Cap & Trade Parking Permits

Parking, like carbon and sulphur dioxide, is dramatically underpriced. And, just like CO2, the status quo is incredibly resistant to change, despite the many large environmental externalities. In Boston (and in Cambridge), residents can park for $0 (and $8) per year, while at the same time it costs as much as $3000 a year to rent off-street garage parking. One open air parking space in Boston sold for $250,000 a few years ago. That’s $2000 per square foot!

Every time these cities (and every city) talk about raising the price of residential permits, political firestorms ensue and we end up with no change. No change means as many as one-third of the cars parked on-street aren’t driven in any given week and residents happily drive within the city instead of walking, biking or taking transit because – well, they have a car! And can park it for free!

A friend has been thinking about this problem for years, trying to come up with a market mechanism that would fix the situation. And suddenly, my environmental brain crossed with my transportation policy brain and voila – cap & trade parking! What if:

Starting today, the city issues no more parking permits and those with parking permits were allowed to sell or trade them. Suddenly, the reality that those permits are worth a heck of a lot more than $8 a year is no longer contested. People who rarely drive will have to decide whether it is worth it to them to keep owning that car, or to sell the permit for wherever the market sets the price. Today in both Cambridge and Boston, parking permits allow parking only in certain specified zones. The parking permits would transfer along those same lines. In some neighborhoods, the permits would like fetch $500/year, in others, as much as $3000.

The city could decide to buy some of these permits themselves, and retire them, reducing the number of cars residing in Cambridge, or providing them at reduced cost to new-to-the-city low income families.

What would this plan accomplish? Two things:

It lets permits get to market rate without politicians having to cast votes. It lets every car-owning resident participate in this new market. It gives the city a way to cap and then reduce the number of parking permits issued in the city. Permit ownership could continue to have an annual price payable to the city. The price would cover street cleaning and road repair, as well as perhaps an annual incentive to residents who don’t own a car, or to buy residents turning 16 a bicycle for their birthday. In Cambridge, a $25 annual parking permit fee would result in about $1 million a year.

It would also reduce the number of cars parking in Cambridge, and therefore the amount of driving that gets done in Cambridge. It would or could turn Cambridge into a city of residents that would rather walk or bike for local trips (which is most of people’s trips) and provide the political demand for the bike, pedestrian, and transit infrastructure that supports this way of life.

What do you think? I need some economists to weigh in.

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Another downside for Cap & Trade: lack of transparency

The opposition says action on climate is all about raising taxes, meaning higher costs for the common man. Proponents say the bill is all about preventing the human race from a nasty, brutish, and short future, and the creation of jobs that will come with a new economy that meets the needs of the future.

As many of you know, I’ve been pretty opposed to Cap & Trade for a whole host of reasons, but I’ve been willing to bow to political pragmatism. What I really want is for the government to create a strategy that will reduce CO2 emissions in the timeframe required, and enable a new economy to flourish. I’ll take that outcome any which way it needs to happen.

But I have a new Cap & Trade fear as I watch the current debate, and remember past ones similarly built on misinformation and speedy adoption by Americans in a hurry.

If a cap & trade bill is passed (which it might), and the price of oil goes up significantly (which it will), it feels like we are guaranteed to have a Republican argument that attributes high gas prices to cap & trade. And it will be totally “provable” to people who believe what they are told. The whole point of C&T is to hide the carbon tax from consumers. Therefore, they won’t know that 80% of the rise in oil prices as nothing to do with C&T.

I think we are setting ourselves up for future political losses by offering an easy target that will require a lot of explaining to untangle. A carbon tax would be so simple, and obvious, and not be able to get mucked up with other issues. Am I wrong?


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The day after I posted the above, we find this is already being done! At a fake grassroots rally against the climate bill in Texas, the American Petroleum Institute was passing out T-shirts that read "I'll pass on $4 gas."

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Al Gore seems to be the one man on this planet who bridges science and populism without talking down, sugar coating, or playing political games. I admire him deeply on this. His Repower America campaign has the right goals working in the right time frame for action.

Washington is deep into hearings on the Waxman-Markey Cap and Trade bill which started out with relatively weak goals (20% reductions by 2020). Lobbyists are hard at work getting legacy setasides, and extra dollars for dirty energy that has to convert (paying the polluters rather than the polluters paying). Politics is driving everything while the reality of the need to reduced emissions sharply and quickly almost goes unmentioned.

This 8 minute update by Gore gives us the context. I hear the emotion in his voice -- still -- despite the large number of times he has spoken on this topic.

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“If you are pro electric vehicles, you are pro nuclear power”

This was the case built by BP Chief Scientist, Steve Koonin, at Technology Review’s EmTech conference last week (webcast available here). His case went like this:

• If every vehicle in America were electric-powered, and we achieved three times the energy efficiencies in those vehicles than we get today,

• It would require 50% more electric power capacity than we are currently producing.

• There is no way to meet this demand other than through significant nuclear power supply.

• Therefore, if you are pro electric cars, you are pro nuclear power.

This curious logic was followed by a confession of his later in the panel discussion:

Koonin noted that he had two houses: one in London, and one in California. When he was in London, he didn’t own or need a car. But he had three cars at his California house.

So I present another logic:
• If most people lived in dense mixed use communities that are well supported by a wide variety of transportation options that allow individuals (like London)

• It would require dramatically less energy – regardless of the source – to live happy and productive lives

• We likely able to meet this demand with alternative energy sources over the next 50 years in the time it will take to replace our fleets and refresh our infrastructure if we accurately incentivize individuals, developers, and cities to choose fuel-efficient and low-CO2 options (unlike the energy costs that built the California that Koonin lives in today).

• So if you are pro addressing climate change then you are a price on carbon emissions.

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Gore is Right and Did it Beautifully

Lest you assume that everything Gore says, I agree with, you would be wrong. In his speech delivered in Washington DC yesterday, he said all the right things. But I was incredibly disappointed and frustrated that he didn’t say these things when he received the Nobel Peace Prize in October, and he didn’t say these things when he addressed leaders from 190 nations at the climate talks in Bali in December. I just couldn’t understand his reticence, and I was mad at him. He knows better. And his speech yesterday proves that. He said all the important things, and he delivered the message much better than I ever have.

His complete speech can be found here.

What are these mysterious “right” points?

He enumerates a wide range of national and global problems and says “But if we grab hold of that common thread and pull it hard, all of these complex problems begin to unravel and we will find that we’re holding the answer to all of them right in our hand. The answer is to end our reliance on carbon-based fuels.”

Yes.

“Today I challenge our nation to commit to producing 100 percent of our electricity from renewable energy and truly clean carbon-free sources within 10 years.”

Yes. Critical is the 10 year time frame for significant reductions. What I found politically clever is that he has set a goal that has better meaning and resonance than the ones I’ve talked about: getting world-wide CO2 emissions down within this time frame. His goal is what is required to achieve my goal, and his is so much less scientific and opaque.

“I have long supported a sharp reduction in payroll taxes with the difference made up in CO2 taxes. We should tax what we burn, not what we earn. This is the single most important policy change we can make.”

Yes, yes, yes. Way to go Al! He is the only American politician/ leader/ environmentalist (what is he?) that has had the courage to say this. NRDC, the Environmental Defense Fund, the Union of Concerned Scientists, and Congressmen and Senators have all wimped out on this point. As I’ve said many times before, Cap and Trade solutions will not cut it. Pushing for “politically viable” solutions that don’t solve the problem is just pointless. I respect his courage for doing and saying what all those others wouldn’t. Previously, only a few scientists have had the nerve to speak out on this point (see Jim Hansen post).

Gore does embed this little tax line about 20 minutes into his 27 minute speech, and he doesn’t repeat it. And that is no doubt politically astute, but he is quite clear “this is the single most important policy change we can make.”

And so he concludes:

“Our success depends on our willingness as a people to undertake this journey and to complete it within 10 years.”

I challenge the next President, Congress, Governors, and Mayors to have the same courage and commitment.

Before the Bali talks, Gore’s climate action organization sent out emails asking for signatures to support his plan. I got the email, and searched everywhere for the plan. I never found one, and I never forwarded that email or signed on. But this is a plan I support whole heartedly, and I encourage you all to sign on so that our leaders can get to work with your important support.

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The Most Important Thing to Read on Global Warming

James Hansen, the US’s leading climate scientist, to whom I turn for climate science, spoke to the House Select Committee on Energy Independence & Global Warming, and the National Press Club on June 23 2008. His entire talk is only 4 pages. Read it. If you don’t think you'll get to it -- or maybe to inspire you to do the reading -- I’ve excerpted some of the high points.

These are Jim Hansen’s words:

I argue that a path yielding energy independence and a healthier environment is, barely, still possible. It requires a transformative change of direction in Washington in the next year…Elements of a “perfect storm”, a global cataclysm, are assembled.

In my opinion, if emissions follow a business-as-usual scenario, sea level rise of at least two meters is likely this century. Hundreds of millions of people would become refugees. No stable shoreline would be reestablished in any time frame that humanity can conceive.

Animal and plant species are already stressed by climate change. Polar and alpine species will be pushed off the planet, if warming continues. Other species attempt to migrate, but as some are extinguished their interdependencies can cause ecosystem collapse. Mass extinctions, of more than half the species on the planet, have occurred several times when the Earth warmed as much as expected if greenhouse gases continue to increase. Biodiversity recovered, but it required hundreds of thousands of years….

Carbon dioxide amount is already 385 ppm and rising about 2 ppm per year. Stunning corollary: the oft-stated goal to keep global warming less than two degrees Celsius (3.6 degrees Fahrenheit) is a recipe for global disaster, not salvation…

Solution of the climate problem requires that we move to carbon-free energy promptly… If politicians remain at loggerheads, citizens must lead. We must demand a moratorium on new coal-fired power plants. We must block fossil fuel interests who aim to squeeze every last drop of oil from public lands, off-shore, and wilderness areas. Those last drops are no solution. They yield continued exorbitant profits for a short-sighted self-serving industry, but no alleviation of our addiction or long-term energy source….

Cheap, subsidized fossil fuels engendered bad habits.


We import food from halfway
around the world, for example, even with healthier products available from nearby fields. Local produce would be competitive if not for fossil fuel subsidies and the fact that climate change damages and costs, due to fossil fuels, are also borne by the public. A price on emissions that cause harm is essential. Yes, a carbon tax. Carbon tax with 100 percent dividend3 is needed to wean us off fossil fuel addiction. Tax and dividend allows the marketplace, not politicians, to make investment decisions.

Carbon tax on coal, oil and gas is simple, applied at the first point of sale or port of entry.
The entire tax must be returned to the public, an equal amount to each adult, a half-share for children. This dividend can be deposited monthly in an individual’s bank account. Carbon tax with 100 percent dividend is non-regressive. On the contrary, you can bet that low and middle income people will find ways to limit their carbon tax and come out ahead. Profligate energy users will have to pay for their excesses.

Demand for low-carbon high-efficiency products will spur innovation, making our
products more competitive on international markets. Carbon emissions will plummet as energy efficiency and renewable energies grow rapidly…

We must establish fair agreements with other countries. However, our own tax and
dividend should start immediately. We have much to gain from it as a nation, and other countries will copy our success…


Democracy works, but sometimes churns slowly. Time is short. The 2008 election is critical for the planet. If Americans turn out to pasture the most brontosaurian congressmen, if Washington adapts to address climate change, our children and grandchildren can still hold great expectations.”

Robin’s words: We can’t get sidetracked by cap and trade agreements. They may be "politically acceptable" but won’t produce the results in the time frame required or redirect the economy as needed. We need carbon taxes “incentives” as fast as is politically possible. We should all do everything we can to make sure our next president understands this clearly. See www.350.org for ways to make your voice heard and see what others are doing.

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Get Real On Global Warming Goals

This article I wrote originally appeared in the Boston Globe on 4.22.09.

REJOICE, cry, or get motivated? After seven years of pretending global warming isn't a real issue, President Bush finally announced a national goal. Let us rejoice. The goal? "To stop the growth of US greenhouse gas emissions by 2025."

It's enough to make you cry. Who are his advisers? Clearly not the leading American climatologists who would have told him that leveling emissions by 2025 misses by over a decade that first and most critical milestone to avoid catastrophic effects of climate change.

If we want to improve our chances of averting this century the extinction of 50 percent of the species or dramatic drops in grain yields or devastating sea level rises, we have to get worldwide CO2 emissions to start a real decline as fast as possible. Scientist Jim Hansen says that if we wait until 2018 to "stop the growth of greenhouse gas emissions" then we have close to no chance of avoiding catastrophic effects. Scientist John Holdren tells us that if we plateau in 2015, our chances of averting these catastrophic effects are down to 50 percent.

All of us are caught in what could turn out to be a death spiral. Politicians suggest a roadmap of politically acceptable solutions that promise CO2 reductions in the palatable distance because they believe the public won't accept what is really required. The public, not yet adequately informed, looks to politicians to tell us the scale of response required and how to achieve it. Leadership won't lead, and the people aren't clued in.

Cap and trade is the current approach on Capitol Hill and in presidential-candidate platforms because it puts the burden of action far from consumers (voters), even managing to overlook the 20 percent of emissions that come from our personal cars. Under cap and trade, major point sources of CO2 emissions - power plants and energy-intensive factories - will take important and necessary steps to reduce emissions by retrofitting their plants and factories. But unless there is a magic wand out there that can be waved over each smokestack, retrofits and new facilities can't possibly come online in the time frame we are talking about - now, and within two to three years. Cap and trade solutions just don't cut it.

Bush's speech did have one brilliant idea that should be adopted immediately. He said that the country needs to create incentives that should be 1) "carbon-weighted to make lower-emission power sources less expensive relative to higher emissions sources," 2) "technology-neutral because the government should not be picking winners and losers in this emerging market," and 3) "long-lasting."

A carbon incentive needs to be applied immediately to everything that emits CO2. The more you emit, the more you pay. This will encourage people to choose options that produce the least amount of emissions.

The changes needed to stop the growth of greenhouse gas emissions in the next two to three years aren't Draconian. We need to reduce our CO2 production by 3 percent this year, and 3 percent each subsequent year. If we cut one of every 20 car trips, or share one out of every 10 rides, that's 1 percent of all CO2 emissions.

And so let's get motivated. We need to stop growth in CO2 emissions not by 2025, or 2018, or 2015, but by 2011. The individuals, businesses, states, and countries that accept this reality first will have a head start on the solutions needed to thrive and succeed, in the new low-carbon economy this century demands.

Politicians need to stop offering solutions inadequate to the task. Americans are strong, brave, and smart. Not only can we take hard truths, we demand them. We want to win. We want to be leaders in this new world. Give us carbon-weighted incentives and watch us lead the world.

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Carbon Taxes or Cap and Trade for Overnight Success?

A debate is raging over whether the next president of United States (we’ve given up on this president taking action) should propose carbon taxes or cap and trade. We need progress now. I will support whatever produces concrete reductions in CO2 emissions immediately and over the long term, meeting the necessary schedule. But carbon taxes are what will actually do the trick.

As far as I can tell, Cap and Trade doesn’t touch the 33% of emissions that come from the transportation sector because CaT is targeted at big industry and utilities. These big players will be forced to buy, trade, and sell for the right to emit. I don’t see how that touches you and me driving our cars (20% of America’s CO2 emissions).

A recent report by Robert Stavins of the Brookings Institute argues that Cap and Trade is less susceptible to political shenanigans and more likely to produce real outcomes. But that certainly hasn’t been the European experience. A New York Times article tells the story of an incinerator in China, financed by Europeans buying carbon credits. The Europeans paid a 100-fold markup on the cost of the reductions achieved by improving the Chinese plant, with plenty of middle men getting rich with little environmental advantage.

Carbon Taxes, on the other hand, will impact every person and sector of the economy. We will all be aware on a daily basis of the cost of our choices (drive or transit? lettuce from Chile or the one from the local farm? Insulate or turn down the thermostat?) and be able to make trade-offs based on our own priorities.

People respond quickly and immediately to price signals as I have learned from Zipcar (where people reduce the vehicle miles they travel by as much as 45% because they decide that it simply isn’t worth $8-$10/hour to go buy some ice cream or return the video). London and Stockholm’s congestion pricing schemes illustrate this reality more overtly. When they turned on congestion pricing, congestion dropped by 20-25% overnight -- literally, not metaphorically. And when Stockholm turned theirs off after the seven-month trial, it increased by 25% immediately, overnight in fact. And this is what we need, overnight success.

Stavins argues that CaT can deliver results, while carbon taxes might not. It'll take years for the investments in cleaner technologies and infrastructure to actually reduce emissions. We don't have time for these investments to be conceived, approved, drafted, built, run over schedule, etc. While we want these improvements in the long run, we need results today.

I recommend that we set the tax rate at whatever is the right price to deliver the desired reductions. We set the US CO2 emissions goal for each year and make a plan for the next decade. Then we set the price of the carbon tax. We review emissions quarterly. On schedule? We clearly have set the price right. Too much carbon still being produced? Raise the tax. Ahead of plan? Reduce the tax. We are already using a system similar to this today: the Federal Reserve changes interest rates periodically to meet money supply goals.

What about poor people and what about middle class people? Won’t this new tax be unsupportable? No. The increases in carbon taxes can be written off against income taxes. Carbon taxes can be tax neutral with respect to your annual tax outlay. But we will be focusing everyone’s behavior on the desired outcome: reduced CO2 emissions.

Given the timeframe we have in which to get worldwide CO2 emissions on a downward path (3 years?), we need to do something that works immediately. We no longer have time to for incentive plans or opt-in plans – that was Kyoto. We no longer have time to get the fine print just right or fret about the gray areas. We need to implement the tax now, monitor closely, and adjust as needed.

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Paying for Our Roads

Right now, vehicle transportation infrastructure gets its user-fee financing from a few major sources:

Gas taxes
Road tolls
Residential parking permits
Vehicle registrations

The public belief is that gas taxes pay for road maintenance and road building of everyday roads – despite the fact that gas taxes haven’t been raised in the US since 1991.

The belief is that highway tolls pay for the building and maintenance of highways on which they are charged. Parking permits and registration fees are seen as mechanisms by which taxes are extracted for no good reason.

We can assume that people don’t like taxes. They don’t much like user fees. And they really don’t like what they perceive to be unfair or “double counting.” Nor do they relish falling unexpectedly into rivers, experiencing increasingly extreme weather patterns and brush fires, significant rises in sea level, or extraordinary species loss.

Unfortunately, the reality is that our transportation infrastructure is grossly underfinanced no matter what the public thinks.

We aren’t covering even basic levels of safety and standards for good repair. We don’t have funding for expansion. We don’t charge the real cost of parking. We don’t charge for congestion. We don’t charge for tailpipe emissions. We don’t charge for contributions to global warming. We also don’t charge for a large number of other externalities (adverse health effects; other air pollution, etc.)

A thoughtfully designed user fee system encourages the behaviors we want more of. With adequate revenue sources and drivers paying closer to real costs, better quality transportation alternatives would be both in high demand and fundable! impacting frequency and quality creating a virtuous cycle.

People will choose to drive (and own a car) on a much more rational basis because the costs of driving and owning a car will be overt and highly variable.

• Drive more, pay more.


• Drive less, pay less.


• Drive a fuel efficient car, pay less.


• Drive during off-peak times, pay less.


• Shed the unused car stored on the street, pay less.

We’ll be doing more of our car errands at once; we’ll be sharing rides (GoLoco); we’ll be choosing to walk, bike, take transit when they prove to be cheaper than taking the car.

As we know, words matter. What happens when we adopt a tax and call it “congestion charging”? The public will assume that this tax covers the negative impacts of congestion and that its goal is to reduce congestion (by shifting travel to other time periods and by funding alternatives). If we are truly charging for congestion, then fees should be based on square footage occupied by vehicle (or a simple and effective proxy) and actual congestion on that road (such pricing systems are currently used in HOT lanes in California). In other words, vehicles are charged when the road they travel on is congested, irrespective of precisely what time of day it is, or exactly which geographic line is crossed. [OK, I do understand political necessities, I’m talking about policy here.]

Congestion charging should not be muddled with fuel efficient vehicles (which should not get confused with the word “hybrid”), or take into account the number of people within the vehicle (buses, taxis, and trucks should all pay the same rates based on physical footprint on the road). A congestion charged applied to a full bus and divided among 60 people comes out to a trivial amount, and a car with one person in it on an empty street – even if its 10am on a Tuesday -- should not be paying a congestion charge.

What's with incenting people to choose fuel efficient cars? Or taxing "SUVs" more than others to drive within the congested area? Everything! Fuel efficient cars still take up space and make the highway congested; SUVS should and will pay more than small cars inasmuch as they take up more space. If we start encouraging people to think that congestion taxes address all sorts of things, we will have a real battle when we need to increase fees to address financing needs.

The future holds the following requirements, so let’s plan for them.


Road Pricing. As we move toward fuel-efficient cars and alternative fuel cars, the already inadequate revenue generated under our current system of taxing by the gallon will become even more inadequate. A solar powered car still needs a road to drive on and still generates wear and tear yet wouldn't pass a gas tax. An appropriate way to get at wear and tear is based on vehicle weight. Vehicle weight and vehicle footprint can be generally related to each other, so the same piece of information can be used for both congestion pricing and road pricing. Taxing by the gallon is necessarily on its way out; taxing by the mile is the obvious solution. When we go to road pricing, we have to immediately drop gas taxes. No double counting, we’ll lose the public’s confidence. The system must appear fair and transparent to the public – as long as we don’t muck up the messaging of what our intentions are!

Carbon Tax or Tailpipe Tax. Some time in the near future, we are going to buckle down and address transportation’s contribution to global warming. In the US, transportation produces 33% of CO2 emissions. Our personal cars alone produce 20%. Cap and trade systems might be the right approach for power plants and heavy industry, but they have no effect on the 33% of emissions produced in the transportation sector.

I weary of hearing about hybrids and dual-fuel vehicles as the answer, and deserving of special treatment. We need to be outcome focused, not marketing focused. Cars that actually produce fewer CO2 emissions should get credit (a 5 year old Honda civic gets better mileage than almost every hybrid on the market, and offers close competition to the Prius. Several SUV hybrids get worse mileage than the average car in America today). A simple solution would be to add a per mile carbon tax based on type of car engine; a more complex solution would be to monitor what is actually coming out of the tailpipe. In the immediate term, we'll apply a carbon tax to gas.

So what would this look like in the future? A layering of taxes per distance traveled, with congestion pricing taxes being applied when appropriate.




What might we expect once we have installed in every vehicle the ability to bill per mile traveled?

• Car insurance rates by the mile. Drive less, less risk, pay less


• A portion of car lease payments by the mile. The value of a car is determined by fixed depreciation costs and the number of miles traveled. Leases will have fixed and variable costs.


• On street residential parking and private parking rates by the hour and time of day, as well as weight (proxy for physical footprint taking up curb space). If you park in a neighborhood with high demand for on-street parking, you will be rewarded for getting rid of a car rarely driven, or freeing up that space for daytime business use.

And then what?

People will buy cars based on stickers that tell them what they can expect for road and carbon taxes per mile. Fuel efficient cars, space-efficient, and alternative fuel cars will be in high demand.

No individuals should feel they are unfairly bearing the burden because of their unlucky proximity next to arbitrary congestion pricing boundaries, or easily tolled highways that subsidize others. Poor workers with no good alternatives to driving can receive subsidies directly from their employers; car expenses can be shared through ride sharing; quality alternatives will now be demanded by a larger fraction of the population rather than being relegated to a problem of the poor.

What are the alternatives?
Bridges that fall into the river when cars drive over them. A system where one out of every four or five dollars earned pays for a car with no available options. A mixed up revenue plan that is not outcome focused and in which revenue shortfalls or outcome shortfalls are politically impossible to correct because people believe they have already paid and have already done their part.

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