpg and your purchase gets 30 and the tax is $1000 per, you would pay a $5000 tax up front. This tax could be prorated so that subsequent buyers have to repay the seller for the remaining projected life of the vehicle.

The advantage of this scheme is that it is easy to administer and puts the negative incentive to buy inefficient vehicles up front. This should aid in altering behavior more quickly than taxes which extend over the life of the vehicle.

Cars which perform better than the benchmark would enable their buyers to get a rebate.

[Hydra]

At one time, my wife and I drove identical cars.

She got half the mileage and wore out brakes at twice he rate I did.

Then she could not understand why she got rear-ended - twice.

Any tax that is based on hypothetical EPA mileage, cannot pssibley be as effcient, accurate or easy to adminsister as what we already have.

Wy is right: we got ourselves in this mess by not indexing properly, otherwise there is nothing wrong with the fuel tax.

RH

[Tim Haab]

Hydra and Wy,

Here's the end of that May 8, 2007 post:

Now that I've hopefully convinced you that a fuel efficiency payment will act as a type of gas guzzler tax that would be less of a burden on lower income drivers, would provide incentives for decreasing miles driven and would encourage a switch to more fuel efficient vehicles, I'd like to point out that the fuel efficiency payment is algebraically identical to a $1/gallon GAS TAX** that many economics including John and me think would go a long way toward solving many of the transportation related externalities.

[odograph]

Is Oregon doing an efficiency tax somewhere else?

This bit here has the reverse effect:

A GPS-based system kept track of the in-state mileage driven by the volunteers. When they bought fuel, a device in their vehicles was read, and they paid 1.2 cents a mile and got a refund of the state gas tax of 24 cents a gallon.

The more gallons burned, the higher the refund.

[joshua corning]

hmmm last year it was the government sponsored pigovian scheme to get low interest loans so low income poeple could get homes...a plan to solve a real problem that was supposed to cost us no money.

Now we have a pigovian scheme to tax fuel....a plan to solve a non-existent problem that will cost us money.

I reiterate....This will not end well.

[Carlos Ferreira]

Odograph, I see what you mean. It still has the potential to be used as an effective policy, though, as long as it penalises the most polluting cars the most, and is not too expensive to operate.
They're probably building it this way to increase the incentive for people to opt for this program?

[Eli Rabett]

Much easier just to tax vehicle weight and engine size. You are proposing the Ira Magaziner solution, complicated, unworkable and guaranteed to confuse people.

[Eli Rabett]

Much easier just to tax vehicle weight and engine size. You are proposing the Ira Magaziner solution, complicated, unworkable and guaranteed to confuse people.

[Hydra]

"Now that I've hopefully convinced you that a fuel efficiency payment will act as a type of gas guzzler tax "

No, you have not convinced me. Why is this new bureaucratic boondoggle any more efficient than the fule tax we already have? The heavier, more HP, and less efficient your car (and your driving) the more you pay. It is automatic, and precise.

Nothing in you proposal captures all of these variables accurately. It is just a WAG based on artificially contrived EPA tests. I don't see ANYTHING that is improved by this, least of all the environmental causes.

I'm sorry, but sit still seems dumb as a box of rocks to me.

Hydra

[Hydra]

"the fuel efficiency payment is algebraically identical to a $1/gallon GAS TAX** "

Then why not just have the gas tax? Why go to all this trouble?

This is the problem with any new funding scheme: first you have a new scheme to pay for (maybe we only need a 90 cent gass tax), and then it is ALWYAS algebraically the same as some level of gas tax, for which we already have collections in place.

Just do it and get it over with.

Hydra

[odograph]

Hydra, you are "pseudonymous" and that trumps the value of your ideas.

[Tim Haab]

Hydra,

I was trying to make the point that a gas tax is much simpler way of getting at many of these issues. Unfortunately, the simplicity was lost and everyone thinks I prefer the complicated solution. Trust me, I lead a very simple life and prefer all solutions to be simple.

[Deborah]

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Deborah

http://termlifeinsurance2.com

[Hydra]

Isn't Odograph pseudonymous, also?

Hydra

[Hydra]

Tim:

Duh! I missed it entirely.

Hydra

[Thomas]

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