Disincentives for Driving

It is no secret that people in the US drive a lot, and they rely on their personal vehicles for the majority of their transportation needs. Slight increases in the price of gas or concerns about the environment have done little to curb the country's fuel consumption significantly. The three Detroit automakers always seem behind the curve on every technology including fuel efficiency. No wonder they are all on the brink of bankruptcy. Citizens seem uncompromising when it comes to their right to drive cheaply. Is there any way to cut down on fuel consumption by US drivers? Freakonomicists STEPHEN J. DUBNER and STEVEN D. LEVITT suggest introducing disincentives for driving could be effective.

What disincentives do they entertain?

1. Congestion pricing which 'penalizes' those who drive in congested areas has been effectively applied in Singapore and London, but has received a lot of resistance in Manhattan.
2. Pay-as-you-drive (PAYD) Insurance - This way, those who drive more will pay a higher car insurance, other things being equal. Progressive is apparently offering such a program called MyRate.

Two disincentives they don't discuss are a possible increase in gas tax and introduction of pollution tax. Here are my ideas on those subjects.

Increasing the Gas Tax:

The 18.4cent/gallon federal gas tax that Hillary Clinton and John McCain irresponsibly proposed to suspend for the summer are by far the lowest for any developed nation. If you include state gas tax, people in the US pay an average of 47cents/gallon in gas tax and that constitutes only 15% of the cost of gas.

In Europe and rest of the developed world, the national gas tax accounts for some 60%-65% of the enormous gas prices. That is the reason why people in many parts of the world pay:

1. Eritrea .................$9.58
2. Norway ...............$8.73
3. Britain .................$8.38
4. Netherlands ........$8.37
5. Monaco ...............$8.31
6. Iceland ................$8.28
7. Belgium ..............$8.22
8. France ................$8.07
9. Germany ...........$7.86
10. Portugal ...........$7.84
108. USA ..........$3.45

Source: Airinc/CNN, based on surveys of 155 countries between March 17 and April 1, 2008.

(A more complete and up-to-date list of gas prices around the world is found on Wikipedia.)

While a large gas tax does hurt consumers, it does discourage driving as they have in Europe. Europeans have a very reliable public transit system, but the US could increase the federal+state gas tax slowly and invest that money back into improving its public transit system. Tom Friedman of The New York Times suggests that politicians set $4.00/gallon as the base and tell the public that the era of cheap gas is over. It might be an unpopular position for a politician to take, but something that is badly needed.

Those who drive will shift towards more fuel efficient vehicles if gas prices are high. Those who are reluctant to pay a premium for a hybrid car will be more willing because the return on their investment comes quickly. In the meantime, not-so-green manufacturers will adapt or die. The pressure on both drivers and auto manufacturers will quickly push fuel efficiency averages in the US. At the moment, those numbers are atrocious, as you can see in this graphic from this Christian Science Monitor article.

Pollution Tax:

One way to implement carbon tax on regular drivers is to add a little penalty to people every year when it is time to renew their tag. people would pay a proportional carbon tax on the basis of:

1. How much they drove over the past year
2. The fuel efficiency of their vehicle

It seems pretty easy to implement. It is a matter of legislators to sign these controversial and unpopular ideas into law.
All in all, I am in favor of rewarding green and environmentally conservative behavior and punishing the contrary. Disincentives fall in the category of punishing unfavorable behavior, which in turn promotes good behavior.