Friday, September 02, 2005

Those Unintended Consequences
For as long as I can remember, I've delighted in trying to think things through to their logical conclusions, even if those conclusions aren't readily apparent. John Tierney of the New York Times had a go at this game earlier this week, in an op-ed focused on the unintended consequences of granting special privileges to hybrid cars. The particular perk he had in mind was the use of carpool lanes by designated highly-efficient hybrids. He makes a good case that this will result in more pollution, congestion, and oil consumption overall, exactly the opposite of the intended outcome.

Without a careful analysis of the number of vehicles involved, city by city, I can't confirm that Mr. Tierney's conclusion is correct, though it's likelier to be right if this benefit is extended for more than a year or two. I also need to give some further thought to the alternative he proposes. In any case, he has uncovered a thorny problem at the heart of almost every alternative fuel and alternative transportation technology: the dilemma posed by the need to make the alternative--which typically starts out requiring some form of subsidy or incentive--attractive enough to catch on without creating a self-perpetuating constituency for preserving the incentive, long after it becomes unnecessary or counterproductive.

The classic example of this is the road tax on fuels. Alternative fuels are usually introduced with either no road tax or a reduced tax, to make them competitive with gasoline. Gasoline containing ethanol has received a tax break for decades, and you won't hear any advocate of natural gas or hydrogen suggest that they be fully taxed when used in cars. Of course, as the number of cars using these low-tax or tax-free fuels climbs, tax revenues will fall, and the impact will fall hardest on states and municipalities lacking the means to make up these revenues elsewhere. LPG, which has been used in cars for years, is still not fully-taxed in all states.

Now, I have no problem with subsidizing the fuels and car technologies that we want to promote, but doesn't it make sense to rethink the mechanisms that these incentives distort, in order to minimize any long-term disruptions? If we want a future in which fuel consumption declines or disappears altogether, then taxing cars or miles driven, rather than fuel, is a better way to pay for the infrastructure they use. (I'm sure we can find other things to do with the fuel tax revenue.)

The bottom line is that government bodies need to think through the consequences of their actions concerning alternative fuels and transportation, because of the persistence of the changes involved. Anyone proposing carpool-lane access for hybrids--or a tax holiday for alternate fuels--should be required to present a clear plan for what will happen when a sizeable fraction of the cars on the road qualify. In the process, they just might come up with a better way to achieve the goal they are pursuing, instead of narrowly focusing on one particular means of reaching it. In the meantime, the discussion about incentives for hybrids may become moot, if Katrina turns out to be the final tipping point for hybrid car sales.

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