Show me the carbon

Show me the carbon Emissions fees could pay for transport infrastructure, ex-DOT chief says.

By Eric Kulisch


      Recent recommendations from experts and interest groups to raise motor fuel taxes or convert to a system for billing vehicles based on distance traveled may be suitable stop-gap measures for funding a huge backlog of transportation infrastructure improvements. But the real gold mine lies in tapping future carbon taxes, according to a former secretary of transportation.
      The Obama administration and Democrats on Capitol Hill have already signaled they plan to move toward some sort of cap-and-trade system in which companies would receive credits for the amount of carbon burned up to a limit and could buy credits in a national or global exchange from companies with fewer emissions to achieve their regulated threshold.
      The federal treasury is expected to reap a multitrillion-dollar windfall from charging for the initial carbon allowances and taxing subsequent transactions. The primary objective of transportation interests should be to figure out how to get their fair share of that revenue flow to improve the transportation system, said James Burnley IV, now a partner at the Venable law firm in Washington.
      'That's where the money is going to be,' he insisted during a panel discussion organized by the RAND Corp., a public policy research institute. Raising the fuel tax, implementing more tolling or converting to a vehicle-mile traveled tax (VMT) may provide a temporary funding patch, but they 'could turn out to be chump change compared to what could be generated by a cap-and-trade system.'
      The transportation sector, Burnley said, needs to get involved with shaping the cap-and-trade policy before other interest groups divvy up the trillions of dollars it generates, 30 percent of which is estimated will come from transportation. He said that money should go to the highway and aviation trust funds. Various payment mechanisms for a carbon emissions trading system are being debated.

James Burnley IV partner, Venable
'If we're not at the table starting right now, somebody else is going to get our money. And we're never going to see it again.'

      'If we're not at the table starting right now, somebody else is going to get our money. And we're never going to see it again. So that has to be the focus first and foremost' otherwise 'we're going to find ourselves in the same situation we do today five, 10, 15 years from now.
      'It's terribly important to go where the money is,' said Burnley, who nonetheless opposes cap-and-trade as an environmental solution, but wants transportation interests to protect themselves if it, or a direct carbon tax, becomes law.
      Cap-and-trade skeptics say there are too many technological, economic and political uncertainties with the idea to make it workable.
      The National Surface Transportation Infrastructure Finance Commission estimated that a tax on carbon produced by motor vehicles would yield nearly $46 billion to $92 billion per year, based on European spot prices for carbon dioxide credits. It recommended that some portion of any carbon tax should go back in the Highway Trust Fund, and not just for environmental programs designed to reduce emissions. It didn't address the more complicated cap-and-trade issue.
      'A gas tax is almost a perfect carbon tax,' said Craig Lentzsch, a commission member and chairman of the American Bus Association.

Tough Road Ahead.    Meanwhile, the VMT fee faces a tough political hurdle as various groups and lawmakers have already lined up against it. Ray LaHood, the current secretary of transportation, endorsed the concept of a VMT fee in a Feb. 20 interview with the Associated Press, but quickly backtracked after the White House and a DOT spokesperson contradicted his statement.

LaHood

      A VMT tax 'is not and will not be the policy of the Obama administration,' White House Press Secretary Robert Gibbs said.
      Speaking to the American Trucking Associations' board meeting on Capitol Hill four days later, LaHood talked about the need to think outside the box in terms of financing solutions, but did not mention VMT as an option. He declined to discuss the subject when pressed afterward by a reporter to clarify the administration's position.
      And Burnley, who served as transportation secretary in the Reagan administration from 1987 to 1989, said significant fuel tax increases are not feasible from a political standpoint considering the recession, anti-tax sentiment and the negative perception that transportation funds are used for pork-barrel spending.
      President Obama and LaHood have also publicly stated they do not favor raising the fuel tax at a time when Americans are struggling to pay their bills.
      The American Trucking Associations is among many groups concerned with the VMT fee. Critics argue that tracking a vehicle's mileage raises privacy and fraud questions, and that rural residents and truckers who drive longer distances will bear a disproportionate burden.
      ATA Vice President Dave Osiecki said his organization favors continuation of the fuel tax because it is easy and cost-effective to collect.
      Administrative costs associated with fuel tax collections from gas stations and states run about 1 percent of revenues. A VMT system will also require automobiles and commercial vehicles to be outfitted with satellite-based global positioning system devices and a wireless receiver connected to the odometer and readers, possibly installed at fuel stations, to upload the data. The cost to operate a VMT system will likely be much higher in the short to medium term, but would drop along with the price of information technology over time, according to commissioners.
      They articulated a goal for total annual operating costs to be less than 10 percent of revenue during the first few years of implementation and less than 5 percent in the long term.
      (A VMT system being developed in the Netherlands projects administrative costs to run at 5 percent of revenue.)
      As envisioned by some proponents, the system would determine the distance traveled as well as which roads and time of day traveled to allow for congestion surcharges, off-peak pricing or other tolling to be built into the automated system.
   'We want to see as much of the revenue dedicated to highways that freight moves on,' Osiecki said. 'We think the fuel tax is more efficient. We see many years for it to still fund the infrastructure.'
      To that end, motor carriers also do not want money siphoned off from the Highway Trust Fund for other purposes, said David Miller, vice president for global policy and economic sustainability at Con-way Inc. Under current rules, about $5 billion of highway revenues are used to fund mass transit, $180 million goes to a Leak Underground Storage Tank Trust Fund, $1.5 billion is diverted to a Sport Fish Restoration and Boating Trust Fund or refunded to state and local governments, agricultural users and others, and interest on the trust fund's balance is deposited in the general fund.
      The trade association also complained that the commission's recommendation to raise diesel taxes more than gas taxes, as well as other federal truck taxes, in the short term places a disproportionate burden on the motor carrier industry to fund highway programs during difficult economic times.
      'We are particularly concerned about a proposed doubling of the Heavy Vehicle Use Tax, which ' experiences significant evasion currently, and a large increase in the rate will likely exacerbate this problem,' it said in a statement.
      The ATA is asking Congress to support the creation of a Freight Corridors Initiative and pay for it by raising the diesel fuel tax. It wants the money from the supplemental portion of the tax to go into a fire-walled account that targets aid to states for longer ramps and other improvements on high-volume interstates, truck-only lanes, port, rail and land border connections, widening or repair of major bridges and related projects.
      'We're willing to pay higher fuel taxes as long as they go into a fund to support users. We don't want to do bicycle trails and (horse) paths,' Miller said, referring to previous pet projects inserted by lawmakers into spending bills.
      The Coalition for America's Gateways and Trade Corridors also endorses a freight trust fund with priority given to projects of national significance. It supports a smorgasbord of new fees, including fuel taxes, direct vehicle fees, freight fees based on cargo value or weight, customs duty diversion, weight-distance taxes, VMT and carbon emission fees.
      Many privacy advocates raise the specter of VMT as the manifestation of government as Big Brother, tracking every person's movement. The commission and experts say those fears are legitimate ' and perhaps pose the biggest political hurdle for distance-based pricing ' but can be easily addressed.
      One way is to enact legislation that decrees location information will not be allowed out of the onboard recorder so that people can take anonymous trips, said Bern Grush, chief scientist for Skymeter Corp., a Toronto-based company that disburses location-based payments for road use, parking and pay-as-you drive insurance. The company essentially meters use like a utility through telematics (integration of wireless communications, vehicle monitoring systems and location devices) and automatically bills users.
      The system should delete trip data right away upon payment, he said, adding there may be some public policy reasons to retain data on commercial truck movements. Payment calculations would be done by the onboard system, transmitted through short-range radio frequency identification or other wireless means and captured by a database that would issue a debit or credit account withdrawal.
      The system envisioned by the National Surface Transportation Infrastructure Finance Commission would not have real-time tracking capability. Rather, it involves a one-way signal to the car, which stores the trip data and then offloads it for payment.
      Nonetheless, the data stream stored in onboard computers that shows where a driver went can be easily uplinked to other systems. Con-way's Miller said truckers would have major heartburn if the government collects data on their movements because it could be made public through a lawsuit or Freedom of Information Act Request and provide a road map to their customers.
      'It raises the prospect that a company's confidential list of customers could be exposed by understanding the route a driver runs and who's visited along that route. Carriers will want to protect that information,' he said.
      At a Transportation Research Board forum in mid-January previewing the commission's report, William Ankner, secretary of transportation and development in Louisiana, questioned the move to a funding system that relies on people driving more, which he said adds to congestion and pressure to continually grow the road system.
      The U.S. Chamber of Commerce, normally an advocate of lower taxes, has said it would support a gas tax increase as long as the money shows direct benefit to users and earmarks are eliminated. It is urging to get manufacturers, retailers and other non-transport businesses to speak up about the impact on profitability from traffic congestion and limited freight-related improvements, and how a new transportation investment plan should take into account supply chain needs. Most industry groups focus their political persuasion on health care, taxes, the environment and other issues and assume that strong trucking, road building and transit lobbies are taking care of transportation matters, Janet Kavinoky, the chamber's director of transportation infrastructure policy, said Jan. 26 at a small logistics conference in Atlanta.
      But the case for better transportation policies will be more effective if lawmakers get feedback from businesses in their districts that can show how the transport system affects their productivity, she said.
      Top priorities for shippers should include last-mile connections to freight transfer facilities, she said.
      General Mills, the large Minneapolis-based food producer, estimates that every reduction of one mile per hour below posted limits in the average speed of its truck shipments adds $2 million in annual costs, it told the commission. The company spends almost $650 million on trucking per year.
      UPS figures that if each of its package delivery drivers incurred one minute of delay each day of the week for a year because of congestion it would cost the company $20 million, much of it devoted to labor considering the company's 100,000 drivers on average earn $60,000 to $80,000 per year, according to a spokesman.
      The federal government pays for about 45 percent of all road network maintenance and improvements.
      'If we lose that, it gets pushed back to the states and shippers have much less chance of having a true, interconnected, well-operated road network,' Kavinoky said.
      Burnley said the general business community is more engaged on transportation infrastructure than it ever has been before and praised groups such as the chamber and National Association of Manufacturers for their leadership in trying to convince politicians of the need for a new transportation vision.
      The Department of Transportation should promote the use of freight-only corridors, which 'could provide enormous productivity gains for the trucking industry' by separating cars and trucks, he added.