I am not a fan of cap and trade. One reason is that it is not clear how this will be applied to transportation given the large number of individual vehicles. The Western Climate Initiative plans to implement the transportation portion of its proposed cap and trade regulation by imposing limits on refineries. While this makes sense from an administrative point of view, it also means we will be passing the de facto authority to raise the price of transportation (aka a fuel tax) to a group of private entities. This seems awkward at best and not well thought out at worst.

The concept of carbon credits for transportation is also not well thought out. This offers a significant opportunity to provide tangible (as well as political) rewards for public agencies and private entities that act to reduce emissions. Scott Belcher mentioned this in his ghost written response for Randy Iwasaki. My conversations with federal and state “experts” on GHG show that this issue has been largely dismissed as too complicated when it comes to the large number of players in transportation. Without some positive incentive, however, I worry that the effort to reduce transportation GHG will simply re-start the old wars between environmental activists and transportation people.

I am puzzled that no one has mentioned a concern over the possible economic impacts that controls on GHG emissions are likely to have on transportation. This seems doubly odd given our current economic mess. I have always thought of transportation as primarily a tool for economic development and economic growth – a previous DOT Secretary in Maryland used to introduce himself as the “Secretary of the Economy.” I hear many proposals on how to meet various GHG targets, but rarely are they linked with any analysis about the likely impacts on economic productivity or on economic growth. Of course, a cynic might say that since we are in a time when deflation is our most significant economic worry, any action that increases the cost of an item that affects our daily lives might help trigger inflation and thus should be encouraged.

Some state legislatures as well as some DOT leaders have called for a 50 percent reduction in VMT. This is scary. I cannot see how this can occur without triggering a significant reduction in economic activity. Similarly, all the calls for people to live near where they work or to use only mass transit do not reflect the realities of today’s flexible economy. Jobs are scattered and people tend to change jobs and thus work locations frequently (I certainly hope we return to these golden days).

Finally, with the exception of a comment from Gabriel Roth, I have not seen a single skeptical comment about the link between GHG emissions and global climate change. I am not an expert in this field, but I do know that there are reputable scientists who disagree with the alleged consensus regarding climate change.

Climate Change and Transportation

As is evident in the responses to Lisa's question, there is finally agreement among the President, Congress and the transportation industry that we should have a national climate change policy--something we to this point have not had. We should not underestimate the importance of this movement and get too bogged down in a debate over the exact right solution.

What this really means is that we cannot make climate policy without transportation and we cannot make transportation policy without consideration of the climate (i.e., the aviation and surface authorizations are climate policy). That is why President Obama appointed Carol Browner to integrate decision-making across the Administration. Secretary LaHood confirmed this week that transportation would be a “good soldier” in coming to climate solutions. These are great starts.

While international emissions for aviation and maritime are “bunkered” and being addressed under the Kyoto Protocol by ICAO and IMO respectively, their future under the upcoming Copenhagen Plan will depend on whether policymakers believe that adequate progress has been made by these organizations to reduce projected total emissions over the next decades (certainly as our aviation participants’ have noted that industry has made progress in reducing the emissions for each flight). This will be a challenge as projected growth in both international aviation and maritime (notwithstanding the recession) could overwhelm the gains made in building cleaner aircraft and adopting cleaner engine standards for ships. Many airlines understand they still have a ways to go and that is why they and the military have invested in R&D of new fuels.

Transportation advocates must recognize that the reduction of greenhouse gas emissions will be a key addition to our litany of national transportation goals including mobility, safety, congestion relief, security and others. As we make infrastructure investments we must both encourage greenhouse gas emission reduction in the short-term through the use of incentives (including carbon taxes and/or a cap-and-trade system) and use the investments to convert our transportation industry to one that is cleaner in the medium- and long-term.

Climate advocates must appreciate that the industry will require time to wean off of fossil fuels and absolute limits that threaten the industry’s viability and economic growth will not fly economically or politically. The transportation industry, in turn, must demonstrate our vigilance in transforming the industry. Our sector's ability to help define the solutions for greenhouse gas emission reductions will depend on how credible our program is.

Lisa’s question and the joining of the two communities for the answers presaged the kind of cross-policy debate, cooperation and consensus that is required now and into the future.

Steve Van Beek

James May's comment about the improving fuel efficiency within the airline industry over the last decade reminded me of this blog entry I wrote in February last year.

Logan airport acheived a 17% percent reduction in CO2 emissions in 6 years with a totally different approach, one not based on fuel efficiency, but rather on asset utilization efficiency: more passengers per airplane. An approach I'd advocate for motorized transport. You can read the details here.

http://networkmusings.blogspot.com/2008/02/achieved-17-reduction-in-co2-emissions.html

Despite the fact that aviation contributes less than 3 percent of overall CO2 emissions, the U.S. aviation industry is very focused on reducing its carbon footprint. In fact, we have an excellent track record of doing just that. Over the last few decades, fuel burned per seat mile is down more than 70 percent from early jets. But we must be careful when it comes to including aviation in cap-and-trade, or any other emission regulatory program.

The unique nature of aviation – taking off in one nation, landing in another – makes fragmented, regional regulation untenable. Aircraft produce CO2 emissions from the point of departure across different regions or countries. This is, in part, why the International Civil Aviation Organization was established. And, in recognition of the uniqueness of the international aviation sector, the United Nations exempted it from the Kyoto Protocol and directed ICAO to come up with aviation specific recommendations. The Aerospace Industries Association fully supports keeping international aviation emissions reduction strategies and policy recommendations under ICAO guidance – there is no national or international body better suited to that purpose. AIA continues to support the work currently underway at ICAO to deal with international aviation CO2 emissions. ICAO’s 15-nation Group on International Aviation and Climate Change – GIACC – is conducting its third meeting this week and is charged with developing a consensus-based, global framework to reduce aviation’s CO2 emissions. This framework, once agreed upon, will be presented to the UNFCCC as international aviation’s contribution to the post-Kyoto worldwide plan.

What does all this mean to the legislation being crafted in Congress? Clearly, it is premature to include aviation in any emissions trading, or cap and trade system, before ICAO issues specific guidance.

The following response is submitted by Scott Belcher, President and CEO of the Intelligent Transportation Society of America:

If Congress and the Administration do decide to pursue a cap and trade approach, they should provide regulated entities with flexibility to decide how to meet their cap while also incentivizing unregulated entities to reduce GHG emissions through a national offset program. In the transportation sector, offset credits could be provided for investment in new technologies and strategies that reduce emissions, such as traffic light synchronization, congestion pricing, active traffic management systems, weigh-in-motion truck inspections, “green driving” technologies, and real-time travel information and navigational systems that enable shifts to transit and provide options for the most fuel efficient routes. Revenues obtained from selling offset credits could be reinvested in smart infrastructure technologies or other solutions for reducing congestion and emissions. This approach would encourage innovation while also minimizing unnecessary regulatory burdens and economic impacts of a cap and trade system.

Most of us agree on the urgency to respond to President Obama’s call for cooperation to solve the many pressing challenges our country faces, including the challenges posed by climate change. In fact, the airlines have long been addressing that challenge and are implementing measures to continue greenhouse gas efficiency gains on a going-forward basis.

For example, the U.S. airlines improved their fuel efficiency – and hence, their greenhouse gas efficiency – by 110 percent between 1978 and 2007, saving over 2.5 billion metric tons of carbon dioxide (CO2), roughly equivalent to taking 18.7 million cars off the road each of those years. Moreover, our airlines have committed to an additional 30 percent fuel efficiency improvement between 2005 and 2025, which will bring an additional 1.2 billion metric tones of CO2 savings, and we are driving efforts to implement more environmentally friendly jet fuels through our leading role in the Commercial Aviation Alternative Fuels Initiative (CAAFI).

The purpose behind “market-based mechanisms” like emissions trading is to use economic regulation to send a “price signal” to motivate behavior not already occurring in the market. But a regulatory price signal is not needed in aviation. Even before the jet fuel price spikes in 2008, fuel already was the airlines’ largest cost center. We have every incentive to minimize our fuel burn and emissions; adding additional taxes on top only serves to hurt the airlines and the traveling public, further crippling our economy.

Against this backdrop, an emissions trading program simply does not make sense for U.S. aviation. Such a program would siphon away the very funds that the airlines need to continue to invest in new aircraft and other advances that are central to our strong environmental record. Instead of working against our efforts through punitive economic regulation, Congress should work in support of them. For example, studies show that the much-needed modernization of the nation’s air traffic management (ATM) system would save an additional 10-15 percent in emissions, currently caused by the inefficiencies and limitations of today’s radar-based system. And yet Congress has not authorized full implementation of this important program.

While cap-and-trade is the wrong answer for aviation, should Congress decide to proceed with such legislation, it should carefully calibrate it to minimize the harm it will cause. For example, Congress should directly provide allowances to the airlines up front, to take into account the airlines’ tremendous fuel efficiency record to date and not interfere with their ability to invest in new aircraft technology and operational innovations. To the extent a cap-and-trade program will include the auctioning of emissions allowances, proceeds from such auctioning should be reinvested into aviation. Further, any such legislation should include sector-specific price relief (commonly referred to as a “safety valve”) that takes into account not only carbon allowance prices, but the prospect for further fuel price spikes. Moreover, any climate change legislation proposing to cover aviation should be crafted to take into account the international nature of aviation, not only that aviation is a global industry and that U.S. carriers must compete with the airlines of other nations on many routes, but also that the United States by treaty has agreed that the International Civil Aviation Organization (ICAO) has the authority to establish standards and policy for international flights.

We have a common objective to protect our planet. I call upon Congress to take heed of the call for cooperation and work with us, and not against us.

I err on the carbon tax side of this discussion, but I do appreciate the economic efficiency of cap and trade. Specific responses to earlier points:

Bob Poole on the revenue neutral aspect: A “dividend” as James Hansen calls it doesn’t necessarily mean revenue neutral. I see this as a very clever linguistic spin on what could more bluntly be thought of as a “carbon ration.” Each person is this country will allocated a certain dollar amount of carbon for “free.” Heavy consumers of carbon despite a carbon tax, will not find themselves in a revenue neutral position. This “excess consumption” will generate some additional revenue to the US government to be used as gets agreed upon. Including

Earl Blumenauer’s good point that whatever effective price for carbon is decided upon, its behavioral impact in the transportation sector will be dramatically diluted relative to other sectors. Consumers absorb a lot of volatility in the price of gas before they make a behavior change. This is why I’d like to see a gas price floor, the proceeds of which can go towards transportation alternatives, whose necessity he describes well.

Eileen Clausen gives an argument against the carbon tax that I hear often and don’t find compelling. That somehow cap and trade will result in real CO2 emissions while carbon taxation can’t make that promise. Well it depends, doesn’t it? In Europe, their cap and trade hasn’t resulted in reduced emissions because they set the ceiling too high and there were too many ways to buy out of it. And sure, we could set the wrong price for carbon and get uncertain or ineffective results too. I recommend that we set national emissions targets and adjust the price of carbon quarterly to a level that produces said results. Much like the Federal Reserve adjusts interest rates to achieve the amount of liquidity it desires (I realize that is a terrible comparison these days).

The end result does need to be guaranteed reductions on a specific time schedule. In my view (and I’m still open minded), a carbon tax tied directly to emissions goals (with a price floor on gas) accomplishes this. Cap and trade requires changes to power plants and infrastructure that will take years. We don’t have the time. We need results and fast. There may well be a market for trading my carbon tax bill (as a huge plant) with someone else’s cheaper/faster ability to produce the necessary reductions – there should be room for some trading within a flat carbon tax.

I do hate the potential for special carve-outs and legacy exceptions, for buying off interest groups and wasting enormous amounts of money on administration mechanisms. But more than anything else, I support real and fast reductions in emissions as soon as possible. And I’m willing to swallow a lot of imperfection if we can achieve that reality.

Earlier today I was part of a roundtable discussion that Transportation Secretary LaHood held with some transportation reporters. Although most of it was about the stimulus, the administration's commitment to high-speed rail, and its agenda for the FAA, I did ask the secretary about how involved he plans to get in negotiations over climate change legislation. He said that he has been invited to "at least half a dozen meetings" on the issue with White House Energy and Climate Adviser Carol Browner, but indicated he intends to follow her lead. "We're going to be in the room," LaHood said. But he added, "I'll be a good, faithful soldier on this." Read my write-up of the interview on our Web site.

There is general agreement that a price on carbon is necessary to achieve the needed reductions in greenhouse gas (GHG) emissions. For the transportation sector, this price signal will likely be small. Thus, as noted by other blog contributors, complementary policies are also needed to address transportation emissions. These policies should include fuel and vehicle GHG performance standards, as well as measures to reduce vehicle miles traveled and improve transportation system efficiency.

But some of the contributors have used the transportation issue to raise a totally different question: Which is preferable, a cap-and-trade system or a tax? Their comments should not go unanswered.

Proponents of a tax often use the argument that it is simpler. But anyone who has looked at the tax code knows that is not the case. Either a cap-and-trade system or a tax can be designed well or badly and can be as simple or complex as the designers wish. Either policy would require monitoring and enforcement; both must determine who is covered; and both must address the question of how to distribute costs and benefits. Tough decisions are required, whether it is setting the cap or setting the level of the tax. Good design would avoid exemptions and special treatment, but they are possible under either approach.

But there are also some key differences. First is the issue of certainty. A tax provides for cost certainty; the cost is fixed because of the tax. Cap and trade, on the other hand, provides for environmental certainty. What's fixed is the cap itself – and it is based on an assessment of the level of emissions you need to achieve in order to protect the climate. In response to a carbon tax, many emitters will reduce their emissions rather than pay the tax, but that result is not guaranteed.

A second issue relates to how the cost or tax is set. A tax relies on the government to determine the appropriate tax level necessary to achieve a certain level of environmental protection. A cap-and-trade system, on the other hand, lets the market determine the value of the emissions reduced.

And finally, we now have 24 states involved in developing or implementing cap-and-trade systems. Do those advocates of a tax really want to see 24 states with cap-and-trade systems plus a national carbon tax?

The transportation sector – responsible for one-third of U.S. CO2 emissions – must be part of a comprehensive national climate plan. A cap-and-trade system and complementary measures represent the right policy solutions.

As America moves forward in an effort to establish an environmentally responsible transportation sector, we must not allow a perfect emissions goal to become the enemy of an excellent emissions reality. In the U.S. today 550 small freight railroad companies operate one third of the nation's freight rail network, and move one out of every four rail cars. Freight railroad transportation has a more beneficial emissions profile in terms of CO2 than any other mode of transportation. Small railroads have preserved rail service for over 13,000 railroad customers that would otherwise be forced to use transportation modes that generate more greenhouse gasses.

The 550 "small" railroads, as represented by my organization, are classified as "small" based on their annual revenues. Of the 550 small freight railroads, 274 gross under $5 million in annual revenues, and an additional 100 gross under $20 million. With a new hyper-efficient locomotive running upwards of $2 million per unit, and with almost 3,000 older locomotives in the short line industry, any legislation that mandates technologies beyond the means of these small businesses will bankrupt a large sector of the rail industry.

In 2006 small railroads consumed 309 million gallons of fuel to move 14 million carloads (over 50 million truck loads) of freight. To move the same freight by highway would have required 927 million gallons of fuel. Today, without cap-and-trade, selecting an environmentally responsible transportation alternative such as rail automatically reduces a rail customer's carbon footprint. Any regulatory regime must take this into account and give credit where credit is due without creating an economically unrealistic burden on small railroad companies. Placing the burden on small railroads will only serve to increase truck traffic, thereby undermining the very goals of plans to reduce greenhouse gas emissions.

Bob Poole is right that a “Carbon Tax” would be less harmful than “Cap and Trade”, if only to help Al Gore (who is in the Cap & Trade business) avoid further conflicts of interest. But it is not obvious that either of Bob’s alternatives is necessary.

There is dispute about whether the earth is actually warming in the 21st century, and also about the contribution of humanity to climate change. But there is no disputing that there was a "medieval warming period" in northern Europe from about 900 to 1300, followed by the "little ice age" from about 1300 to 1850. During the “medieval warming period", wheat was grown in Greenland, and grapes in England. There is evidence that the warming periods were generally better for Europe and North America than the cooling ones.

It is also indisputable that no serious flooding was recorded in the medieval warming period, i.e. the Mediterranean shores remained close to where they had been since Biblical and Roman times.

[The benefits and costs of climate change are discussed in the book CLIMATE OF FEAR: Why We Shouldn't Worry About Global Warming by Thomas Gale Moore, an economist with a special interest in transportation, who served on President Reagan's Council of Economic Advisers.]

If, then, global warming is beneficial, the legislation required is not to tax global warming activities, such as motorized travel, but, rather, to subsidize them. But road users are already paying too little for the use of most roads, as are users of US mass transit systems. So more subsidies would raise problems.

If Henry Waxman were to insist on changing transport taxes to warm the climate, he could consider a balance of subsidizing SUVs, and taxing light vehicles, which would also reduce highway fatalities. But many would oppose tax increases on the grounds that we are already over-taxed.

So, despite Deron's eloquent statement, a possible answer to this week’s question might be that Congress would do best to do nothing.

Congress and the Administration should put a cap and trade system in place expeditiously, and it should include gasoline, diesel, natural gas and aviation fuels upstream (refiners and importers). Including transportation fuels in the cap will ensure we meet an economy-wide emissions target.

As Eileen Claussen points out, this is just the first of three prongs for addressing transportation sector emissions. The second is performance standards such as fuel-efficiency standards for vehicles, which were raised for the first time in decades in the 2007 energy bill, which also included first-time-ever standards for heavy trucks which I'm glad to see endorsed by Bill Graves and ATA. Governor Schwarzenegger of California has also pioneered, and the President has endorsed, a low-carbon fuel standard for energy powering transportation.

The third component of a new policy addressing transportation sector emissions is investment in low-carbon technology and alternatives. The economic recovery bill was a good start on this part of the program, with $2 billion for advanced battery development and $17.7 billion for public transportation and intercity rail.

And this brings up one of the overlooked advantages of putting this new system in place. It will address what economist Sir Nicholas Stern called the greatest and widest-ranging market failure ever seen, and in doing so will launch a tremendous job-creation and economic development program. This is will be fueled by the revenue side of the ledger referenced by Rep. Earl Blumenauer (whose new CLEAN TEA legislation is another key component of a smart strategy), and will be a follow up on the economic recovery package. This low-carbon technology and infrastructure investment boom will modernize our economy and put us on a more competitive footing globally as we manufacture clean technology for exportation.

The other overlooked advantage of this program is the effect it will have on our "oil addiction," as the previous President termed it. By including transportation fuels in the program, complemented by performance standards and a CLEAN TEA policy, we guarantee that our transportation-driven oil dependence is tackled too. As the program is implemented, the oil intensity of the economy will plummet and we will become less beholden to hostile and unstable oil-producing nations and more insulated against oil price fluctuations.

Benefits accrue to a triple-bottom-line with this program: environment, economy and security. Small wonder that it remains at the top of the Congressional and Presidential priority list.

Congressman Blumenauer points out that "public transit, carpooling, biking, walking, and living closer to work and school can reduce Americans’ need to drive thereby reducing carbon emissions...according to the American Public Transportation Association, public transportation reduces carbon dioxide emissions by 6.9 million metrics tons annually." I think it is important to add that the expansion of a multi-modal transportation system that Congressman Blumenauer is referring to should also be a critical component of our economic development goals. Transit investment promotes economic development around transit stations, stops and hubs to offer a way of achieving more development with less new vehicular congestion and greater use of transit and walking. To the Congressman's point, mixed development with residential/retail/office/other uses can be a very effective means of creating economic activity nodes that are more energy efficient and less polluting while providing new jobs and nice places to live.

The Congressman also notes that the "CBO has estimated that current cap-and-trade proposals under consideration in Congress will generate between $50 and $300 billion in revenue per year." I want to flesh out this point as it relates to public transportation and the stimulus package recently signed by President Obama. Mass transit received $8.4 billion in the stimulus bill for capital improvements and expansion projects. Intercity and passenger rail (including Amtrak) received more than $9 billion for capital improvements and expansion projects. With all of this potential new service coming on line through capital expansion (which is necessary to meet growing demand) we all need to be cognizant of how we are to fund inevitable operating cost increases. As Congress begins to craft a possible cap-and-trade program, including how the proceeds of that program are disseminated, I urge Congress to consider the potential significant increases in operating costs for public transit agencies that will be incurred as we expand our systems to meet demand and our collective economic growth goals.

Before we rush down this path too far, the first question to ask is: How will a federal Cap-and-Trade law affect our economy? Without doubt, transportation is one of the most powerful engines of economic growth. But in just the last 12 months, America has been transformed from an “on-the-go” nation with millions of citizens, businessmen, and producers of our goods and services constantly in motion into an entirely different country where everyone is told to just “hunker down.” This “hunkering down” is one of the primary psychological forces pushing our economy over a cliff. Is now the time to place new tax and regulatory burdens on the transportation needs and aspirations of Americans?

Aviation providers, though, have other issues. Firstly, every airplane operator already is fully “incentivized” to reduce fuel use. It is, by far, our most significant variable cost and we constantly seek newer, more efficient aircraft and engines to put into our operations. New taxes and regulations may create new incentives for some transportation modes, but to aviation operators it will merely be more headaches and paperwork – and add virtually nothing to existing economic rationale to conserve fuel.

Secondly, every pilot knows that most of the fuel that aviation wastes is because of government rules and procedures, and all that wasted fuel produces unnecessary greenhouse gases. The outmoded air traffic control system typically directs aircraft to spend much more time going from point A to point B, and at less fuel efficient altitudes, than we could achieve by ourselves using modern GPS-based navigation and traffic-monitoring systems. Just last month, I piloted a plane over a route from New England to Washington that, because of ATC inefficiencies, was 81% longer than a simple straight line between the two points. If government wants to implement an effective tax to reduce carbon emissions by aircraft, then have them tax their own ATC system. If government was forced to pay just a penny a mile for each ATC routing that could have been shortened by a modern navigational system, then we’d really see some meaningful reductions in greenhouse gases and collect billions to fund critical aeronautical research.

Which brings me to another ironic reality. What has happened to the first “A” in NASA? While Congress proposes taxes and regulations, it has slashed funding at NASA for aeronautical research – exactly the type of research that has produced fuel-saving engine designs in the past. It may not be as politically sexy as funding orbiters and rockets, but it’s far more likely to produce the technical breakthroughs that we need to reduce carbon emissions by aircraft.

Finally, aviation is global and only a global emissions-control framework makes any sense. ICAO is better equipped to make scientifically-based proposals and apply them uniformly around the world. Until they do so, any unilateral U.S. legislation will complicate international travel, discourage air transportation at a time when our economy needs more dynamism and activity in all business sectors, and add nothing to the significant incentives that already exist for aircraft operators to minimize carbon emissions.

Airports recognize that aviation’s contribution to climate change is an important issue that can only be tackled through the joint cooperation of the entire industry at a global level. While airports are not opposed to a cap-and-trade system, we do believe it must be global in scope and recognize the industry’s existing accomplishments to reduce greenhouse gas emissions.

A cap-and-trade system, however, must be viewed as only one part of a comprehensive solution that includes other measures to reduce greenhouse gas emissions such as airport infrastructure improvements, a modernized air traffic system, and technology to improve aircraft fuel efficiency. Any revenues generated from the imposition of a cap-and-trade system on the transportation sector should be returned to the industry to help further those other measures.

While airports contribute only a fraction of aviation’s greenhouse gas emissions, they have already taken a proactive role in reducing those emissions through such measures as reducing their energy usage, converting to low emission vehicles, and recycling. Earlier this month ACI-NA members adopted a comprehensive slate of goals that will further the industry’s commitment to reducing its environmental impacts, including several goals related to climate change.

Airports cannot control the industry’s largest contributors to aviation’s carbon footprint - aircraft and ground vehicles. Still, they have worked to identify where they can play a role in helping to reducing emissions from those sources, often through the development of greenhouse gas emissions inventories. The soon-to-be-released Airport Cooperative Research Program methodology for conducting such inventories will provide a useful tool for airports working to identify greenhouse gas emission reduction opportunities.

Why is the solution to every issue another complex law followed by dozens and dozens of complex regulations that take years to prepare, more years to litigate and then even more years of agency reconsideration, depending on the outcome of judicial review.

This nation has millions of pages of laws and regulations so why don’t we just try to make some of these countless laws work before we add more cost and complexity to the system.

So let’s try to be practical. The Energy Independence and Security Act of 2007 mandated DOT to initiate a rulemaking to increase CAFÉ standards and for EPA to initiate rulemaking on renewable fuels. The Energy Policy Act of 2005 authorized $25 billion for Detroit to develop innovative technologies and other parts of the legislation authorized extensive research on batteries and hydrogen fuels. EPA also has historic authority on both fuels and engines.

To reduce transportation sector emissions we need to increase vehicle miles-per-gallon through flexible actions that promote the use of better batteries, innovative engine technologies and designs, and alternative fuel source capabilities. The federal government already has the authority under present law to stimulate such technological innovations. Let’s use them rather than enact a complex cap and trade system that will impose huge costs on the U.S. at a time when we can least afford it.

Transportation is responsible for about one-third of greenhouse gas emissions in the United States; passenger automobiles and light trucks alone contribute 21 percent. The “built environment” – transportation plus the building sector -- accounts for two-thirds of the nation’s emissions and these sectors must be responsible for a proportionate amount of the solution.

Certainly, increasing fuel efficiency and decreasing the carbon content of fuels can reduce vehicles’ greenhouse gas emissions, but the emissions reductions from technological fixes will be overtaken by the continuing growth in vehicle miles traveled (VMT). It’s clear that in order to reach our climate goals, we will have to reverse the upward trend in vehicle miles traveled.

Even if transportation fuels are included in cap-and-trade or carbon tax legislation, those policies alone are not likely to increase the price of gas enough to change Americans’ driving behavior. According to the Congressional Budget Office (CBO), including transportation fuels in cap and trade or carbon tax legislation won’t increase gas prices enough to change Americans’ driving behavior. And as we saw this summer, significantly increasing the price of gas without providing transportation alternatives can impose an enormous burden on American families.

Public transit, carpooling, biking, walking, and living closer to work and school can reduce Americans’ need to drive thereby reducing carbon emissions. According to the American Public Transportation Association, public transportation reduces carbon dioxide emissions by 6.9 million metrics tons annually.

The CBO has estimated that current cap-and-trade proposals under consideration in Congress will generate between $50 and $300 billion in revenue per year. To meet greenhouse gas reduction goals, a significant portion of this revenue should be invested in transportation infrastructure that reduces greenhouse gas emissions. Providing these alternatives will mean financial savings, time savings and health benefits for consumers as well.

That's why this month, in conjunction with Sens. Carper and Specter and Reps. Tauscher and LaTourette, I will introduce the Clean Low-Emissions Affordable New Transportation Equity Act, or “CLEAN TEA.” This bill will dedicate ten percent of the funding generated through cap-and-trade legislation to create a more efficient transportation system and lower greenhouse gas emissions through strategies such as funding new or expanded transit and passenger rail; supporting development around transit stops; and making neighborhoods safer for bikes and pedestrians.

Additionally, Congress should use the reauthorization of the Surface Transportation Act to align federal transportation policies with climate change goals.

By requiring transportation planning to incorporate climate change targets, strengthening funding for public transit, and making it easier for local jurisdictions to implement low-carbon transportation alternatives, we can focus federal policy and funding into projects that reduce our carbon footprints, improve our communities, save Americans money, and create a transportation system for the 21st century.

Transportation sources account for roughly 29 percent of all greenhouse gas emissions in the United States. When this percentage is broken down by mode, 18 percent of all greenhouse gas (GHG) emissions come from automobiles, including cars, SUVs and light-duty trucks; 5 percent from heavy-duty trucks, 3 percent from aircraft and 1 percent each from marine, locomotives, and pipelines.

Hence, passenger cars, light-duty trucks (which include sport utility vehicles, pickup trucks, and minivans), together with motorcycles, make up about 63 percent of all transportation GHG emissions.

Unlike automobiles, heavy-duty trucks are “mobile” offices not used for pleasure, but rather used out of necessity to conduct work, delivering nearly 100 percent of our nation’s consumer goods. A non-moving truck is a non-productive truck.

Trucks are essential for the movement of goods and we realize that steps must be taken to ensure their contribution to a sustainable future. In May of 2008, ATA unveiled six key recommendations to lower emissions. The bold sustainability program will have an immediate impact on the environment, reducing fuel consumption by 86 billion gallons and thus reducing the carbon footprint of all vehicles by nearly a billion tons over the next 10 years.

The plan includes:

• Limiting speed through a national 65mph speed limit and governing all trucks manufactured after 1992 at no more than 65 miles per hour
  

• Creating a federal solution to limit idling through highway infrastructure improvements and incentives to implement new technologies
  

• Increasing fuel efficiency by encouraging participation in the voluntary federal greenhouse gas reduction effort known as the U.S. EPA SmartWay Transport Partnership Program
  

• Reducing congestion through improved infrastructure as a preferred method for further reducing carbon emissions—paid for with a dedicated fuel tax if necessary
  

• Allowing broader operation of higher productivity vehicles, which can help decrease carbon footprint and reduce fuel consumption by reducing congestion and the number of trucks needed on the road
  

• Setting national fuel economy standards through technologies that reduce fuel consumption and maintain the performance of vehicles
  

The trucking industry believes that stepping up to the table and working with all stakeholders on climate change options will not only educate decision-makers on the unique nature of our business, but also enhance the opportunity to develop unique solutions to a very serious issue confronting us.

For more information about ATA's recommendations, visit the sustainability Web site.

Why a Carbon Tax is the Way to Go

The main focus of proposed climate change legislation is a cap & trade system, a version of which already exists in Europe for greenhouse gases (GHGs). Cap & trade legislation was endorsed by presidential candidates Obama and McCain, and a bill to that effect passed the House but was killed in the Senate in 2008. The basic idea is that the federal government would define maximum levels of carbon emissions over time, and would auction off permits which companies would need in order to emit carbon at all. Those permits would be tradeable, allowing firms that can cut carbon emissions deeply at lower cost to sell surplus permits to those whose cutbacks would be very costly. So in principle, the idea is to create incentives for GHG reductions, without government having to micromanage the details of who emits what or uses which technologies.

In that simplicity and market-based nature, cap & trade is an alternative way of implementing a carbon tax, which would be a uniform national tax ($X per ton) on all carbon emissions. Most politicians prefer cap & trade for two nominal reasons. First, they don’t want to pass something called a tax, even if the impact of cap & trade on the price of energy would be the same as an equivalent carbon tax. Second, cap & trade is nominally imposed only on businesses, not on individuals—again, a distinction without a difference in terms of economic impact.

But the real reason politicians prefer cap & trade is that it presents huge opportunities to play favorites with industries and trade associations. For several years now, various industries have been jockeying for position, making the case that they should get large numbers of carbon permits at no charge at the start of the program. Second, the auction revenues give elected officials potentially several trillion dollars (between now and 2050) to dole out to favored causes. A Wall Street Journal editorial (“Cap and Spend,” June 2, 2008) detailed provisions of a House cap & trade bill that proposed spending (among other things) $190 billion on training people for “green-collar jobs,” $288 billion for “wildlife adaptation,” $171 billion for mass transit, and $213 billion to help carbon-intensive industries like steel and cement adjust to the new regime. That’s the kind of horse-trading some transportation advocates want to participate in.

By contrast, a growing number of economists and environmentalists are coming to appreciate the benefits of a pure carbon tax approach. First, there would be no playing favorites about industries’ starting positions. It wouldn’t matter how little or how much they’d already done to reduce GHGs. All that matters is how much they emit from now on. Second, if the carbon tax were implemented as many now recommend, there would be no new revenue for Congress to allocate to favored causes, in hopes of micromanaging how electricity, transportation, manufacturing, homebuilding, etc. cope with GHG reduction. That’s because the carbon tax would be designed to be revenue-neutral.

What has led people such as former Labor Secretary Robert Reich, environmentalist Bill McKibben, NASA scientist James Hansen, and consumer advocate Ralph Nader to advocate a revenue-neutral carbon tax? It’s the realization that an effective system to reduce GHGs via either cap & trade or a carbon tax would represent a huge increase in most people’s cost of living—and that imposing such an increase will be politically impossible. So the best way to shift decisions about energy use from high carbon-intensity to low carbon-intensity is to tax carbon, but rebate 100% of the proceeds to American households.

After studying the GHG issue for several years, I’ve concluded that a revenue-neutral carbon tax is by far the least-bad approach to making the transition to a lower-carbon economy. It has the enormous virtue of making unnecessary the tens of thousands of rules and regulations that Congress and state legislatures would otherwise impose, trying everything they can think of (mandated VMT reductions, subsidies for this fuel or engine type rather than that one, misguided smart-growth mandates, etc.) to reduce GHG emissions, often at a cost of tens or hundreds of times more than the generally recognized benchmark of $50/ton of CO2 equivalents.

A carbon tax will send the right price signals to every nook and cranny of the economy, changing relative prices and incentivizing all sorts of shifts in how energy is used. That will stimulate research and development into energy efficiency across the board. It will also make superfluous current attempts to micromanage transportation policy from the top down. And by rebating the proceeds to U.S. households, we will avoid the massive “rent-seeking” by interest groups and politicians that would accompany another trillion-dollar net increase in federal tax revenue.

This question and the answers (or lack thereof) should make the case for why a carbon tax is the best way to discourage the use of carbon.

Reducing greenhouse gas emissions from transportation, which contributes one third of total U.S. CO2 emissions, will need to be a key part of any strategy to limit economy-wide emissions. Transportation energy use and emissions are determined by four elements: fuels; vehicle efficiency; vehicle miles traveled; and overall efficiency of the transportation system. A strategy to reduce greenhouse gas emissions (GHG) from transportation requires a systematic approach to address these interdependent and, at the same time, distinct elements.

The Pew Center and its partners in the U.S. Climate Action Partnership (USCAP)* support a three-pronged approach to address transportation emissions: include fuels in the cap-and-trade program; implement complementary policies, such as vehicle and fuel GHG performance standards; and use allowance value from cap and trade to ease transition costs and accelerate the adoption of low-carbon transportation. Not only do these policies address GHG emissions, they also promote energy security, the development of smarter infrastructure, and land-use planning.

Including transportation in a national, multi-sector cap-and-trade program has the potential to achieve greenhouse gas (GHG) emissions reductions at a minimum total cost. Under a cap-and-trade program, the government establishes a GHG emissions cap and issues GHG emission “allowances" (authorizations to emit one ton of GHGs) equal to the level of the cap. Companies included in the program are required to hold GHG emission allowances sufficient to cover their emissions. Companies with higher abatement costs can buy allowances from other companies with less expensive reduction opportunities, lowering the overall cost of compliance.

If transportation is included in a multi-sector cap on GHG emissions, the requirement to hold emissions allowances can be placed at one of several points. In general, the Pew Center prefers a downstream point of regulation, where entities are covered at the point of emissions. However, in the transportation sector, an upstream point of regulation – with refineries serving as allowance holders – makes the most sense. Compared to more than 1400 crude oil producers or the multitude of end-users, there are about 150 refiners in the United States. As the point of regulation, refiners would be responsible for shifting to low-carbon energy sources (such as biofuels) or buying allowances to cover the carbon content of the fossil-based fuels they sell. The cost of allowances translates into a price difference in the fuels that would provide a price signal to consumers. Consumers could then factor the increased price of gasoline in their transportation, work and housing choices, particularly in the long term.

One of the challenges with including the transportation sector in a cap is that, in the short term, reducing emissions from transportation is expected to be more costly than other sectors, with smaller impacts on fuels, vehicles, and use. Because most legislation contemplates a modest initial GHG cap, the price signal on gasoline is unlikely to be sufficient, especially in the short run, to drive the needed technology advances. The cost of carbon content does not translate into a significant portion of the retail price of gasoline, thus the price signal is smaller than in other sectors, e.g., electricity or natural gas. For example, a carbon price of $25 per ton CO2e increases the cost of gasoline by roughly 25 cents, a smaller change than the variability normally seen in the market.

To guarantee significant emission reductions from the transportation sector, the emissions cap can be complemented by additional policy measures. Under a cap-and-trade program, the allowances issued by the government have value, and that value can be distributed to facilitate the adoption of low-carbon technology by fuel providers and vehicle manufacturers, as well as create incentives for consumers to purchase high-efficiency vehicles and use other means to reduce transportation fuel consumption. Another approach to guarantee emission reductions from transportation, especially in the short term, is to use sector-specific policies that complement the cap-and-trade program. These measures can include fuel- or vehicle-related performance standards and incentives to reduce carbon-intensive travel and improve transportation system efficiency. This mix of policies presents the systematic approach necessary to successfully address transportation emissions.

* USCAP is a coalition of 25 major corporations and five leading NGOs that support mandatory, national legislation requiring significant reductions of greenhouse gas emissions. USCAP has issued a landmark set of principles and recommendations to underscore the urgent need for a policy framework on climate change.

The answer to the first question is that Congress should not adopt a cap and trade program at all. While we don't know precisely what Congressman Waxman may have in mind, his public statements suggest that he will propose a scheme that is permanent; extract from taxpayers over the next several decades trillions of dollars in floating excise taxes; and impose unprecedented command and control regulations on most economic activity. Such a system of taxes and regulations would impose hugh new burdens on the U.S. economy, which is already reeling. Worse still, it is likely to make little significant difference in reducing greenhouse gases worldwide. Many of the industrialized countries that signed the Kyoto Protocol are failing to meet their targets. China, India and other developing countries have been rapidly increasing emissions and insist they should be exempt from the Kyoto Protocol.

Furthermore, automobile manufacturers are already subject to statutory requirements to increase substantially the average fuel economy of their products, and President Obama has declared repeatedly that he intends to have DOT impose even higher standards. U.S. commercial airlines, on a revenue ton mile per gallon basis, increased fuel efficiency by almost 25% from 2000-2007. So a compelling case can be made that transportation should be exempt from any cap and trade legislation.

If, despite the facts and good sense, such a scheme is enacted, then the transportation community should insist that it adhere to two principles. First, at whatever point of the fuel chain allowances are required, it must be done in a way that permits tracing how the fuel is used (i.e., is it burned as jet fuel or home heating oil or diesel fuel?). Second, the user pays approach that is still the basis for the deposit of fuel taxes into the Highway Trust Fund and the Aviation Trust Fund has to be preserved. In other words, the sums paid for allowances to produce transportation fuels must be dedicated to transportation programs. Since these sums are nothing more than fuel excise taxes, this will be the mechanism through which such taxes are collected.

While existing fuel taxes may also continue, it is very difficult to imagine that Congress will substantially increase those taxes, on top of the cap and trade system's taxes. If cap and trade is enacted without provisions requiring that transportation generated revenues be deposited into the transportation trust funds, then the programs funded out of those trust funds will be premanently crippled.