No Excuse to Avoid Bold Reform

While $1.67 gas will provide temporary relief for beleaguered household budgets, historians may one day bemoan this bout of cheap bas for taking pressure off of elected officials to take bold action against oil dependency at precisely the time when legislative opportunities came before them.

A major test will be the Economic Recovery. If Congress is serious about spending infrastructure dollars wisely, it will make sure the stimulus bill spends taxpayers dollars for 21st century transportation, not just to inflate the dysfunctions of our current system.

Towards that end, House Transportation and Infrastructure Chair, James Oberstar’s outline for spending infrastructure funds is a big step in the right direction. By providing $12 billion for public transportation (compared to $30.25 billion for highways), it would be a long-overdue break from 80-20 split of funds that has existed since the 1970s. By insisting that funds be spent in 90 days, the plan would indirectly favor addressing America’s backlog of repair and maintenance projects rather than new highways that would worsen oil dependence. Finally, the plan would introduce reporting on exactly how the money was spent and how many jobs were created – a measure of accountability that is sorely missing in the distribution of federal transportation funds.

Advancing these principles will help America’s long-term prosperity while creating at least as many jobs as traditional no-questions-asked highway construction. Let’s hope that legislators realize $1.67 is no excuse to avoid bold reform.

Although the current low price of fossil fuel poses a temporary setback to the market for greater energy efficiency, it is providing an important near-term economic reprieve for millions of Americans struggling right now to make ends meet. It is surprising in these circumstances to read so many comments urging a significant increase in the gas tax.

Before we can even begin to think sensibly about whether to raise the gas tax, we need to decide what it is and why we are collecting it. Is it a “sin tax” whose chief purpose is to discourage the consumption of what we’re taxing? (Think cigarettes and booze.) Or is it a user fee designed to raise money for infrastructure improvements that benefit the people we’re taxing? One thing’s for sure: It can’t be both. And before deciding whether we want it to be a sin tax or a user fee, we need to ask whether it can really work very well as either.

Raise your hand if you think Congress can be persuaded to increase the gas tax by $1 to $2 a gallon – the amount necessary to change long-established habits in a meaningful way. (Hint: The last gas tax donnybrook produced an increase of 4.3 cent a gallon.) Trust me on this: Congress isn’t about to embrace the sin tax approach.

As a user fee, on the other hand, the gas tax worked like a charm for decades. It enabled us to connect up the country with highways that were the envy of the world, and users properly bore much of the cost.

Alas, it’s not working like a charm any longer. The most pressing transportation problem today is not connectivity; it’s congestion. What we need today is a user fee that helps manage demand – that can be varied from facility to facility and over the course of the day. The gas tax allows no such calibration. Drivers on crowded urban Interstates at rush hour pay no more than nocturnal drivers on lonely country roads. The gas tax not only fails at demand management; it also fails now to generate revenues sufficient to support the infrastructure investment we need. Improvements in vehicle fuel efficiency mean that fewer dollars are collected at any level of highway usage, while highway and transit spending of gas tax receipts steadily increases under successive reauthorizations. And when prices spike and less gas is purchased, gas tax proceeds shrink further.

Sooner or later, we will figure out that taxing a commodity the consumption of which we are trying to discourage isn’t an optimal formula for the future of America’s vital surface transportation system. It conflates and confuses our transportation, energy, and environmental policies. The gas tax will never raise enough money; it can’t be applied in a way that engenders the most efficient use of the system; and Congress will never raise it to the point where it actually alters driver behavior.

For now, we certainly need to keep the gas tax in place; there is no immediately available alternative. With so much stimulus money being pumped into surface transportation, commencing difficult deliberations on whether to raise the tax even as much as ten cents probably isn’t a worthwhile use of scarce Congressional time. Given the technology available today, however, it is essential that we begin to transition as quickly as possible to a far more effective approach. The most attractive alternative by far is a satellite-based mechanism that facilitates metering and charging for vehicle miles traveled (VMT) anywhere in the system. Charges could be adjusted dynamically -- by time, location, and even by vehicle and engine type, in a way that internalizes the real costs users impose on the system in a meaningful way, moderates congestion, and even accelerates the transition to more efficient vehicles. Hardship cases could be addressed through direct government assistance. But the net result would be a transportation system that works, now and in the future. The transition to a user fee system based on VMT would deconflict our energy, environmental, and infrastructure policies at long last and facilitate clear-headed approaches to all.

In his post Ken Orski made several observations on the forthcoming report by the National Surface Transportation Infrastructure Financing Commission which I have had the honor to chair. In particular Ken called into the question the wisdom of the calling for a 10 cent increase in the gas tax.

I should note that the Commission has not yet issued its final report (we expect to do so in early February), but since all of our Commission meetings have been open to the public, some of the recommendations that the Commission have discussed have been widely reported.

But since Ken, nor anyone outside the Commission has seen the actual report, his post does not mention the wide ranging and numerous recommendations that the Commission will be making. In fact, the lion’s share of our recommendations and emphasis is on issues other than the gas tax.

Having said that, yes the Commission is recommending that as part of reauthorization that Congress consider raising the gas tax 10 cents a gallon. The Commission believes that the level of underinvestment in our nation’s surface transportation system is quite significant and that while other funding and financing measures are needed, including transitioning to a more direct pricing alternative to the fuels tax, there is a serious short-term funding gap and the gas tax, as well as increased use of tolling, is a critical component in addressing.

Ken suggests that now is not the time for a gas tax increase. But as he knows if a gas tax increase were included in reauthorization it would not be implemented until mid-2010, and consensus economic forecasts predict that the economy will be in recovery by then, especialy if Congress passes a sizeable stimulus package.

He goes on to argue that if a gas tax increase is passed next year that increases in gas prices will reduce support for it. Yet, the Energy Information Administration suggests that gas prices will still be low in 2010.

Finally, Ken suggests that additional revenues won’t be needed because of stimulus. If his assumption is true, this logically means the federal government won’t need to help states and localities advance tolling either, since there will be no need for the revenues. But the Commission has found that the national (federal, state and local) investment shortfall is so large that even the most ambitious stimulus package devoted to roads and transit would make up perhaps 1 or at most 2 years of the shortfall.

So while a modest increase in the gas tax cannot and should not be the only solution to the crisis, or even the most important one, it’s a needed component of an overall solution to make sure the America’s surface transportation system gets back on track. The Commission's final report will have much more to say about what the entire package of solutions should be.

Basing policy on forecasts of the price of oil can be tricky. I was at CBO during the energy crisis of 1980. Our energy group forecast that the price of oil would continue to increase rapidly – I recall numbers of $80 a barrel or more: equivalent to $200 a barrel today. But in fact, prices dropped rapidly, reaching the teens from the mid 1980s through 2000. The most serious energy crisis faced by the US has not been based on price, but rather the shortages experienced in the 1970s. Efforts to move closer to energy independence would help reduce this risk.

I know that once again the conventional wisdom is that the price of oil will rise dramatically – one blogger mentioned $10 per gallon gasoline. In reality, we have only had a one-year jump in the price of oil – admittedly a pretty spectacular jump. Another blogger mentioned that a “high-oil-price, carbon-constrained future” called for a shift in the current mix of federal funding for highways and transit, with a dramatic increase in the share of funds for transit.

I have two questions. First, if we do face a world of long-term high prices for energy, should we not emphasize more efficient ways to move people and goods regardless of mode? This would call for a change in the types of transportation investments we make for both highways and transit. Technology, for example, offers a number of opportunities for highways to improve energy efficiency. Second, should not the real decisions about spending on transit versus highways be made at the regional level rather than by the federal government? Perhaps another way to phrase this debate concerns how best to split the federal dollar between 1) those portions of the network with national significance and 2) regional or metropolitan transport investments. This would then allow state and/or local bodies to decide the most appropriate allocation between highway and transit investments in their region.

Some Reflections on the Financing Commission's Recommendation for a Gas Tax Increase

Predictably, the Financing Commission's recommendation for an "immediate" 10-cent/gallon gas tax increase (or a 50% increase in the current tax, as some press reports put it) has raised a storm of criticism, reminiscent of the negative reaction that met an earlier tax increase recommendation by the Transportation Policy Commission. Much of the current criticism has centered on the fact that the feasibility and timing of a gas tax increase cannot be divorced from the political environment and the economic conditions prevailing at the time. The conditions that would allow a tax increase to be seriously considered include: (1) the state of the economy; (2) the price of gas at the pump; and (3) the immediate need for additional resources. Currently, there are serious uncertainties concerning all three conditions:

(1) Many economists predict that the economy will experience a relatively slow recovery, perhaps lasting several years. As long as the country is in a recessionary climate, any tax increase, especially one that would disproportionately affect the low income population, will be politically questionable.

(2) The acceptance of a gas tax increase will also depend on the price of gas prevailing at the time. Admittedly, a 10-cent/gallon increase in the price of $1.55/gallon gas would probably meet with a minimum of organized opposition. However, most experts do not expect the price of oil to remain at the current $50/barrel level. As the price of gas begins to climb up again, reflecting the long-term upward trend in the price of oil, the political acceptance of a gas tax increase will become more problematic.

(3) Finally, the need for a gas tax increase will depend on the necessity for additional transportation resources. Here the impact of the stimulus bill cannot be ignored. An injection of a substantial sum of stimulus money would lessen the need and pressure for an immediate increase in the federal gas tax. As long as the stimuls funds kept flowing, Congress would feel a reduced sense of urgency to increase an unpopular tax. Besides, we do not yet know the size of the stimulus package to be devoted to transportation. It may amount to several times the proposed 10-cent increase in the gas tax (estimated by the Commission to be $20 billion/year).

The bottom line: The Commission's recommendation for an immediate hike in the gas tax may be premature. I hope that my good friend and fellow blogger, Rob Atkinson, Chairman of the Financing Commission, will respond to these observations.

Robin, I love the video as well and I am reminded of a different Toles cartoon about the stimulus.

One comment I have about the role of the gas tax. Several years back, someone remarked to me that development impact fees are revenue-generating devices, and have little actual effect in terms of steering development since they are a relatively small expense. Unless we are talking about a very large increase in the price of gasoline at the pump, the same applies to the gasoline tax. It is a revenue-enhancement tool that has little impact on behavior. First, it is a relatively small portion of what people pay for a gallon of gasoline, and second, travel demand is inelastic. In fact, at least in the short-term elasticity appears to have dropped substantially over the past few decades as Dan Sperling and others found in a recent analysis.

Prices this past year did have a serious effect on travel demand (and on vehicle purchasing decisions). They had to reach record levels to do so, and we may well see similar trendlines in the near future. But, as Rob Atkinson rightly says, even if we put a price on carbon via new policy it is unlikely to yield a similarly large price increase.

What this means for transportation policy -- in addition to underscoring the importance of fuel economy performance standards as a complement to climate policy -- is that our focus should be on how revenue is spent. So to answer Lisa's last question more directly than in my last post: Regardless of whether and how much we boost the gas tax, investments should prepare us for a high-oil-price, carbon-constrained future. We need to adjust our portfolio for the 21st century. For starters, we should dramatically improve the 27-year-old deal whereby new revenue is divided 80-20 between highways and transit. That seemed sensible in a time of cheap oil and ignorance about our climate challenge, but 2008 ushered in a new era.

What about one to ten dollars a gallon?

$1.67 is an interesting number, but suppose we look instead at a broad range of possible prices -- for example something in the order of anywhere from one to ten dollars a gallon. Now that is an interesting question. What does a spread like this mean for national policy? And If you are uncomfortable working with that huge range, well you better get used to it because it is just one example of what we call the New Normal. That's the kind of thing that we need to be prepared to look at, understand, and work to make wise policy. That's our future. And we can either make it, or sit back wait for it to happen to us. It’s our choice.

To make some sense of this and lend what I hope will be a helping hand to the incoming transportation team, I would like to look at the future of continuing large swings in the price of gas at source and at the pump from two very different perspectives. The first is that of someone born and raised in a rural small-town environment in northeastern Mississippi, which today looks a great deal different from how things were when I was a child there. The second is from the vantage of a strategic planner with a special interest in the politics of transportation from both a sustainability and global perspective. I would then like to see if we can find a way to put our heads together in order to piece the best ideas/opportunities of these two presumably polar positions together for policy purposes for the incoming administration. I am sure we can do it.

Let's start with the Mississippi perspective. In many ways a typical citizen's-eye of what this is all about.

Letter from Mississippi

Today down in the lightly settled rural areas around my hometown of Amory Mississippi there are at least three unyielding realities which most of our friends and neighbors have to figure out how to live with every day.

• First, that the time in which our town was a lively place which served to provide both the people who lived in town and surrounding communities with a wide range of goods and services all within walking or biking distances somehow disappeared in the closing decades of the last century. No one here is quite sure of how or why it happened -- but it did and it was a great loss. One that we really start to feel as the price of gas climbs.
  

• The second harsh reality is that as the town emptied out the only possible way of getting around today is . . . if you have a car. A very American phenomenon. But there is more to it than that.

• The third is that most of us down here are not particularly rich, meaning that when gas prices double, triple worse, it hits us a lot harder than the average American. We are not only one of the poorest states in the Union, but today more than 20% of our neighbors live below the official poverty level. And a lot more than that if you are a rural white and sadly worse yet if you are a rural black.

So as an average citizen from northeastern Mississippi I have some questions about how the new team in Washington is going to deal with the harsh realities we face both now and will surely have to face in the years ahead. This is one problem we can be sure is not going to go away by itself.

To be perfectly frank certainly the most comfortable solution for us would be a return to dollar gas. One of the great conveniences of that is that it would allow us to keep going as we have over all these last years without changing. Nobody really likes to change, at least when they feel it's being forced on them. But we look around and we know that the world is changing, and I guess that includes us to.

So the question becomes: how do we live down here with three or four or five dollar gas? I guess we had to start thinking about that now. And at five dollars a gallon we are definitely going to have to be thinking more about transportation and access, and less about cars per se -- at least as we always have in the past.

A lot of ideas come to mind as to how to deal with this, but since most of them are kind of unfamiliar, we're probably going to need some help in developing basic organizational and even legal support in order to make them work.

Here are a couple to think about which would be important for us and for many people who lived in small towns and rural areas across America:

1. We don't have very many taxis around here, and the ones we do things To cost a lot. But if we can figure out how to get more people into the taxis so as to drive down the costs and at the same time put more of them on the road, well that might be the start of something interesting.
   

1. Much in the same spirit, we have a lot of people who have both cars and plenty of time on their hands to serve as informal but still effective taxi. If we could only organize to find a system to make this work.

1. We used to hear something about car and van pooling which was used by some of our local industry employers, back when we had still local industry. That has to be an idea we could revisit, both for getting to work and for other important trips as well.

1. Likewise we have a fair number of church and school buses in the county, most of which sit around empty 95% of the time. Surely we can do something more with them.
   

1. And then what about working out some things where people want to share a car when they need it, and not have to pay the full expenses involved in owning and operating your own car.

1. There is almost no provision for cycling in this area, and there surely have to be some interesting things we could do to encourage and support this form of low-cost healthy transportation. That plus better and safer sidewalks and other protection for people who want to walk.
   

1. We used to walk a lot before we started to depend on cars, and I know there are a lot of people out here who would like to be able to do it again, if only there were a place to go to within walking distance.

Maybe I should add in closing that we have figured out that there is more to it than just cars, transportation and the price of gas at the pump. Maybe some of you up there should be telling us how we can get back to towns and small rural centers that offer something more than an empty street and closed storefronts. That has to be part of our solution strategy, wouldn’t you say?

Back in the days of the War Between the States, our part of Mississippi for a long time resisted pressure to secede from the United States of America. We were and are to this day proud and independent people. But what we now need from Washington are some clear signals and a good understanding of the realities we face every day.

We're waiting to hear from you. And you will find that we are ready to do our part.

From a global perspective

My twenty distinguished colleagues who have already weighed in with their views and counsel on this question here have covered a lot of the most important bases for which I'm grateful. They make a good read so no reason for me to try to cover the same terrain.

Instead, let me now take a couple of steps back from the heat of the action and share with you my thoughts on how this looks from a global and more strategic sustainability perspective. When we step back from the stove a couple of important things become clear::

1. We are going to see continuous, at times violent and in any event uncontrollable swings in the price of fossil fuels in 2009 and in the years ahead. This is the inescapable reality of the future, the New Normal.
   

1. At no time in the past have we seen such wide, rapid and unpredictable fluctuations. This suggests to me that whatever our future policy is, it better be very different from the past. In other words if it looks familiar we can be pretty sure that it is not going to work.

1. So we have to know that we have to innovate and we have to dare.

1. It is my firm belief that this high volatility can be turned toward to our advantage if we tackle it in a sufficiently strategic and politically savvy manner. I and a thousand others have written in the past that "a crisis is a terrible thing to waste". And since this is an excellent case in point, I hope that we will now find a way to put our brains together to make sure we don't waste this one

1. However unless there is a tidal change in our approach, the likelihood is that we are going to lurch from one hapless piecemeal “solution” to another and in the process show ourselves as unable to assume the responsibilities of good governance. This is no time for complacency and wait-and-see or more of the same. I would say that we have done enough waiting and seeing for at least the next eight years.

1. The reality is that we have all the tools needed to engage a policy based on strategic, steady and significant increases in price at the pump. This is needed for all the reasons which my colleagues here have pointed out very well and which I therefore need not repeat, while at the same time ensuring that those who today are both highly dependent on their cars will not suffer – excessively, unnecessarily, inequitable -- from the necessary strategic price increases.

So we know what we have to do, and that is to work out and implement a clear game plan for these steady price increases and everything that is needed to soften the edge, beginning immediately. If Europeans can live with gas at close to $10 a gallon, Americans can too. And this can be achieved moreover without a sacrifice in life quality.

All we need is leadership to show the way.

Eric Britton

PS. I'm reading a fine book by James M. McPherson on the leadership challenges that then-new president Abraham Lincoln faced when he arrived in Washington, DC in 1861. The book, "Tried by War”, which I strongly recommend to you, offers a number of striking analogies to the situation and the stresses that President-elect Obama is undoubtedly going to have to face and deal with when he takes office in less than two weeks time. President Lincoln had plenty of advisors and plenty of generals, but things began to move in the right direction only when he took charge of it himself. That’s leadership.

You can contact the author at +1 310 601-8468 in the States or +331 4326 1323 in Europe. In either place eric.britton@newmobility.org for email or Skype: newmobility work just fine.

The most important policy lesson to be learned from the dramatic drop in gasoline prices is that market forces beyond our control will have a significant impact on what policies we propose and the likely effectiveness of these policies. While fuel prices can be tracked on a daily basis, they are not the only market force that affect transportation policy. People change jobs, companies shift locations, and new markets appear as old ones age. We live in a global economy and transportation policies that are based on a specific set of economic circumstances are likely to fail.

Much of the talk about policy options, however, often ignores the realities of the market place. Calls for new land use policies or promotion of investments of one type or another – whether “green” or with an emphasis on traditional transportation – often seem to exist in isolation of the realities of the market place. Much of our transit policy, for example, seems to assume CBD-centered work trips, a vestige of the economy of the 1960s. Highway programs often focus on state or metro needs, with limited attention to intercity freight movements or to options beyond trucks.

Robin Chase began this set of comments with a phrase used by venture capital firms about whether or not a market really exists for a new product or service: “will the dogs eat the dogfood.” This has relevance here as well. Do our policies reflect the realities of the market place? I worry that many proposals reflect our hopes, rather than the dynamic features of today’s – and tomorrow’s – economy.

In terms of a more direct response to the question, I agree with many others who see this relatively low price as an opportunity to increase fuel prices. This can be done on a modest scale (nickels and dimes per gallon) in order to provide funds needed to develop a transportation network for the 21st Century. On a larger scale, we should consider by setting a price guarantee that would provide an incentive to develop alternative energy sources – some say that $80 a barrel is needed to ensure a market for solar and wind power. Dan Sperling from UC Davis has proposed one way to implement this guaranteed price, using $3.50 a gallon as a benchmark http://www.nytimes.com/2008/11/16/opinion/16sperling.html?th&emc=th.

Robin, I love your video short. It made me think of this Tom Toles cartoon, which foreshadows what could happen in all major cities if $1.67 gasoline continues indefinitely.

Here is an amusing video short of what 2014 might look like if we choose to invest in highways and get $5/gallon gas:

http://blip.tv/file/1643573/

Energy price volatility plays havoc with the nation’s and the world’s economies. Airlines are particularly impacted by that volatility – with the most recent run-up in prices producing multibillion dollar losses. Obviously, we all want to work to reduce that volatility with prudent policies and investments to conserve energy supplies, while reducing environmental emissions and simultaneously assuring a reliable supply of fuel consistent with the needs of the economy.

In striving to reach those mutual goals, the U.S. airlines have established a tremendous fuel efficiency record with an improvement of 110 percent between 1978 and 2007. The ATA airlines are committed to an additional 30 percent improvement between 2005 and 2025. Government also has a critical role to play in air traffic control modernization and in supporting the development and deployment of alternative fuels to complement the industry’s progress. Through economic stimulus investment in modernization of our nation’s air traffic control system, the government can meet several major policy objectives: enhancing our nation’s infrastructure and improving energy efficiency, which in turn will provide significant energy security and environmental benefits. So too will alternative energy policies that expressly include support for alternative jet fuels.

Careful investment decisions made today will provide immediate economic relief while preparing for anticipated future growth. This growth will come from an industry with a proven track record for improving fuel efficiency and overall environmental stewardship – very few stimulus proposals offer that.

When gas was $4 a gallon, there was a great deal of pressure on Congress to act and provide relief to commuters struggling with the high price of gas. While Congress worked out their differences in responding to those struggles, transportation demand management programs nationwide got Americans into transit and alternative commute programs. Now that gas has fallen below $2 a gallon, pressure on Congress to act and provide commuters with relief has subsided; however, the need is still great.

The rapid fluctuation in gas prices is something that we can expect for years to come. As long the United States, as a nation, relies on fossil fuels from unstable nations, we can expect the price of energy to vary greatly. What we have learned is that provided the right incentive, Americans are willing to use alternative forms of transportation. While $4 dollar a gallon gasoline certainly propelled many American out of their cars, so too can proactive incentives that provide alternatives to driving alone.

To respond to the second question, long-term infrastructure planning should not be captive to the ebbs and flows of the short-term markets. Instead, it should look to 10, 20, and 50 year horizons to make appropriate decisions and plans. We’ve spent 50 years investing in infrastructure expansion, and those investments aren’t going to disappear overnight. Does anyone see the interstate system going away? Instead, we need to focus on the efficient use of our existing and potential future resources, whether that is framed in terms of investment dollars, fuels, time, land, materials, or other resources. From there, we can then make investment choices that respond to those long-term forecasts.

To deal with the short-term shifts in resource costs (and answer the first question), we need to invest in system operations and demand management tools that allow for the inevitable shifts based on cost signals. This is an ongoing cost of operating our transportation systems versus the capacity investments that are discussed and debated in these six-year authorization cycles. By the investment in programming, we can help provide a cushion to the public for the worst of the resource price shocks, as well as encourage system use that works towards the goals in the long term plans.

In short, we should prepare for the continuance of price shifts that we saw this summer, as we invest 1) long-term in infrastructure, and 2) short-term in simultaneous programming for assisting the public in making different mode choices.

Our approach to transportation has long been based on a simple concept, transportation user fees would be used for a single purpose – investing in transportation infrastructure. If Americans think their transportation dollars are being used for other purposes, even noble minded ones like environmental initiatives, they will continue to walk away from user fees.

While nobody doubts the wisdom of encouraging greener, more fuel efficient vehicles, relying on user fees like the gas tax to achieve those outcomes sets a dangerous precedent. Diverting our already strained user fee revenue away from core transportation projects, even to do something well-minded like improving fuel efficiency, will simply erode support for sustaining and expanding the current user-fee approach.

Indeed, this compact with drivers is being eroded from both sides. There is a growing temptation to use other sources, like general funds, to pay for transportation projects. And while that has tremendous benefits, including cutting congestion, we run the risk of undermining the long-term stability of transportation funding. If we come to rely on sources other than user-fees to finance transportation, today’s investment feast could easily turn into tomorrow’s funding famine as politicians look for easy, but unwise, budget cuts.

Once the stimulus is passed, we have to find a way to return the federal transportation program to its core mission – building and maintaining roads, bridges and transit systems, and its core source of funding – user fees. If we do that, and do it well, then we will have an approach that is reliable and effective. But if begin using gas taxes, tolls and other forms of user fees to spur social, environmental and economic change, we’ll make great headlines, and really poor progress on cutting traffic, fixing our roads and funding needed new capacity.

• By most indicators, demand for transit, rail and HOV services remains as high as last summer when gas was over $4 per gallon.
• The recent dip in gas prices should only be viewed as a temporary reprieve and an opportunity to think through the need for different ways to:
  • Fund transportation differently
  • Achieve energy and conservation goals
  • Integrate transportation and land use—better land uses can save money, time, and energy

Steve Heminger and Ken Orski have an interesting debate going below. Mr Heminger argues for raising the gas tax to increase the demand for greener transportation alternatives, as was the case when gas prices skyrocketed this summer. Mr. Orski argues against raising the gas tax and allowing people to enjoy the extra pocket money while waiting for the natural increase in oil prices to spark a demand for new energies.

Certainly both sides have merit. On one hand, we need to eliminate our dependence on foreign oil and the temporary crutch of lower gas prices is only delaying that change. On the other, a gas tax increase takes money out of the pockets of working families who are hurting the most in our ailing economy.

What this debate really demonstrates is that gas prices and consumer demand are too variable to base the argument for renewable energy on. It is critical to our economy, environment and security that we develop alternatives to foreign oil. That needs to happen regardless of the ups and downs in gas prices. Gas prices impact only the timing of consumer demand for alternative fuel sources but we know that demand will come eventually. Why let short-term, unpredictable gas prices determine when we change? We need to think long-term and act in the national interest by committing to renewable energy sources and fuel alternatives independent of temporary shifts in demand. America cannot limit its vision for a new green economy through the distorted lens of today’s gas prices.

For long-term transportation planning, we need to start thinking beyond the gas tax. Funding our transportation needs through the gas tax amounts to a user fee. But building and maintaining the fundamentals we all rely on every day is too important to be funded by a user fee as unreliable – and inadequate – as the current gas tax. Do we fund other essential public services such as police, fire and education with user fees? Of course not. And our transportation needs should not be funded soley with user fees either.

Because gas tax revenues are unpredictable in the short-term and unsustainable in the long-term, we need to find news ways of funding our transportation needs. The current transportation funding gap is huge and growing – so all funding options should be considered. However, there must continue to be a strong federal component to transportation funding because we cannot sell off valuable public assets to the highest private bidder or pass the buck to state and local governments.

The most important question we should ask ourselves is whether transportation policy should rely on the unpredictable and uncontrollable nature of gas prices. Mr. Atkinson makes a very compelling point in his analysis of the European model -- specifically that paradigm shifting technological advances have not occurred in Europe, where $4 or more gasoline is commonplace. Moreover, as Mr. Heminger points out, a great deal of the revenue from increases in market-driven gas prices results in windfalls for foreign nations. In my opinion, the Obama Administration and State and Local governments should pursue more progressive transportation policies irrespective of gasoline prices. Of course, increases in gas prices will affect transportation choices including mode, carpooling, telecommuting etc., as well as VMT, but relying on the market for the implementation of policies to achieve environmental, smart growth and land use goals is insufficient.

The Obama Administration and Congressional leaders would be wise to consider the long-term impacts of the federal stimulus package and use this unique opportunity to begin the planning and down payments for a national transportation policy as a compliment to the reauthorization of SAFETEA-LU. These national policies should be put in place as soon as possible to focus on the reduction of greenhouse gases and carbon production by investing in R&D for new technologies and reallocating funding to focus on improving mobility, specifically by expanding multi-modal flexibility. This means providing more money for public transportation and rethinking land-use regulations to concentrate economic development around multi-modal locations, including a greater reliance on walkable communities. As I have said before, this type of development can be a very effective means of creating economic activity centers that provide new jobs, are more energy efficient, pollute less and are also nice places to live. Moreover, if we create more attractive places to live that are designed around transit accessibility, people will naturally make the choice to leave their cars behind (or live with fewer cars) by virtue of convenience, not only price.

Again, the upcoming stimulus package provides a unique opportunity to forge ahead with a forward thinking transportation investment strategy irrespective of the price of gasoline, that should carry forward into the reauthorization of SAFETEA-LU. This strategy should rely on the principles of a multi-modal transportation system designed to cut greenhouse gases, reduce congestion, and improve the quality of life by moving both people and goods as efficiently as possible.

Despite $1.67 gasoline, our country seems to be no closer to coming to grips with the need for a real energy policy. Having lower fuel costs is good news for many folks struggling in the recession to make ends meet and who could not afford gas to go to work or to job interviews.

But surely, in this country where anything is possible, we can figure out a way to harness the commitment to a new energy policy that was present last summer when gas was $147 a barrel (over $4 a gallon), while ensuring that people who need help getting by can receive it.

At the end of December, oil was around $37 a barrel, making good on a prediction last fall by analyst Peter Beutel that oil would go at least this low. His prediction came in the form of a warning: that oil would go to $37 and maybe lower; that we, as a country, would lose our will to create an energy policy and we would do nothing; and that the next time we had a spike in oil prices it would go twice or three times as high as in the summer of 2008.

The aviation community came together as one last summer on this issue. Airports all over the continent worked with airlines to increase operational efficiency, and hold down costs. Hundreds of millions were saved through this collaboration. And airports did this even though their own costs were rising.

Aviation representatives including airports, airlines, engine and airframe manufacturers, and the Federal Aviation Administration (FAA) are also working jointly to identify and encourage alternative aviation fuel sources through the Commercial Aviation Alternative Fuels Initiative (CAAFI). CAAFI aims to enhance energy security and environmental sustainability for aviation through alternative fuels. Members of CAAFI exchange information about the current status of alternative aviation fuels and outline plans for their future development and introduction into service as supplements or substitutes for traditional petroleum-based Jet-A.

Fuel pricing is something that affects every American. It is just not an aviation issue but a national issue of overriding importance. This is one we all have to commit to put aside pre-conceived notions to tackle. All options must be explored. We've had 30 years of warning. We need to maintain our focus on creating an energy policy and encourage our new president to maintain his.

While consumers may welcome the short-term relief, large fluctuations in fuel prices have been confounding America’s ability to make the right energy policy and use decisions for many years. The cruel irony of falling gasoline prices is that they may dilute efforts to increase efficiency and reduce carbon emissions. As we get back to a range where bottled water is more costly than gasoline, we risk losing the momentum needed to shift to more fuel efficient and alternatively fueled vehicles. The end result will be greater vulnerability to fuel supply constraints and increased risks of climate change. Congress should use a period of lower gas prices to change the way fuel is taxed to target increased revenues at surface transportation infrastructure. This would create the twin benefits of modulating the economic effect of a gas tax increase while sending an important market signal which ties fuel use to the goal of energy independence and reduced emissions. This is the best, most market-driven, way to encourage greener, more fuel-efficient alternatives.

The recent high fuel prices forced consumers to drive less, with corresponding reductions in receipts into the highway trust fund. In fact, it is now necessary to use general funds to pay for the underlying highway construction and maintenance programs. The "user-pays" link between Highway Trust Fund revenue and infrastructure expenditures has been broken, unless and until a new system that taxes motorists according to how much they use roads and the wear and tear they place on them is devised. This makes it all the more important that Congress take a fresh approach to surface transportation reauthorization this year. It should reform the underlying programs -- making them more accountable, streamlined and mode neutral, and it should place American competitiveness and energy independence at the top of the list of benefits achieved by the expenditure of transportation dollars.

Thus, cheap gas has - as with most things that appear too good to be true - unseen costs. Its impact on the environment, energy independence, and the wear and tear on the nation's infrastructure creates a web of cross subsidies and indirect costs. Congress can cut through all this with an effective and balanced transportation program, and get it done long before the debate is finished on a "cap and trade" program.

“Winning” the “War” and Saving the World

I agree with Steve Van Beek and all the others who say we should increase fuel taxes now to create incentives for consumers to burn less oil and for industry to develop cleaner alternatives to unbridled oil consumption. I also agree with Rob Atkinson that price signals alone will not stimulate the new technologies we need to bring about cheap hydrogen, electric and other types of clean vehicles. We probably need government help to stimulate the development and adoption of new technologies. As a start, however, we have to change the national bias that now favors carbon fuels over all others. How do we make a compelling case?

Here’s another way to look at the problem. Let’s say the United States wants to win a military conflict with another country. The fastest and most efficient way to do it would be to use nuclear weapons. Drop a few nukes and the war is over. Enemy gone. (Note: I’m using hyperbole here. Don’t turn me over to any war crimes tribunal or commission on human rights. Also, don’t use nukes on an enemy who also has nukes). Now, the reality is that we don’t use nuclear weapons to win a military conflict because if we did we would (a) kill too many innocent civilians, (b) destroy the natural environment in the enemy country and surrounding lands for years to come, (c) incite the outrage of the international community of nations, and (d) give other nations permission to use nuclear weapons. Just to name a few.

Let’s look at the case of oil. For more than a hundred years, we Americans have been burning oil as quickly and as cheaply as humanly possible. Today, the fastest and most efficient way for us to travel – to work, to school, to shop, to visit grandma – is to keep using the current fleet of vehicles and to keep burning oil at an accelerating rate…until it’s all gone. What we have done over the last hundred years, in essence, is to wage nuclear war on the earth’s natural environment. And we are only now beginning to fully recognize the catastrophic results of our actions. The reality is that we are not compelled to burn oil in the future in the same way we have done in the past. With the right incentives (much higher fuel taxes and government support for technology innovation), we could voluntarily refrain from trying to win the race to burn every barrel of oil in the world and in the process AVOID (a) killing innocent civilians, (b) destroying the natural environment, (c) inciting the outrage of the international community of nations, and (d) giving other nations permission to burn all their oil as quickly as possible…with equally disastrous consequences.

Will it be hard to increase fuel taxes today to stimulate technological innovation and encourage consumers to embrace cleaner fuels? Yes. But it will be much harder to do it tomorrow when the price of gas rises to $3 or $4 per gallon once again.

As Steve Van Beek said so eloquently, we should use this golden opportunity to exercise leadership and to make the tough decisions to reorient transportation policy. Shame on us if we fail. The world hangs in the balance.

Read more at www.ibtta.org.

Even in a somewhat diminished free market like the United States economy is today, consumers still make individual choices that make economic sense to them – without regard to long-term transportation implications. Fluctuating gas prices clearly undermine the critical national interest of getting away from imported petroleum. While the current price retreat will likely be short-lived and almost certainly $3 a gallon gas will be back by the end of 2010, it does not mean U.S. / state governmental policy has to swing as wildly as consumer choice does. In fact, the current lull in gas prices provides an ideal opportunity to raise the fuel tax to invest now in the transportation system we will need when fuel prices go beyond $4 a gallon again. Or we can choose to do nothing because gas is cheap and in a year or two people will ask, “Why didn’t “they” do something when we had a chance”?

First of all, oil and therefore gasoline prices are unlikely to remain low. While this past year’s eye-popping $140/barrel price level may or may not return, it seems pretty clear that the era of cheap oil is over.

In the interim, to ensure we don’t slip into our habit -- as the President-elect has said – of moving from “shock to trance” with our oil addiction, we must use policy to press forward with efficient vehicle technology, development of oil substitutes and construction of oil-efficient transportation infrastructure to facilitate reduced miles-of-travel per capita.

Let’s set aside policy for development of oil substitutes such as research and development of battery technology for plug-in hybrid vehicles and biomass-derived liquids (a cutting edge idea is to use algae as a feedstock), as well as renewable fuel standards and the more promising low-carbon fuel standard pioneered by California’s governor. Providing consumers with more than one energy choice to fuel transportation, a sector 97-percent dependent on petroleum, is important but would require more space than allowed here.

On the demand side, continuing to raise the bar on vehicle fuel economy is crucial. Last year’s energy bill thankfully requires that new light-duty vehicles achieve at least an average of 35 miles per gallon (mpg). Britain’s standard for vehicles in 2020 is much higher at 56 mpg, but 35 mpg is a 40 percent improvement over the current fleet’s efficiency. This is a tried-and-true policy: The fuel economy standard was first enacted in 1975 in response to oil price shocks, and in ten years it doubled average car efficiency and boosted light-truck efficiency by half. While the standard was flat for the two decades after that, the initial boost ensured that by 2000 we were consuming 2.8 million fewer barrels of oil daily than would have been the case otherwise (according to a National Research Council report). The lesson is clear – when prices drop, we must keep raising the bar on fuel economy so that when they rise again we’ll be less dependent.

Thankfully Congress also made history in last year’s energy bill by enacting the first-ever fuel economy standards for heavy trucks, which consume about 2.4 million barrels of oil a day. The new Administration should move quickly to implement this policy, putting trucks on a similar, regular efficiency improvement track.

Other than technology-neutral vehicle performance standards, we must prepare for an oil- and carbon-constrained future by boosting investment in public transportation. The current public transportation system saves hundreds of thousands of barrels of oil a day. We can build on this foundation, balancing our transportation mode portfolio so it’s not so oil-dependent, and spurring transit-oriented economic development across the country. This is the national transportation project for the next fifty years as the Interstate Highway System was for the last fifty.

In the end, this is about choices for consumers, as I wrote a year ago in The Futurist magazine. Vehicle choices when buying a car, energy choices when filling a tank or recharging a battery, and transportation choices. Right now, consumers cope with a dearth of options. The best way to counter price trends is not to slip into our usual dependent trance-state, as the President-elect cautions, but to adopt and stick with policies that help unshackle consumers from the gas pump.

While most people can offset the costs of fuel by limiting how much and how often they drive a car, the trucking industry has a far more complex set of options for reducing the amount of fuel consumed. Rising fuel costs increase the cost of everything transported by truck, including food, clothing and medical supplies. Only by working together can we limit its impact.

Increasing fuel efficiency and minimizing fuel consumption are major goals of any trucking company. Those goals coincide with the global need for industries to reduce their carbon footprint and their overall environmental impact.

The trucking industry’s environmental sustainability program initiatives reduce fuel consumption, emissions and combat global climate change with innovative reductions in CO2 emissions.

The American Trucking Association’s program will reduce fuel consumption by 86 billion gallons and CO2 emissions by 900 million tons for all vehicles over the next 10 years by: setting governors on new trucks to limit speeds to no more than 65 mph; reducing the national speed limit to 65 mph for all vehicles; reducing engine idling; reducing congestion by improving highways; using more productive truck combinations; supporting national fuel economy standards for trucks; and increasing fuel efficiency by encouraging participation in the U.S. EPA SmartWay Transport Partnership Program.

The EPA has recognized ATA for promoting and helping to expand the SmartWay Program, which helps the trucking industry to reduce fuel consumption by using anti-idling auxiliary power units, lighter and less roll-resistant tires, aerodynamic equipment, special transmissions and driver training.

Though traffic volumes have lessened recently, relieving highway congestion is still a critically important strategy for reducing carbon emissions. Improving the nation’s highway infrastructure is a long-range challenge, and ATA has recommended a 20-year program, focused initially on fixing critical bottlenecks. Longer-range ideas include creating truck-only corridors which would permit carriers to further increase the use of more productive vehicles. If congestion in identified urban “chokepoint” areas were eliminated, the reduction in truck CO2 emissions would be 45.2 million tons over ten years.

A stronger focus on infrastructure spending has become necessary because of the decrease in traffic by the general public, which has translated into a smaller balance in the highway trust fund. To compensate for decreasing traffic volume, ATA supports an increase in the federal gasoline and diesel fuel taxes by 50 percent to finance highway construction and repairs, until the government devises another way for motorists to pay for using public roads

For more information about all of ATA’s recommendations for reducing emissions and delivering a more sustainable future, visit the sustainability Web site at www.trucksdeliver.org.

Getting prices right is an important, but insufficient step for improving our nation’s transportation system and reducing carbon emissions.

It is important because like any product or service consumers buy, the price of transportation services affects the demand for them. As we have seen last summer, when prices are high, consumption declines. Moreover, transportation users do not pay the full costs of using the system. Only around 60 percent of the revenues raised by all levels of government for highway funding comes from user fees. An even lower share comes from user fees based on actual use of the system (gas taxes and tolls) as opposed to fixed costs unrelated to use (e.g., vehicle registration fees and taxes). Moreover, users do not pay for the external costs they impose on the system, with the two largest being congestion and pollution (including carbon emissions). Therefore, one important step to support greener, more fuel efficient alternatives would be to raise a larger share of system revenue from marginal cost approaches, including more tolling and congestion pricing and a modest increase in the gas tax at the state and federal level, coupled with a national approach to carbon pricing (either from carbon trading or a carbon tax).

But even though we should move more toward a system where users pay closer to the full costs they impose on the system, we have be realistic about what this will accomplish. Unfortunately, the prevailing view in Washington, informed largely by the neo-classical economic doctrine, is that if we just get the prices right, the magic of the marketplace will lead to the development of the needed technologies, including cleaner cars. It's a comforting thought that appeals particularly to those who worry about government getting involved in technology development.

Unfortunately, it's wrong. Even if carbon were trading around $30 per ton (higher than its current price), gasoline prices would only increase by about 30 cents per gallon. Does anyone really believe that if we increased the price of gas by 30 cents a gallon that a market for electric cars would magically emerge? Just look at Europe where gas taxes have been on the order of $3 to $4 per gallon for many years. While these prices clearly have led the Europeans to drive smaller and more fuel efficient cars, and take alternative modes (e.g., transit, bicycles, walking) more than we do, they have not created a market for the kinds of radically cleaner vehicles, such as all electric cars, that must be created if we are to solve the global warming crisis.

The reason is simple. Radically cleaner cars (electric, hydrogen, or other technology) are not good enough or cheap enough yet. Prices only work in changing consumer behavior when they have a choice of something else that meets their needs. Electric cars, for example, will only emerge when someone comes up with battery technology that is much better than today's. This suggests that while getting prices closer to costs is needed, it is not enough. What is needed is a robust and effective clean vehicle R&D initiative with the goal of getting radically cleaner vehicles in the marketplace with performance equal to or surpassing today’s petroleum powered vehicles and at the same or lower costs. Only then will Americans switch get rid of their gas guzzling vehicles

Three Strategies to Implement Now

As with a number of issues posed by Lisa, the answer boils down to leadership. Will we use this golden opportunity to reorient transportation policy? Or will we once again put off tough decisions only to compound the challenge to future generations?

Gasoline, diesel, kerosene, and bunker fuel are fossil-fuel commodities vital to today's transportation network. This fact will not change in the short-term. Therefore, we must do several things that include: (1) support the development of alternative fuels, electric vehicles, and enabling technologies that will provide consumers and businesses with alternatives with dramatically lower (or zero) greenhouse gas emissions; (2) incentivize consumers and businesses to make mobility decisions informed by climate and energy considerations by internalizing the external costs of fossil fuels; (3) highlight and support the innovative actions of states and localities that in many cases are already providing the leadership to transition to more sustainable practices; and (4) participate aggressively in the international arena whether it is with the climate meetings this year in Bonn and Copenhagen, meetings of the International Maritime Organization and the International Civil Aviation Organization, or others.

As we work on these we should make sure that all of our public policies that support transportation align with our goals. For example, to replace our current tax/financing structure, a VMT-based fee better captures the costs of driving and can provide a simple method of generating revenue. If we are not yet ready for that, an increase in the gas and diesel taxes dedicated to infrastructure investments is a decent proxy in the short-term (its value, already declining, declines significantly if we meet our long-term conversion goals). If the increase is large, a rebate along the lines alluded to by Orski/Krauthammer would be good public policy.

Whether by land, sea or air, passengers and shippers rely on transportation to participate fully in modern society. Across the globe, as developing nations grow further demands will only increase (notwithstanding the drop in traffic due to the current global recession), compounding our challenge. Problems such as climate change, energy vulnerability, and congestion will increase exponentially if this generation does not provide strong leadership and invest intelligently now to put us on a more sustainable path. Shame on us if we fail.

See more at enotrans.com.

Environmental progress generally goes hand-in-hand with economic growth. Richer societies have the means to spend more money on environmental programs than poorer societies. While there are certainly some positive outcomes associated with high fuel prices, we should not wring our hands about a drop in fuel prices. Lower prices also lead to more disposable income – certainly a good thing for our country at this time! A stronger economy may also lead to more money being spent on environmental technologies.

It is important to add some perspective to what happened in the summer. When gasoline hit $4 a gallon last summer, Americans drove about 3% less than in 2007. Experts suggest that the biggest changes involved trip chaining, car pooling, cuts in trip length, and trips not taken at all. A small percentage (experts estimate about 2-5%) of this lost personal mobility involved a shift from driving to public transit. Indeed, the biggest losses in travel occurred in rural areas (where most transit alternatives are cost prohibitive), causing the greatest harm to those who drive work trucks, have long trip lengths, lower incomes, and few transportation alternatives. While some have applauded the impacts of high fuel prices last summer, it caused great pain for working families throughout the country.

Although larger economic problems (such as the housing market) had a greater economic impact, it is important to note that reduced travel is not good for our country’s economy. The Energy Information Administration tracks Real Disposable Personal Income, Real GDP, and Vehicle-Miles Traveled – these three factors have grown in amazingly tight correlation over the past 50 years. These trends are intuitive when one considers that most trips involve shopping, working, eating and recreating – all activities which contribute to our economic growth.

Slight reductions in travel have occurred before, specifically during fuel price spikes and economic downturns in 1974 and 1979. Experience shows that these did not cause any long-term dramatic changes in behavior, although progress was made in environmental technologies.

This is happening today at with greater urgency than in the 1970s. Automobile companies have spent billions investing in improving engine efficiency, mainstreaming hybrids, and pursuing alternative energy sources. These investments will reduce the cost of the green technologies in the mass market. Congress is helping by creating financial incentives for the R&D. These gains are our best hope for progress because technological (not behavioral) changes are the only realistic, long-term hope for greener outcomes . An examination of how we have cleaned our air over the past three decades makes this point clear.

In terms of infrastructure investments, Congress must consider programs that provide the greatest bang-for-the-taxpayers’ buck to reduce wasted fuel and emissions. That need not force people to drive less. In fact, as much as 77% of the wasted fuel and greenhouse gas emissions at severe traffic bottlenecks could be saved by improving traffic flow.

The final question asks about the impacts to long-term planning. There is a tremendous amount of backlogged, planned projects that must be funded. With fuel prices low, now is the right time to make increases to transportation user fees and invest these revenues in the Highway Trust Fund. As much as $5.70 in economic activity can be generated by a $1 investment in major highway improvements. With low fuel prices and a weak economy, this is the one tax to raise. We need serious political leaders to push the American people to support raising the money needed to invest in congestion relief, safety improvements, freight corridor development, and replacement of aging bridges.

While I am sympathetic to my "green" friends' arguments that higher gas prices would bring about desirable changes such as a shift to more fuel-efficient vehicles, increased transit ridership and reduced dependence on foreign oil, there are two problems with artificially raising gas prices through a tax increase at this time: 1) In the midst of a severe recession and rising unemployment , a gas tax increase would be economically inadvisable because it would further reduce disposable incomes just when increased consumer spending is needed to bolster the economy ; 2) the almost certain prospect of a massive economic stimulus bill ($775 billion by the latest account), a sizeable portion of which is expected to be dedicated to infrastructure, is bound to affect both the need for and the politics of a federal gas tax increase during the next two years (or as long as the extra stimulus money keeps flowing into the transportation sector.)

Charles Krauthammer offers one way around it: a zero-sum gas tax increase. Revenue neutrality could be achieved by reducing the drivers' payroll (FICA) tax or, in the case of retired people, by increasing their monthly social security payments. But this approach has its own problems: it merely shifts the burden of a gas tax increase onto other government programs (or further increases the deficit).

So my answer to my good friend Steve Heminger is: Let nature takes its course. Sooner or later oil prices will resume their upward trend and produce some of the positive changes in travel behavior and fuel consumption that we all want. In the meantime, let's be satisfied with the unexpected windfall of the stimulus money!

While high gas prices make politicians extremely uncomfortable, $4 per gallon gasoline last summer led to less driving, fewer traffic fatalities, more transit use, and serious consideration of the business case for alternative fuels. What's wrong with those outcomes?

Fuel prices and consumer demand are indeed variable, but there is no question that demand will grow as the worldwide economy recovers and that fossil fuels are a finite resource. So, over the long term, fuel prices will rise and produce some of the positive changes in driver behavior we saw last summer. We can either wait for that future to happen, or hasten it with public policies such as higher fuel taxes.

Which option should we choose? Well, consider this: a lot of the revenue from market-driven higher fuel prices ends up in the pockets of foreign regimes hostile to U.S. security interests. The revenue from higher domestic fuel taxes can help rebuild America's infrastructure and provide better transit alternatives that our citizens will need when prices return to higher levels.

Unhappily, low gasoline prices are likely to have a very adverse impact on the public’s willingness to support the steps needed to accomplish the changes which virtually everyone agrees the country needs to make in the years ahead.

We need a national energy plan designed to reduce our dependence of imported oil, thereby reducing the trade deficit and improving our national security. Thus, we should be building the national grid needed to distribute electricity from wherever it can be produced to wherever it is needed and promoting – and subsidizing as needed – the development of renewable energy. Additionally, we should be building and promoting rail and bus based public transportation options, encouraging automobile manufacturers to invest more aggressively in more efficient cars, and taking the steps necessary to optimize fuel consumption by the nation’s airlines.

In support of these efforts, we need to discourage the country’s profligate use of gasoline by imposing gasoline taxes to make our gasoline prices roughly equivalent to those in other developed countries. Doing so will provide funds to support the energy related infrastructure investments and developmental research needed while simultaneously encouraging Americans to buy and use higher mileage vehicles and to use public transportation.

Until we act to make infrastructure investments and energy related research and production projects economic – by pricing the petroleum based alternatives appropriately – we will continue the self indulgence which has created our ever escalating national debt.

We can build subways and light rail. We can throw billions of venture capital and taxpayer dollars at solar, wind, and genetically engineered power. We can mandate fuel-efficient cars and energy-efficient housing. But, as every venture capitalist so inelegantly asks, "will the dogs eat the dogfood?" Most of them won't. Not as long as gas prices stay low and carbon is not taxed. This fundamental uncertainty – what will be the future price of oil? – makes planning and purchase of hard assets, factories, and infrastructure incredibly difficult and very high risk.

Since it is in the news, let's use the American automobile industry as exhibit number one. Right now, it's easy to speak despairingly and disparagingly about their lack of foresight and failure to innovate. But how stupid were they? Smart companies' products are shaped by consumer demand, and consumer demand for cars is shaped by energy prices.

Toyota's early introduction of the Prius? Toyota's genius was listening to their home market consumers, where gas prices are more than double what they are here in the U.S. Those Japanese dogs ate that dog food right up! Thirty-five percent of Prius sales to date have been in Japan, a dramatically smaller market than the United States. Sure, we American dogs managed to eat some of the energy-lite cars, but we chowed down on gas-hungry SUVs during that same time.

Transit construction faces a similar market reality. I was at a public hearing about proposal to connect two Boston subway lines. The analysis showed relatively low ridership. At issue: what would demand be on project completion, in about 7 years? Was it really worth the enormous price tag? I asked what price of gas was being used to model demand. The answer was a price per gallon that was lower than what I had recently found at the gas pump. Why? The planners were not energy experts and they had used future prices offered up the Department of Energy. But if gas were $5/gallon, there was little question that the project should be undertaken.

If we really were serious about actual adoption of green cars, green transportation, green power, energy efficient products and services, and reducing dependence on foreign oil, we would make our gas prices more in keeping with those experienced by European and Japanese consumers, and we'd include a carbon tax. Perhaps we don't do this all at once, but the government should put a floor on the price of gas, and have a planned schedule for raising it over the course of the next two years so that it is more in keeping with our peer-group countries and more in keeping with the true costs of fossil fuel use. Then we – consumers, innovators, governments alike -- could plan and build and be assured that not only American dogs, but all dogs, would eagerly be snapping up the delicious American confections.

We live in a world where the price of oil can swing from an August price of $147 to a December one of $35 a barrel. Low and highly volatile energy prices are holding this country back from a competitive standpoint and a planning standpoint. Putting a floor on the price of gas that is on par with European and Japanese prices creates demand at home, ensures a viable export market abroad, creates the incentives that drive innovation, and ensures that we will build a transportation infrastructure that suits the future mobility needs of this country where fossil fuel will be scarce and expensive.