Topic: Energy and Environment

Will Vehicle-Mile Fees Be a User Fee or a Tax?

Earl Blumenauer, Oregon’s bow-tie wearing, bicycle-riding member of Congress, has endorsed the idea of replacing gas taxes with vehicle-mile fees. Last week, he introduced a bill directing the Department of Transportation to start vehicle-mile fee pilot programs in every state and authorizing $150 million to fund the pilots. Since privacy is a major concern for many people, Blumenauer wisely makes protection of personal privacy a top priority of the legislation.

Blumenauer’s support for vehicle-mile fees is refreshing considering that, during the last Congress, the House passed a bill forbidding the Department of Transportation from even studying the possibility of such fees. (The otherwise-fiscally conservative member of Congress who introduced that bill ended up being a one-term congressman.) But Blumenauer’s stance also has some questioning his motives as he is one of Congress’ leading advocates of funding rail transit and other non-highway programs out of gas taxes.

It’s true that Blumenauer supports building streetcar lines more than new roads. In introducing the bill, the congressman focused on the fact that, over the past four years, Congress has had to transfer $48 billion in general funds to the Highway Trust Fund, and is currently spending $15 billion a year more on surface transportation than is coming in from gas taxes and other highway user fees. The Oregon representative obviously hopes vehicle-mile fees will help close the gap, allowing him and his colleagues to continue funneling billions of dollars into rail transit and other forms of travel that are actually pretty obsolete.

Getting Highway Numbers Right: The Tax Foundation’s Response

On Thursday, January 17, the Tax Foundation (TF) issued a paper arguing that only 32 percent of state and local highway costs were paid out of user fees, while the remaining costs came from “general funds.” In a post here, I pointed out that, actually, user fees for highways cover 76 percent of the costs of roads and most of the remaining 24 percent come from interest on user fees before they are spend and bond sales that will be repaid out of user fees.

TF replied, saying “O’Toole conflates taxes and fees.” In fact, TF specifically said that state gas taxes are user fees, but somehow defined federal gas taxes as “general funds.” I simply argued that, to be consistent, TF should count federal gas taxes as user fees as well.

TF went on to say, “O’Toole suggests we include federal gasoline tax collections in state-local revenue.” Again, TF said that federal gas tax collections are “general funds” and I disagreed with that statement. If state gas tax collections are user fees, then federal gas tax collections are too. They are certainly not general funds, any more than state gas taxes are general funds, since federal law dedicates them to transportation projects and mostly to highways.

TF said, “O’Toole suggests that we include motor vehicle registration taxes and fees, but not the associated expenses” such as highway patrols. In fact, I said nothing about the associated expenses because, for the most part, those expenses are already included in the reported $155 billion cost of highways.

TF said, “O’Toole suggests that we include state and local bond sales for road construction, which would double-count revenue.” But nothing I said would double-counting revenues. What I said was that bond sales for highways are not, in any sense, “general funds” if they will be repaid out of user fees.

TF said, “O’Toole suggests that we include $13 billion in “investment income” on state-local gasoline tax and user fee revenue, but that is not a net interest figure.” What TF means is that some of that interest might come from investments of non-user fees, which is true. But since user fees cover the vast majority of state and local road costs, interest on those user fees makes up the vast majority of interest. Yet TF counted all interest as “general funds.”

TF said, “O’Toole suggests that we use Federal Highway Administration data rather than U.S. Census Bureau data. We have no evidence that the U.S. Census Bureau is unreliable in this area.” I suggest that the fact that the Census Bureau, which uses secondary data, differs from the Federal Highway Administration, which uses primary data, is itself evidence that the Census Bureau data are unreliable.

In sum, by TF’s own definition of user fees as being gas taxes and tolls, something like 55 percent of the cost of roads is collected in user fees. Adding vehicle registration fees brings this to 76 percent, and most of the rest is covered by bonds that will be repaid by user fees and interest on those user fees. TF’s reply failed to address my main point, which is that none of these revenues can be considered “general funds.”

Battling over Keystone XL

The Washington Post has an article today on the battle over the Keystone XL pipeline.  There is a sense of urgency on both sides as the decision on the project is expected to be fast approaching.

The Post features arguments from pipeline proponents that the project will provide an economic boost to the state of Nebraska, and from pipeline opponents that the oil carried though it will lead to more carbon dioxide emissions than previously thought, thus upping the impact on global warming and climate change.

But the numbers being tossed about don’t tell the whole story.

First, a look at the new economic claims. An analysis from the Consumer Energy Alliance concludes that during the two year construction phase of the pipeline, the economic activity in Nebraska will increase by a bit more than $400 million per year—generating directly or indirectly, about 5,500 new jobs. Sounds impressive, but this boost is short-lived. After that, for the next 15 years, the economic input drops down to about $67 million/yr, supporting about 300 jobs.  A net positive, but not as much as many proponents claim.

The climate claims are even less significant. In its new report, Oil Change International asserts that the current estimates of the well-to-wheel (WTW) carbon dioxide emissions from oil extracted from the Alberta tar sands have been underestimated. They claim that the State Department failed to fully include carbon dioxide emissions from the burning of the petroleum coke that is produced as a side product of producing oil from the tar sands. This “petcoke” can be burned like coal, and in fact, is cheaper and more energy dense than coal, so it is often preferable.  According to Oil Change International, including the petcoke in the calculation would increase the WTW carbon dioxide emissions by about 13 percent.

There are several things wrong with the Oil Change International analysis. First is that the State Department actually did include a considerable discussion of the influence of the treatment of petcoke in its assessment.  It concluded, just like Oil Change International, that if the petcoke is burned, it increases the total wells-to-wheels carbon dioxide emissions of Canadian tar sands oil by the same 13 percent.  But what the State Department points out, and which Oil Change International plays down, is that the burning of petcoke to produce energy by and large displaces the use of coal for the same purpose.  So instead of the total emissions, what is important is the incremental carbon dioxide emissions produced from using petcoke instead of coal. And when that number is used, the WTW emissions increase by less than 1 percent—which is why the State Department concluded that the fate of the petcoke really wasn’t all that significant in the overall WTW emissions calculation.

But whether consideration of petcoke increases the WTW carbon dioxide emissions of the tar sands oil by 1%, 13%, or any number in between, really doesn’t matter anyway in terms of its impact of global warming.  For as I have shown previously, the global warming potential of the Keystone XL pipeline oil is only about 0.00001°C/yr.  Increase that by 13% and you basically get the same environmentally insignificant number.  In fact, you’d have to increase it by several orders of magnitude before it is even worth paying attention to.

The war over the pipeline will probably rage on until (and even after) a decision is reached in a couple of months. Hopefully, emotion will play a role secondary to facts.

New Government Climate Change Report Yet More “Show Science”

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

You can get anything you want

At Alice’s Restaurant

-Arlo Guthrie, 1967

Late last week, the U.S. Global Climate Change Research Program (USGCRP) released a draft version of its latest assessment report on the impacts of climate change in the United States. Updated reports are required by Congressional decree every 4 years or so.  The 2013 report, as it now stands, tips the scales at over 1,000 pages, consequently, we haven’t made our way through it yet, but if the Executive Summary is any indication, this report seems even worse than the one the USGCRP released in 2009.

This is yet another example of our imperial government’s predilection towards “show science” in order to justify taking people’s stuff.  By analogy, think of the “show trials” in some of history’s more freedom-loving regimes. 

As of this writing, it’s not clear if they intend to produce another “summary” document, such as the 200-pager they put out in 2009. That one was so bad as to require us to produce an Addendum that represents what the USGCRP report coudda, shoudda, woudda looked like had the author team made a more complete and fair assessment of the scientific literature.

Admittedly, our Addendum report, which was finalized and released last fall, did include citations from the scientific literature that were published subsequent to the publication of the 2009 USGCRP report, which obviously the USGCRP report authors couldn’t have known about.  But, as our Addendum demonstrates, when these new research results are included, the potential impacts of climate change in the U.S. are substantially tempered.  This leads us to think that the 2013 version from the USGCRP—which seems to hype the impacts of anthropogenic greenhouse gas emissions even more so than the 2009 report did—didn’t do a grand job  in synthesizing the literature.

Nor does it appear they did a good job with the statistics of climate and climate change in the U.S.

Another Lower Climate Sensitivity Estimate

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

As the earth’s climate sensitivity is perhaps the key factor in what climate lies ahead, we’ll often report on scientific findings that enhance our understanding of this important parameter.

Recall from our previous discussion, that the earth’s “climate sensitivity” is the amount that the average global surface temperature will rise, given a doubling of the concentration of atmospheric carbon dioxide (CO2) from its pre-industrial value. This metric is the key to understanding how much global warming will occur as we continue to burn fossil fuels for energy and emit the resultant CO2 into the atmosphere.

And as we mentioned, the big problem is that scientists don’t know what the true value of the climate sensitivity really is. The U.N.’s Intergovernmental Panel on Climate Change (IPCC) summed up its assessment of the science regarding the value of the climate sensitivity in its 2007 Fourth Assessment Report (AR4) thusly:

It is likely to be in the range 2°C to 4.5°C with a best estimate of about 3.0°C, and is very unlikely to be less than 1.5°C. Values substantially higher than 4.5°C cannot be excluded…

New findings seem to be coming in with some regularity since the publication of the AR4 that the IPCC’s estimate is on the high side of reality.  We discussed some of these findings in our publication Addendum: Global Climate Change Impacts in the United States (p.26-27) and more recent ones in a Global Science Report last month.

Now we have another new, lower estimate, to report on.

Climate Impact of the Keystone XL Pipeline: Some Further Thoughts

On Tuesday, I posted an analysis of the climate impacts from the burning the oil that would be transported through the Keystone XL pipeline (if the pipeline were to be approved).

I concluded that on an annual basis, the burning of the ~800,000 barrels of oil that would flow through the pipeline each day would produce about 0.0001°C of global warming per year (one ten-thousandths of a degree Celsius)—a value of little climatological significance.

But on further reflection, I think this number is too high.

Data on U.S. oil consumption from the Energy Information Administration (EIA) shows that our consumption peaked in 2005 at a rate of nearly 21 million barrels per day (bpd) and has declined since. In 2011 (the last year of available data) the value was just under 19 million bpd. The EIA projects a continued slight decline of U.S. petroleum consumption for decades into the future.

This means that oil flowing through the Keystone XL pipeline will not amount to additional oil use, but rather will displace more expensive (economically and/or socially) foreign oil imports. Thus, all else being equal, the Keystone XL pipeline would lead to no additional global warming beyond that which would have taken place anyway from our domestic oil consumption.

But all else is not quite equal because the extraction and refining process of the Alberta tar sands oil (that the Keystone XL pipeline will deliver) is more energy intensive than oil from the Middle East, or Mexico, or Venezuela. By most accounts, this extra effort increases the lifecycle (well-to-wheel) CO2 emissions of Alberta tar sands oil by about 15 to 20 percent.

What this means is that instead of assuming CO2 emissions from an additional 800,000 new barrels of oil each day, I really should consider only the extra 15-20% of emissions that the 800,000 bpd of tar sands oil produces over the oil that we currently import. When I do this, instead of 0.0001°C of added warming each year, I get that the Keystone XL oil will produce only about 0.00001°C of warming each year (give or take a couple hundred thousandths of a °C).

I think we can all agree that 0.00001°C of warming is effectively the same as zero warming.

No matter how you look at it, there is no climate impact of the Keystone XL pipeline.

Whether or not other transportation routes out of the Alberta tar sands open in the future to meet the growing global (outside of the U.S.) demand for oil should not be a matter of consideration when assessing the climate impact of the Keystone XL pipeline.

End Gas Tax? Yes! Pay for Roads with Sales Tax? No!

Virginia Governor Bob McDonnell wants his state to be the first to end the gas tax. This is a good idea because gas taxes are an imperfect user fee.

However, McDonnell proposes to replace the gas tax with a 0.8-cent sales tax that he says will generate more revenue than the gas tax. If your only goal is to make government bigger, then generating revenue is a good idea. However, if your goal is to have better roads, then even a gas tax makes more sense than a sales tax.

The key to the success of the free is feedback. As imperfect as the gas tax is, it generates feedback to highway agencies: if they build roads no one uses, they get no gas taxes. Sales taxes generate no feedback at all; the agencies get money whether anyone uses the roads or not.

We know from the transit industry what happens when transportation agencies are funded out of sales taxes and other general taxes rather than user fees. First, they build expensive monuments that please ribbon-cutting politicians but do little to solve transportation problems. Then they fail to adequately maintain those monuments or the rest of their transportation systems. That’s hardly a sound prescription for our highway systems.