Tag Archives: Congestion Pricing

A better way to tackle climate change?

The Netherlands has proposed to tackle climate change a different way:

The Dutch government said Friday it wants to introduce a “green” road tax by the kilometre from 2012 aimed at cutting carbon dioxide emissions by 10 percent and halving congestion.”Each vehicle will be equipped with a GPS device that tracks how many kilometres are driven and when and where. This data will be then be sent to a collection agency that will send out the bill,” the transport ministry said in a statement.

Ownership and sales taxes, about a quarter of the cost of a new car, will be scrapped and replaced by the “price per kilometre” system aimed at cutting the Netherlands’ carbon dioxide emissions by 10 percent.

Traffic jams will be halved and it helps the environment,” the ministry said.

So, what if the U.S. was to try and use this as  a way to combat climate change? Well in U.S. dollars it will be a proposed cost of around 7 cents per mile.  We drive about 12.5k miles per year so that would yield a total cost of $875 annually per person.  With about 275 million motor vehicles on the road, that would yield an average of $240 billion dollars a year!  That would have a sizable impact on reducing the deficit.  If this were implemented it would have a significant impact on reducing traffic congestion and it would internalize the externality of carbon dioxide, helping to pay back for environmental damage.

Besides the political implications, (regressive taxation, blah blah) the U.S. is a much bigger country than the Netherlands and our vehicle mileage is drastically larger because we have more ground to cover.  Although technically feasible, the huge cost of implementation by putting GPS units in every car even if we exempt trucks, motorcycles and classics may be worth mentioning.   Though $875 dollars a year isn’t that bad, especially if sales taxes on cars were cut, I don’t think Americans particularly like the idea of having to pay more for their driving.  They probably won’t like the idea of big brother tracking how much you drive either.

It would make sense to just tax oil, but American’s won’t have that, especially when already faced with high gasoline prices.  But wouldn’t Americans prefer this than the high energy costs transferred from cap n trade?  I mean, the majority of carbon dioxide comes from our use of oil in transportation, although I am not sure it would be as effective as cutting carbon dioxide as cap and trade would.  And so this makes me wonder, which would be more politically effective, this or cap and trade?

HT: Mankiw

Internalizing Externalities: Traffic Congestion

Free exchange posted a paper from the NBER who found more harmful externalities from traffic congestion:

The results suggest that traffic congestion is a significant contributor to poor health in affected infants. Estimates of the costs of traffic congestion should account for these important health externalities.