Thursday, September 13, 2012

Climate change and traffic congestion

What's common between addressing climate change and traffic congestion? Disincentivizing private vehicle usage will help mitigate carbon emissions and control traffic congestion. As the graphic below shows, transportation is a large contributor to global carbon emissions.

Happily for environmentalists, the sheer immediacy of the problem of traffic congestion, makes it an issue demanding urgent attention for policy makers. In simple terms, climate change advocates stand a greater chance of succeeding in their fight against carbon emissions by joining hands with urban transport managers in addressing traffic congestion.

Any effort to reduce carbon emissions has to involve aggressive action by US, China, and India. Given the magnitude of the problem - deteriorating traffic and air quality - it is therefore unsurprising that in recent weeks all three have initiated policies aimed at restricting vehicle usage and/or reducing the carbon footprint from vehicular emissions.

Following Shanghai and Beijing, Guangzhou, the third largest Chinese city, has embraced license plate auctions and lotteries to restrict the growth of vehicles. It is estimated to halve the number of new vehicles entering the market. Even the usually lethargic Indian government has been spurred into action and is contemplating urban transport tax to discourage vehicle ownership and congestion pricing to disincentivize vehicle use. In the US, President Obama recently announced stricter energy efficiency standards which are expected to nearly double the average fuel economy of cars and light trucks to about 54.5 miles a gallon by 2025.

However, as the Times points out in a recent article, a more effective way to address this challenge may be by simply taxing carbon fuels. This blog has consistently argued in favor of carbon tax as the preferred strategy to achieve carbon abatement, based on considerations of both economic efficiency and practical implementation challenges. This graphic from the Times article highlights the potential gains from a carbon tax in the US.

Nevertheless, as this McKinsey report shows, improvements in emission standards is one of the cheapest carbon abatement options.

But with the issue of discouraging vehicle use, we need to realize that we can make a meaningful dent only by simultaneously deploying all the three policy options available - making vehicle ownership costly (vehicle tax, license plate auctions etc), internalizing the social costs of vehicle usage (carbon tax, congestion pricing, high parking fees etc), and encouraging the use of public transport. In countries like the US, among these options, carbon tax, despite its certain political opposition, is likely to be the least distortionary and most effective way to address both traffic congestion and climate change.

1 comment:

Anonymous said...

Be sure that Ray Brindle sees this.