This Friday is the deadline for public comments on the stricter vehicle efficiency standards from EPA and the Department of Transportation. The docket is likely to be overrun with statements for and against the regulation that would make cars and light trucks 30 percent more efficient in 5 years.

From an economic perspective, the social benefits of the rule outweigh the costs. The environmental, health, and energy security benefits -- most especially from reducing the tailpipe emission of greenhouse gases -- could more than double the estimated costs to manufacturers of installing more fuel efficiency technologies: social benefits could total over $800 billion, compared to around $400 billion in compliance costs.

But there will also be the straight up savings to consumers, who will spend a fraction of the current cost of filling their tanks. The benefit to Americans' pocket books could reach as high as $2 trillion.

Sources here and here (PDF).

This line item alone swamps the price tag on the rule making it overwhelmingly justified -- but some opponents of the rule may want the EPA to nullify these savings.

Their argument goes something like this: Consumers have the option to buy more fuel efficient cars right now, and they do not. Therefore, there must be something about having bigger, heavier, more powerful cars that benefits American consumers. Since this regulation could limit their ability to buy these larger, those citizens would have to do without something they value.

Opponents of stricter fuel standards admit that it is almost impossible to value that preference for bulkier cars, but they might try to convince the agencies that it is at least as much as the fuel savings we'd see at the pump. Since consumers could have those same fuel savings today by buying a Prius or an Insight, but forgo those cars for an Explorer, then the lost consumer benefit would need to be at least that amount.

But how consumers choose and value cars is more complicated than that. A car's newness, size, and power are valued not just for their functionality, but for their relation to the others in the parking lot. Consumers value horsepower not just for speed but as a status symbol and for the ability to out-accelerate others at a traffic light. People don't necessarily want a big car, they just want a bigger car.

The problem with prestige goods is they don't actually increase welfare or status. If Smith buys a bigger car, Jones has to buy a bigger car as well to catch up; relative to average car size, neither has really moved ahead. By devoting resources to conspicuous features like size, less visible features like fuel efficiency and financial savings are sacrificed.

The proposed CAFE regulations correct a market failure and accomplish what the non-cooperative marketplace cannot: fuel efficiency increases, Americans get the value of fuel savings, and consumers do not have to risk their positional status, since over time the entire fleet's average size and power will shift.

This is one of the chief reasons to regulate: to increase consumer welfare by doing what the market can't on its own. It might take consumers some time to grow accustomed to the new vehicle options, but relatively quickly they will be just as happy with their new, more fuel-efficient models, and they will be thrilled by the trillions in savings at the pump.

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Don't ask what kind of mileage it gets.In the summer of 2006, Marine Corps Major General Richard Zilmer sent the Pentagon an unusual "Priority 1" request for emergency battlefield supplies. Stationed at a temporary base in Fallujah, Zilmer was commanding a force of 30,000 troops responsible for protecting Al Anbar, the vast territory in western Iraq bordering Saudi Arabia, Jordan, and Syria. Heavily armed insurgents were hammering the region, and Al Qaeda was quickly gathering recruits. Zilmer's beleaguered soldiers were running low on fuel for the diesel generators powering their barracks -- fuel that cooled their tents in the 135-degree weather, refrigerated and cooked their food, and kept the communication lines open. The general, however, was wary of trucking in backup supplies during a time of so much turmoil. The U.S. fuel convoys that chugged along the back roads of Iraq every day -- long lines of 18-wheelers hauling armored vats of gas -- were among the insurgents' prime targets.

Zilmer's memo presented the Pentagon with an unprecedented request: "a self-sustainable energy solution," including "solar panels and wind turbines." This was the first time a frontline commander had formally requested renewable energy backup in battle. Without alternative power sources, the memo continued, U.S. forces "will remain unnecessarily exposed" and will "continue to accrue preventable ... serious and grave casualties." Put in civilian-speak: Too many of Zilmer's troops were dying in fuel convoys, and the relentless gasoline demands of the diesel generators were partly to blame.

Renewable energy was not an environmental consideration for Zilmer, it was a tactical necessity -- a matter of life and death, of victory or defeat. The Pentagon is the largest consumer of petroleum in the United States. In recent years it has used between 130 million and 145 million barrels of oil annually -- 2 percent of America's total petroleum demand. That translates to nearly 400,000 barrels per day, roughly the total daily energy consumption of the United Arab Emirates. Over the last century, no institution has done more to propel America's rise to power than our military -- or consumed more oil in the process. We have petroleum to thank for building the Department of Defense into an as-yet-unmatched fighting machine -- but our troops are only as powerful as the flow of fuel that sustains them.

I was both baffled and hopeful when I read about Zilmer's memo. Here was a no-nonsense Marine Corps general who has served more than 30 years in the U.S. military (not your typical tree-hugger) stationed in a country that's virtually floating on an ocean of oil (Iraq has the world's third-largest oil reserves, after Iran and Saudi Arabia) demanding clean energy solutions that only a few years earlier had been regarded as rinky-dink hippie technology suitable only for yurts and Earthships. Zilmer's plea struck me as a clear harbinger of change in America's attitudes about energy. If there was ever an opportunity to "man up" the effete image and role of solar panels, wind power, and other fossil-fuel alternatives, this was it. Just think of what the Pentagon could do to fast-track alternative-energy innovations going forward -- after all, it was military R&D that led to the invention of jet airplanes, helicopters, radar, remote-control mechanisms, cell phones, global positioning systems (GPS), microchips, and the internet.

But for all the promise it augured, Zilmer's memo also carried overtones of despair that spoke to the massive challenges that come with fueling the military -- one more oil-dependent today than ever before in history.

How did the American military get so hooked on petroleum? How much does it really cost -- in both blood and treasure -- to fuel war? What would it take to transform the world's biggest and strongest military into a petroleum-free enterprise? And how did this become the primary concern of a man leading 30,000 troops? To get answers, I went straight to the heart of the U.S. military establishment.      

*

Despite the imposing neoclassical façade I'd seen in so many photographs, the Pentagon as I approached in autumn 2007 looked surprisingly humble, unadorned, and low-slung. No sign of the tragic events of Sept. 11 remained on the building's exterior. But inside, a string of police line tape marked "Do Not Cross" still demarcated a section of the structure's impacted west side.

I had come to discuss the military's fuel consumption with Dan Nolan, who oversaw energy projects for the Defense Department's Rapid Equipping Force. (He recently retired.) Nolan, who graduated from West Point and has an engineering degree from the University of Southern California, procured in-field equipment ranging from tents to tanks for the Pentagon.

I met with Nolan in a windowless, soundproof room with cinderblock walls and a two-way mirror in the basement of the Pentagon, where interviews with the media are often scheduled. Though the setting was austere, the conversation rolled amicably. Nolan was eager and passionate about the military's green prospects: "I can see a future," he said, "where we have base-camp generators powered by garbage, surveillance aircraft powered by the sun, hybrid-engine tanks many times more fuel efficient, soldiers' clothing that harvests solar energy to charge their electronic field gear ... footwear that converts the kinetic energy from movement into stored energy, buildings and facilities operating entirely on renewable energy ... it's all in the works."

Thus far, Nolan's most successful energy-efficiency programs had been comparatively low-tech. He devised a superinsulating spray foam that could be applied to the outside of soldiers' tents in Iraq to save on air-conditioning demands; after the DOD spent $95 million on insulating foam for base camps in Iraq, the agency earned that back in energy savings in just 60 days. The security benefits are perhaps more impressive: DOD data show that if all U.S. military base-camp tents in Iraq were spray-foamed, the number of fuel convoy trucks needed would be reduced by 13 per day.

Nolan was additionally collaborating with a start-up called SkyBuilt Power to meet the demand for renewable in-the-field power stations. SkyBuilt had developed a mobile power station that fits into a standard shipping container and uses a mix of solar, wind, and hydro power to augment diesel generators. The hitch was cost: this contraption is priced at roughly $100,000, compared with just $7,500 to $10,000 for a basic diesel generator. For that reason, Nolan had been able to deploy only two of the renewable power systems in combat zones.

The range of green innovations the Pentagon is working on is impressive, extending beyond specialized military applications to products with potentially vast commercial potential: a combined-cycle jet engine with 40 percent greater efficiency, jet fuels derived from algae, low-cost lightweight titanium applications to replace heavy steel, ultra-efficient batteries. The Pentagon has partnered with companies including Boeing, General Motors, and General Electric to try to bring some of these products to market, but the time frame is vague at best. "Hard to say," Nolan replied when I asked him how soon some of these products will be commercially viable. Another reality check is the Pentagon's annual budget for developing efficient and alternative technologies: just over $1 billion in 2009. That's a tiny fraction of its total R&D budget, indicating that fossil-fuel reduction is not exactly an urgent priority.

What would it take to get the funding and political capital necessary to significantly ratchet down the military's energy footprint? I posed this question to Al Shaffer, the executive director of the Pentagon's Energy Security Task Force. Shaffer, who trained as a meteorologist to supply weather information to frontline combat units, has a big-picture handle on all the moving parts of the Pentagon -- not just the Army, Navy, and Air Force, but also the dozens of other divisions that handle logistics, long-term strategy, and, most important, budget.

He formed the Energy Security Task Force in 2006 in response to the spike in fuel prices after Hurricane Katrina. "All of a sudden we realized we had a problem at the Defense Department," Shaffer told me, "because a $10 increase in the price of [a barrel of] crude resulted in a $1.4 billion upsurge in our operating costs for the next year."

Shaffer noted the growth in the military's green R&D efforts to push the development of efficient and renewable technologies, and emphasized the progress the military has made installing renewable energy on its bases. "Did you know that the world's largest photovoltaic farm is on an Air Force base?" he asked, adding that the DOD currently derives 12 percent of the electricity for its facilities from renewable sources, making it one of the world's largest consumers of green energy. The agency has vowed to increase that to 25 percent by 2025, and reduce the energy usage of its facilities 30 percent by 2015.

All of this sounded promising, but I asked Shaffer how the U.S. military can talk about a secure energy future when its own B-52 bomber uses up to 45,000 gallons of fuel in a single mission. And as the Defense Science Board's 2001 report "More Capable Warfighting Through Reduced Fuel Burden" stated clearly, fuel usage is not something the military can actually restrict: "Because DOD's consumption of oil represents the highest priority of all uses, there will be no fundamental limits to DOD's fuel supply for many, many decades."

Shaffer nodded slowly, indicating he understood this problem all too well. "Energy security is critically important -- and it has become dramatically more so in recent years because of the increase in cost of oil. This is scary." He paused. "Our cost for energy went up just shy of $3 billion from fiscal year 2005 to fiscal year 2006, even though we reduced our overall usage of energy by about 5 percent during that same time period."

The shift to a greener and more efficient military, said Shaffer, will accelerate as the Pentagon adjusts to volatile oil prices and rethinks the way its fuel costs are calculated. The Defense Science Board report pointed out that the Pentagon calculates the cost of the fuel it uses according to wholesale refinery price -- roughly the price we pay at the pump -- and does not factor in the cost of delivery in the field of combat. DSB analysis showed that the total cost of fuel when delivered to army bases over short distances is roughly $10 per gallon. That number quadruples over long distances to "at least $40-$50 per gallon" and rockets up to "more than $400 per gallon" when fuel is delivered by aerial tankers to aircraft in flight. "This produces a sub-optimal allocation of resources," the report concluded.

These kinds of added costs are particularly pronounced in the Iraq operation given that a pipeline infrastructure can't be used, and given how dispersed the combat activity is. "The war on terrorism is a lot like guerrilla warfare," explained Shaffer. "When we send out a convoy, there are vehicles in front of the fuel trucks, there are vehicles behind the fuel trucks, and there are aircraft flying overhead. It's very, very complex. Takes a lot of kids, a lot of our young troops. Every time they go out and do this type of run, it puts their lives in danger."

Once the Pentagon starts factoring in the true cost of fuel, it makes the new renewable energy alternatives look cheaper by comparison.

"We don't do things to be green," Shaffer told me. "We do things for operational efficiency, for improving our capability to perform our mission, whatever that mission may be. And it just so happens that being sustainable is now a smart thing to do." Not since World War II -- when the Germans were bombing American oil tankers and interrupting the Allies' fuel supply routes -- has the Pentagon had to worry about having affordable and abundant energy to buoy its military operations.

"Suddenly efficiency presents us with multiple benefits," Shaffer told me. "We save money; we simplify our logistics supply line, which makes us a more effective fighting force; we free ourselves from dependence on oil controlled by our adversaries; and above all we save lives. With better energy conservation, we simply would not have as many combat casualties."

In March 2008, the Defense Science Board publicly released a report titled "More Fight -- Less Fuel." This report reiterated many of the requests it had made in its 2001 document and berated the Pentagon for failing to implement these recommendations in a meaningful way. Though it praised initiatives like those of Nolan and Shaffer, it exposed the underfunding that plagued such programs. This sequel report included an emphatic plea to "unleash us from the tether of oil."

How much time -- and how many more lost lives -- before the top brass at the Pentagon respond seriously to pleas for efficiency and energy self-sufficiency?

This piece was excerpted from Amanda Little's book Power Trip: From Oil Wells to Solar Cells—Our Ride to the Renewable Future.

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The other day I highlighted a new piece from Elizabeth Kolbert in the New Yorker, which was critical of No Impact Man and other "stunts" in hyper-green living. Mainly I used it as an excuse to point to my old piece on the civic sphere, which, ahem, you should read.

I should have made it clear in the post that I have not read the No Impact Man book (or the other books mentioned in Kolbert's piece), so I'm not really qualified to comment on whether her criticisms are fair.

Not surprisingly, Colin Beavan -- No Impact Man himself -- doesn't think so! Kolbert's main charge is that personal lifestyle changes like his, no matter how committed or extreme, tend to obscure the fact that the big changes needed are collective -- social and political. One person changing doesn't amount to much.

Beavan wrote me to protest that a) he agrees with Kolbert's point entirely, b) his book actually contains a whole section toward the end about volunteering for NGOs and going to lobby Congress, and c) he has consistently used his platform to push for social action. One of Beavan's supporters also mounts a convincing defense in this post. It does seem that, whatever you could say about the other books in Kolbert's review, she did seem to squeeze Beavan into a box to make a point, a box in which he doesn't really belong.

You could argue, I guess, that whatever Beavan's intentions, and whatever he may have said in his book or blog, it was inevitable that the stunt -- going without toilet paper, etc. -- became the focus. The net cultural effect, even if unintended and explicitly disavowed, was roughly what Kolbert charged. Then again, you could just as easily counter that it's hard to get people involved in social change, period, and that you have to do whatever you can to get people's attention to begin with; that's what the stunt was, something flashy to draw people in and get them thinking. Not like other methods of pulling people into social change are working!

I certainly don't know the answer; if I knew how to make change, I wouldn't be a misanthropic shut-in blogger. I will say, though, that it's extremely easy to second guess other people's choices, much easier than taking action yourself. Whatever you might think of No Impact Man, Beavan has put skin in the game -- real, intense, sustained effort -- and that's a hell of a lot more than most people do. So props.

A final point: if people are going to do these kind of personal-behavior performance pieces, it's important that they convey accurate information about the impact of personal behaviors. That is information the public desperate needs. McKinsey found, in a 2008 survey of consumers:

Our study shows that more than one-third of the consumers who want to help mitigate climate change don't really know how. The top three ways for them to reduce their own emissions are to drive more fuel-efficient cars, improve the insulation of their homes, and eat less beef. Yet when we asked the consumers in our study to name the top three, they fingered recycling, energy-efficient appliances, and driving less. Few consumers knew how eco-friendly it is to shun beef.

Peoples is confused.McKinsey and Co.

As you can see, the American people are deeply confused about how to reduce their impact, even if they wanted to. I cringe every time I see someone on TV going on about unplugging power strips -- the most time-consuming, irksome, low-impact change a person can make. If you want to reduce your impact, replace your car with a Prius or take public transit, insulate your home, and eliminate beef from your diet. Do that and you can relax about, say, toilet paper.

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Capturing the massive social benefits of fuel efficiency requires regulation

Photo: ThreatedThoughtsIt's now fairly widely understood that Cash for Clunkers has worked great as a stimulus program but is negligible as an emissions-reduction program. That's fine -- it did what it was supposed to do. Now that we know how well people respond to cash incentives, though, it's time to do some deeper thinking about how to drive a large-scale shift to more fuel-efficient vehicles.

Conservatives are always complaining that CAFE standards force automakers to make more fuel-efficient cars, but don't give consumers any incentive to buy them. That's a valid complaint. The usual response is to propose raising the gas tax, which, as I've mentioned before, drives me crazy. This is the solution people come up with when they are besotted with economics and utterly ignorant of politics. Let's put voters -- particularly low-income voters -- in financial pain, thereby forcing them to buy different kinds of cars, whenever they can afford to do that, which could be a long time, particularly with their budgets being destroyed by high gas prices. A political policy that yields pure pain, for every single voter that drives. Lemme see a politician sell that.

A much, much better idea is an oldie but goodie: feebates. Under this program, consumers who buy vehicles that exceed CAFE standards are given a lump-sum subsidy. Yes: cash in pocket! The dealer puts it right in your hot little hands. These subsidies are paid for by a fee on consumers who purchase vehicles that fall short of CAFE standards.

Purely as policy, it has some shortcomings. It doesn't penalize driving -- we'd prefer someone buy an SUV and park it most of the time than buy a hatchback and drive it every day. But that shortcoming can easily be remedied by pairing feebates with higher gas taxes. As a political matter, though, lead with the policy that's easier to understand and offers tangible benefits!

All of which is prelude to noting the excellent news that Sens. Jeff Bingaman (D-N.M.), Olympia Snowe (R-Maine), Richard Lugar (R-Ind.), and John Kerry (D-Mass.) have introduced a bipartisan feebate bill: the Efficient Vehicle Leadership Act of 2009 (S.1620).

The Efficient Vehicle Leadership Act creates a program that rewards consumers who buy cars and trucks that get better gas mileage than the average overall fuel economy required for its class. Motorists who buy models which exceed that CAFE standard will receive a “fuel performance rebate” (claimed on their tax return or paid instantly by the dealer, whichever the buyer prefers), an amount tied to the fuel savings over and above the relevant CAFE standard. The savings can range from several hundred to several thousand dollars, depending on the vehicle’s fuel economy relative to other models of the same size. Conversely, for inefficient, gas-gulping vehicles, manufacturers will be assessed a fuel performance fee to pay for the program.

If we've learned anything from Cash for Clunkers, it's that direct, tangible incentives like this drive behavior -- much more and faster than economic projections indicate.

We've used those incentives for economic stimulus. Now we should put them to work increasing the fuel efficiency of the whole fleet.

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Conventional wisdom has it that the effort to reduce greenhouse-gas emissions is going to be long, expensive, and painful for consumers; efficiency can at best defray the costs.

It may not be visible to the casual news consumer, but that climate/energy CW is substantially shaped by economic modeling. I've argued in the past that such models systematically overstate the costs and understate the benefits of clean energy and emission reductions. I won't rehash all those points here (you're welcome!), but suffice to say, one of the main arguments was that the models consistently underestimate energy efficiency.

Several recent studies examine the potential for energy efficiency to reduce emissions at a negative cost, i.e., a profit, and the results bolster the argument. Importantly, these are ground-up studies, based on history and practice, rather than top-down studies based on economic theories and spreadsheets. From that perspective, the news turns out to be quite good.

"The Positive Economics of Climate Change Policies: What the Historical Evidence Can Tell Us"

Energy efficiency has outperformed expectations again and again, insofar as expectations are set by econometric projections, says Skip Laitner of the American Council for an Energy-Efficient Economy. He took a thorough look at the "economic data and the historical record." Here's what he found:

• Energy efficiency investments can provide up to one-half of the needed greenhouse-gas emissions reductions most scientists say are needed between now and the year 2050.
• Investments in more energy-productive technologies can also lead to a substantial net energy bill savings for the consumer and for the nation's businesses. In the diagnostic assessment summarized in this report, savings are on the order of two trillion dollars by 2050 (measured in constant 2007 dollars).
• Non-energy expenditures within the U.S. tend to be more labor-intensive and provide a greater rate of contribution to the nation's Gross Domestic Product compared to expenditures on conventional energy supplies. Instead of taking jobs away from the economy, the diagnostic assessment described in this report suggests a small but net positive gain in the economy.
• Hence, shifting away from the production and consumption of conventional energy resources, in favor of more productive investments in energy-efficient technologies, can lead to a more robust economy and to a greater level of overall employment opportunities with the U.S.

How can that energy efficiency potential be unlocked? Funny you should ask.

"Unlocking Energy Efficiency in the U.S. Economy"

McKinsey's latest study is their most comprehensive assessment of efficiency yet (ably summarized by Joe Romm). Here are their efficiency options, mapped on a cost curve:

McKinsey & Co.

The study concludes ...

... a holistic approach would yield gross energy savings worth more than $1.2 trillion, well above the $520 billion needed through 2020 for upfront investment in efficiency measures (not including program costs). Such a program is estimated to reduce end-use energy consumption in 2020 by 9.1 quadrillion BTUs, roughly 23 percent of projected demand, potentially abating up to 1.1 gigatons of greenhouse gases annually.

As Joe says, that's tantamount to saying "the entire 2020 target in the Waxman-Markey climate bill could be met with energy efficiency at a net savings to U.S. consumers and businesses of $700 billion."

One crucial thing to note about the McKinsey study is that it is only about stationary sources of energy; it doesn't consider transportation efficiency. Funny you should ask about that.

"Moving Cooler: Transportation Strategies to Reduce Greenhouse Gas Emissions"

At the behest of, among others, the U.S. Department of Transportation, the American Public Transportation Association, NRDC, the EPA, and Shell Oil, Cambridge Systematics has produced a comprehensive accounting of policy options for reducing transportation emissions. The top-line result:

As you can see, the maximally aggressive policy portfolio described by Cambridge could reduce GHG emissions almost 25% by 2050. That portfolio would cost a great deal, but it would save a great deal as well. Savings would exceed costs between 2015 and 2020:

Importantly, the study finds most big emission reductions not in fuel efficiency, but in pricing policies (tolls, congestion fees, pay-per-mile insurance) and land-use changes.

That's another 11 percent to add to McKinsey's 2020 reductions, bringing us to 38 percent -- well above ACES targets, closing in on IPCC targets, at net positive savings. So much for miserable consumers shivering in the cold.

If we put our minds to it, we have the means and the opportunities to substantially reduce emissions while strengthening the economy. The early push on efficiency will give us much-needed breathing room to scale up new, clean sources. The path we need to follow is clear, and it leads to greater prosperity, health, and sustainability. That is good news.

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Capturing the massive social benefits of fuel efficiency requires regulation

Major car companies are starting to vote on their choice for the "car and fuel of the future" with big bets on manufacturing capacity.  The winner, no surprise, is going to be highly efficient plug-in hybrid electric vehicles and pure electric vehicles (see, for instance, "Everything you could want to know about plug-in and EV announcements at Detroit auto show").

Plug-ins and EVs are a core climate solution, since electric drives are more efficient, easily powered by carbon-free energy, and far cheaper to operate per mile than gasoline or any alternative fuel, especially hydrogen, even when running on renewable power. And they are the key alt-fuel strategy needed to deal with the energy/economic security threat of rising dependence on imported oil and the inevitably grim impacts of peak oil (see "Why electricity is the only alternative fuel that can lead to energy independence").

No surprise, then, that Toyota is planning on a major rollout of its plug in:

Toyota Motor Corp plans to start mass producing plug-in hybrid vehicles in 2012, with a projected first-year output of about 20,000 to 30,000 units, the Nikkei business daily reported on Saturday.

We also have some details on the cost and all-electric range of the Toyota plug in:

Toyota wants to price its plug-in hybrids at a comparable price to Mitsubishi Motors Corp's all-electric car, which debuts this month to fleet customers in Japan at 4.59 million yen ($47,800) before government subsidies, the Nikkei said, without citing sources....

Toyota's plug-ins will be able to run 20-30 km (12.4-18.6 miles) on battery power alone at full charge, the paper said.

It always bears repeating that after the battery charge is exhausted, the car will revert to being a highly fuel-efficient "conventional" hybrid that runs on gasoline.

Toyota appears to be making a shrewder decision on the all-electric range than GM, which says it is giving the Chevy Volt a too-large 40-mile capacity (see "Has GM overdesigned the Volt: Is a 40-mile all electric range too much?" and "CMU study suggests GM has wildly oversized the batteries in the Chevy Volt plug-in hybrid").

Ford had made clear in its restructuring plan last year that the future fuel is electrons (see "Whose bailout plan is best: Ford drops hydrogen while GM remains confused about ethanol"):

The next major step in Ford's plan is to increase over time the volume of electrified vehicles, as battery costs improve and as the transition from Hybrids to Plug-in Hybrids to Battery Electric Vehicles occurs.

Now Reuters reports:

Ford plans to introduce a battery-powered commercial van in 2010, a battery-powered small car the following year and a plug-in hybrid to challenge General Motors Corp's highly touted Volt starting in 2012.

Those plans put utilities and battery companies "at the center of the universe" for automakers, [Ford CEO Alan] Mulally said.

Ford, the first of the U.S. automakers to roll out a hybrid, has made a renewed commitment to the technology a centerpiece of its turnaround plans....

Within a decade, automakers and utility companies expect to make commonplace two-way communication between vehicles and an interactive utility power grid that will solidify their cooperation.

Utilities are expected to install millions of "smart meters" at homes that would signal the car's computer when the power grid is strained, and power expensive, so charging can be suspended.

For now, the goal is simply to convince motorists to plug in, said Nancy Gioia, Ford's director of hybrid vehicle programs.

Gioia projects that "from 10 to 25 percent" of Ford's production by 2020 will be some type of electrified vehicle.

General Motors, of course, has long been touting its efforts to electrified vehicles:

GM, now operating under a federally funded bankruptcy, has also pledged to have more plug-in hybrids and even pure electric vehicles for city driving in the future....

Britta Gross, GM's director of global energy systems and infrastructure commercialization, would not offer a percentage for plug-ins and other types of electric cars, but said GM would "do the heavy lifting" trying to meet the moonshot-like goal set by President Barack Obama to have 1 million plug-in hybrids on U.S. roads by 2015.

Finally, we can move beyond the rhetorical hype about what low-carbon alternative fuel vehicles American consumers might be driving in the foreseeable future, and on to the manufacturing and practical reality of plug-ins and EVs.

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Do we need nuclear and coal plants for baseload power?

Let's take a look at a few studies that have come out recently and see if we can find a common thread.

These are disparate areas of study and disparate conclusions. One thing they all have in common: an environment-degrading practice often defended as necessary to economic health is revealed, upon closer inspection, to be uneconomic. I wonder how many other allegedly economic environment-degrading practices would also be revealed uneconomic if examined with a fresh eye?

It's almost like the economy is embedded in an environment, and degrading the latter ultimately degrades the former.

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The American Clean Energy and Security (ACES) Act allocates funding to produce the next generation of clean, fuel-efficient vehicles in the United States, and when combined with clean vehicle performance standards adopted by the Obama administration, the American on-road fleet will become about 25% more fuel efficient over the next decade.

As a result, by 2020, Americans will drive more efficient vehicles and have lower household transportation costs. Even in the face of rising gasoline prices, cleaner vehicles will save money by sipping instead of guzzling gasoline.

For detailed methodology and explanations, and a printable map, visit my original post.

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John McCain’s troubles are the world’s troubles

George Voinovich (R-Ohio) [UPDATED]

Feeling ambivalent?Will the Waxman-Markey bill spark a full-scale energy revolution?

No. Not on its own, not in the next 10-15 years. The short-term targets for reducing greenhouse gases are too low, the renewable electricity standard is too weak, too many offsets are allowed, and there's too little investment in clean energy. To boot, there's every indication the bill will get worse before it passes ... in the unlikely event it passes.

The green world is grappling with these unpleasant facts right now, fluctuating between rage (kill it!), dread (we're screwed), and resignation (it's better than nothing). Or maybe that's just me.

Anyway, on odd-numbered days, I think I've reached a fragile zen detente with the whole process. Mainly, I've been trying to focus on a different question: will there be an energy revolution? After all, the American Clean Energy and Security Act is not the only shot for Obama to make good on his campaign promises on energy. Nor is the legislation our last chance to tackle the climate crisis. No bill can carry that kind of weight, not at this moment, with this Congress. America is at the tail end of an era of cheap energy and heedless economic growth. Waxman-Markey is just the struggle to get an extremely hidebound, backward-looking set of political institutions to acknowledge that the old order is collapsing. Building a new order is something else entirely.

The question is, what's going to happen after the bill is passed? An energy revolution will require a combination of social, technological, business, legal, regulatory, and legislative changes. Federal legislation can't do all the lifting. Conversely, other changes can compensate somewhat for a weak (at least at the outset) federal framework. What will ultimately make the difference is not the specific mechanics of the bill but the, ahem, Sweep of History. (And who better to capture the Sweep of History than Some Blogger?)

I am reasonably optimistic, despite the flaws in Waxman-Markey, that history is on our side, and that the arguments happening today in Congress will soon be seen as peculiar and archaic. Here, briefly, is why:

Obama (Lo, is he not The Beginning of All Lists?)

There is no reason to think that this bill is going to be Obama's only legacy on energy. Already there's been the stimulus bill, which will probably do more for clean energy in the next five years than Waxman-Markey, the new mileage standards, and the big climate impacts report. And there is plenty more to come.

In the latest issue of Rolling Stone, Jeff Goodell has a fantastic piece on Energy Secretary Steven Chu. (For reasons only RS understands, it is not yet online. However, Charlie Petit at Knight has a bootleg PDF copy and some thoughts on the piece. Also read Brad Plumer. And while you're at it, read Brad's long and extremely excellent piece on the question of whether we need technological breakthroughs to beat climate change, which is centered on Chu.)

The RS piece contains this striking passage:

"The fact is, we're not going to level out at 450 ppm," [Chu] says. "We're going to go over 450 ppm. So what will we do? I'm not in favor of deploying geoengineering. But thinking about it is OK."

For a moment, the room goes quiet. In effect, the United States secretary of energy has just told an elite group of scientists and politicians that, no matter what happens with climate legislation this summer in Congress, no matter what China does or does not do, no matter what targets are set at climate negotiations in Copenhagen later this year, our future as a species is likely a grim one. Chu has uttered the politically unthinkable: that his own administration's efforts to halt global warming might not be enough to avert a catastrophe.

In other words, Chu gets it. He knows that this isn't just political football. It isn't just another "issue." It's imminent misery, not just for future generations but for people alive today.

And he's not the only one. White House science adviser John Holdren gets it. So do climate czar Carol Browner, EPA administrator Lisa Jackson, CEQ chief Nancy Sutley, and both Hillary Clinton and Todd Stern at State. So, if we're to believe those close to him, does Barack Obama (though many of his supporters are beginning to have their doubts, what with his ongoing low profile on the subject).

If Obama wins a second term, we will have eight years of an administration filled with people who believe that the fate of millions, possibly human civilization itself, rests on their ability to tackle this problem. They're not going to view the passage of a compromised cap-and-trade bill as the end of their responsibility. They'll use their eight years to make sure the long-term emission-reduction framework put in place by Waxman-Markey is part of our national DNA. They'll keep pushing China. They'll use executive branch tools (including, but not only, the EPA). They'll drive research and deployment.

In eight years, the quest for a clean energy revolution will not be a subject for partisan dispute but a simple fact, a shared national mission, and part of every business's long-term planning.

Some other reasons for hope:

• Oil prices threaten the economic recovery, as Ryan Avent keeps warning. Coal is getting more expensive, and several coal utilities are applying for rate increases. Gas prices are going to fluctuate (generally on the way up).

In short, fossil fuels are not going to become less of an economic pain in the ass. Their corrosive effects on the economy and public health seem likely to become steadily more apparent. Once consumers are familiar with alternative sources that offer stable, effectively free (after the initial capital investment) power, they're going to start demanding them.

• Cleantech is cool. This is from Joshua Green's excellent piece on clean energy in The Atlantic:

Shortly after the inauguration, a friend up for several jobs in the new administration confessed that he yearned to wind up at the Department of Energy. "It's like NASA in the '60s," he told me. "All the best and brightest want to be there." Obama's choice of Steven Chu, the Nobel laureate physicist, as secretary of energy only heightened the allure. In the early Obama era, romantic notions about making one's mark on history tend to take the form of helping recast America's economy, and by extension the world's, in a way that will head off global catastrophe.

And this:

"Think of the smartest guy you've ever met and then imagine 50,000 more just like him innovating all at once," Mike Danaher, a partner and cleantech specialist at the law firm Wilson Sonsini Goodrich & Rosati, told me. "Just as they did with telecom in the '90s, they're attacking every component of every kind of alternative energy to improve it."

Cleantech's allure can partly be captured via numbers -- the amount of VC investment, the amount of stimulus money -- but it goes beyond that. It's about nerd chic. Figuring out energy is what all the hot-shit brainiacs coming out of Ivy League schools want to do these days. There's just an amazing amount of brainpower being devoted to these problems, more every day. I predict the pace of innovation is going to outstrip even the most optimistic projections. The clean-energy mammals will overwhelm the dirty-energy dinosaurs sooner than we think.

• The need for a real economy. One thing you frequently hear about the bubble-busts of the last 20 years is that there was too much capital chasing too few real investments. We need a new source of economic growth to absorb that capital. And there's a felt need today for Americans to start making stuff again -- inventing, manufacturing, and exporting things of real value.

What can we make? What's the new source of growth? Here's how economist James K. Galbraith put it:

Finally, there is the big problem: ... How to build the productive economy for the next generation? ...

Today the largest problems we face are energy security and climate change—massive issues because energy underpins everything we do, and because climate change threatens the survival of civilization. And here, obviously, we need a comprehensive national effort. Such a thing, if done right, combining planning and markets, could add 5 or even 10 percent of GDP to net investment. That’s not the scale of wartime mobilization. But it probably could return the country to full employment and keep it there, for years.

Moreover, the work does resemble wartime mobilization in important financial respects. Weatherization, conservation, mass transit, renewable power, and the smart grid are public investments. As with the armaments in World War II, work on them would generate incomes not matched by the new production of consumer goods. If handled carefully—say, with a new program of deferred claims to future purchasing power like war bonds—the incomes earned by dealing with oil security and climate change have the potential to become a foundation of restored financial wealth for the middle class.

This basic view, albeit toned down, is mirrored in Joe Biden's Middle Class Task Force, which is pushing hard on clean energy as a source of restored middle class prosperity.

All of which is to say: the structural position of the U.S. economy more or less requires a push toward clean energy. You can't build an economy on moving fake money around forever. If you want large and expanding markets, there aren't that many places to go.

• States and cities won't stop. Waxman-Markey may set national standards at relatively weak levels, but plenty of states have tougher renewable electricity standards. A few are experimenting with feed-in tariffs (see here and here) and producing extraordinary results. You can't throw a rock without hitting a mayor who wants to revitalize his or her city by establishing a reputation as green (see Grist's list of 15 green mayors).

The federal debate is warped by the outsized influence of carbon-intensive states and industries (magnified both by corporate contributions and by the frakked-up structure of U.S. constitutional government). But at the subnational level, there is a swarm of political leaders without the same constraints. Eventually, their success -- not only environmental success but subsequent economic and political success -- will alter the political calculus even in the most recalcitrant states. Whether or not the trend is accelerated by Waxman-Markey, wealth is already transferring from middle states to the coasts, because the East and West coasts are where the action and innovation are.

• We are on the cusp of an extended progressive era. This is the one I'm least confident about, so I'm putting it last. But in my optimistic moments, I agree with the politics editor at The Nation, Chris Hayes:

Look at how far we've come in the last four years. We have a black president who ran on the most ambitiously progressive domestic agenda in a generation. Look at the political perspectives of the youngest voters, the most progressive cohort since the dawn of polling on almost every issue. White, male, Christians are the demographic roadblock. And the country is getting less white and less Christian. The macro forces are moving in our direction. What makes you lose hope is the hand-to-hand combat happening on Capitol Hill. Progressives have a unique lack of self-confidence where we feel like we are just going to get this one little chance, but I think the force of history is on our side. I believe that with every last fiber of my being.

I can't say I believe that with my every fiber. Maybe 60 to 70 percent of my fibers. But sometimes, when I squint just right, I see a future blooming with cultural and technological ferment, a tidal change on the way that will be helped by a strong federal climate bill but will not be stopped by a weak one.

Related Links:

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It's an annual rite as familiar as April showers; Americans again jumped in their cars in droves this past weekend to celebrate the unofficial start of summer. It was fitting that last week President Obama took a major step, announcing regulations that will increase fuel efficiency within a few years. With this move, Obama ensured that the Memorial Day weekends of the future will not leave as big a carbon footprint.

These standards will save billions of barrels of oil, stop millions of tons of carbon emissions, and may help pull Detroit out of its funk as it forces new rounds of innovation. While the Markey-Waxman bill slowly works its way through the labyrinth in Congress, Obama has taken the single most important step to combat climate change in U.S. history.

This move was bold, but it was also becoming legal necessary. The Supreme Court’s 2007 decision in Massachusetts v. EPA gave that agency precious little wiggle room. It required Obama either to regulate greenhouse gases or deny the science of climate change. No one is surprised that he decided to obey the Court take action.

As a result, Obama is going to start facing many more similar choices. Because the Mass. v. EPA ruling dealt with cars and light trucks, regulating those sources was naturally the first on the list. But this is only the first step. There are petitions on aircrafts, marine vessels, and fuels collecting dust that will need to be wrestled with. The President's legal obligation to deal with these petitions will likely force additional greenhouse gas regulations into the pipeline in the near future.

In the meantime, Congress is inching closer to passing its own plan to reduce carbon emissions. While there are some legitimate complaints, the Waxman-Markey bill is unquestionably among the most important pieces of environmental legislation ever considered.

But, the Waxman-Markey bill has only passed the first, and one of the easier, hurdles that it will face. The Senate battle is yet to come. To some extent, the bill’s sponsors have reached the top of the foothill, but will now need to climb the mountain. This will be no easy task.

EPA's legal obligations to continue regulating greenhouse gases can be used as a key point of leverage on the Senate. First came fuel-efficiency standards, soon we may see action on fuels more generally, and eventually the President could even adopt a full cap-and-trade system, complete with auctions and the power to enter into an international agreement.

This dynamic has the potential to keep the pressure Congress: If legislators wait too long, they risk ceding to the EPA their chance to put their stamp on the most important environmental issue of our generation. If environmentalists want to see action in Congress, one of the most important steps they can take is to keep the heat on the President to keep regulations rolling out. As climate change supporters try to carry the bill up over the Senate, having Obama there prodding it along will be sure to help.

Related Links:

Obama administration officials grateful for early spring

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Jon Stewart was brilliant as usual on Obama's new fuel efficiency standards:

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UPDATE:  The NYT story is not entirely accurate, and, separately, sources tell me there appears to be a little confusion as to exactly what mpg standard is set for what class of vehicles (see below).

UPDATE2:  The numbers appear to be 39 mpg for cars, 30 mpg for light trucks (see here).

For all those who are worried that the Waxman-Markey clean energy bill represents the alpha and the omega of energy policy, the NYT reports today:

The Obama administration will issue new national requirements for the emissions and mileage of cars and light trucks in an effort to end a long-running conflict among the states, the federal government and auto manufacturers, industry officials said Monday.

President Obama will announce as early as Tuesday that he will combine California’s tough new auto-emissions rules with the existing corporate average fuel economy standard to create a single new national standard, the officials said. As a result, cars and light trucks sold in the United States will be roughly 30 percent cleaner and more fuel-efficient by 2016.

I agree with Dan Becker of the Safe Climate Campaign (and formerly of Sierra club)

“This is a very big deal,” said Daniel Becker

Kudos to team Obama for putting this deal together.  Here are more details:

… the president would grant California’s longstanding request that its tailpipe emissions standards be imposed nationally. That request was denied by the Bush administration but has been under review by top Obama administration officials since January.

The italicized sentence is inaccurate.  California never asked that its emissions standard be imposed nationally, since, of course, it has no right to make such a request under the Clean Air Act.  It merely asked to be allowed to have a separate, tougher emissions standard as the law allows.  Other states may then choose between the California standard and the national standard.

But Mr. Obama is planning to go further, putting in place new mileage requirements to be administered by the Department of Transportation that would match the stringency of the California program.…

“This is a very big deal,” said Daniel Becker of the Safe Climate Campaign, a group that has pushed for tougher mileage and emissions standards with the goal of curbing the heat-trapping gases that have been linked to global warming. “This is the single biggest step the American government has ever taken to cut greenhouse-gas emissions.”

… The current standards are 27.5 miles a gallon for cars and about 24 miles a gallon for trucks. The new mileage and emissions rules will gradually tighten, beginning with 2011 models, until they reach the 2016 standards.

The auto industry is not expected to challenge the rule, which provides two things they have long asked for: certainty on a timetable and a single national standard….

President Obama became personally involved in the issue because he is also trying to find a way to rescue the American automobile companies from their financial crisis….

Mr. Obama directed the Environmental Protection Agency in January to reconsider the Bush administration’s past rejection of the California application. The president also instructed the Transportation Department to draw up rules to supplement a 2007 law requiring a 40 percent improvement in gas mileage for autos and light trucks by 2020.

The Bush administration failed to write any regulations to enforce the 2007 law.

Daniel J. Weiss, an environmental policy analyst at the liberal Center for American Progress, said that under the White House plan, California would retain the ability to set its own emissions standards in the future when the current program expires.

He also said that the new administration program was very close in language and intent to a provision in the climate change and energy bill now before the House Energy and Commerce Committee. That bill calls for a “harmonization” of the California and federal regulatory programs to provide a nationwide standard.

He said the standards were being written so that the car companies would already be on track to meet the standards set in the first few years of the program. The cars and trucks that will be sold in that period are already in the design phase. But starting in 2013 and 2014, the new rules will begin to bite, Mr. Weiss said.

Related Links:

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The decision of the Obama Administration to embrace stronger fuel economy standards by 2016 is drawing praise from environmentalists but fire from auto analysts who say it will add to Detroit's woes.  The decision to accelerate fuel economy comes on top of a variety of policy proposals to address climate change, the auto industry and transportation including the cap and market bill that was the subject of House hearings yesterday, the deliberations of the Auto Task Force over GM's fate, replenishing the Highway Trust Fund and a proposal to offer clash for clunkers also in legislation working its way through Congress.  Here are my thoughts how higher fuel economy standards fit into the bigger picture.

First, fuel economy standards are among the least precise tools for addressing climate change.  The reason?  Fuel economy is the mathematical equivalent of lower gas prices insofar as its allow consumers to drive more for less.  While it is therefore good for motorists' pocket books, its impact on emissions is ambiguous.  If you believe that people drive a certain amount each day and never vary that amount--then higher fuel economy translates directly to lower emissions.  However, if you believe that people drive more when gas costs less in other words that gas usage is price elastic--then higher fuel economy leaves more money in your pocket but does little to reduce emissions.  Last year's falloff in driving when oil prices spiked (as well as numerous studies) suggests that gas use is price elastic. As a result, the primary impact of higher fuel economy is likely to be what economists call an improvement in consumer welfare but not a large reduction in gas emissions. 

Second, higher fuel economy--by lowering the cost of driving a mile--also runs counter to the idea of making carbon more expensive--the idea behind carbon tax proposals and the cap and market legislation debated yesterday.

Third, fuel economy standards like gas prices are likely to impact the quantity of gasoline consumed.  In fact that is the goal.  To the degree they lead to less gas consumption, they lead to fewer gas taxes collected.  Since the Highway Trust Fund which finances not only roads but a large share of mass transit in America relies on gas taxes, higher fuel economy standards may reduce money available for transportation.  Later this year, Congress will try to fix the finances of the Highway Trust Fund.  But we should be mindful that improving fuel economy cuts in the opposite direction of two other policy ideas: making carbon more expensive and replenishing infrastructure funds.

Finally, there is the cost to the auto industry of making cars more fuel efficient.  The Auto Task Force has adopted fuel economy as an unofficial goal and suggested Chrysler and GM need to improve fuel economy as a condition of survival.  However, there is no link between fuel efficiency and profitability and, if anything, the correlation is negative.  Large cars remain a requirement for families and Americans simply like them.  Indeed, a Chevy Suburban with five in it is far more fuel efficient than a Prius with one person in it.  Cash constrained Americans--the lower three fifths of our beleaguered consumers--also prefer to pay less up front even if they have to pay more for fuel later on.  This is a question of their internal discount rate and cost of capital--which in the case of the poor is very high.  Even the New York Times, discussing the looming GM bankruptcy yesterday, got its logic mixed up when it described the fact that 11 of 20 of GM's best selling cards are gas guzzlers as a problem.  The company's problem is not its money making cars but its money losers.

As I have written before the crisis of the auto industry is due to one thing and one only, the virtual halving of sales volume due to the financial crisis that makes it impossible for anyone, Toyota, Honda, GM or Chrysler, to make money in the United States.  Fuel economy is a largely separate issue.

All this is a long way of saying that the higher fuel economy standards are no magic bullet to the problem of emissions and the real requirement of all the policy suggestions currently floating around is that they work together in alignment.

Here are proposals that are aligned.

The cash for clunkers idea now before Congress that Jack Hidary and others have advocated makes sense because it replaces old, smoky cars with new clean ones and also will generate demand for cars at a time when sales are down.

Pricing carbon through cap and market makes sense because it will attach the costs of emissions directly to their source, carbon. 

Good old gas taxes which are a form of carbon tax make sense as well, since they connect the tax to the carbon.  In contrast, the Vehicle Mileage Tax that some have proposed, even apart from its Orwellian implications for our freedom, would remove any incentive to buy an electric car or plug-in hybrid or, indeed, own a fuel efficient vehicle.

Incentives for electric cars and plug-in hybrids make sense because they move us off gasoline entirely.  Indeed, higher gas mileage is only likely to lead to major reductions in emissions if it hastens a switch to electric vehicles.

All these goals require a healthy auto industry.  If the Auto Task Force can keep GM out of bankruptcy, this would be a good thing, as a drawn out GM bankruptcy could hobble America's clean energy future.

In short, when dealing with issues this complex, it is vital that we get them right and that different policy proposals work together.  While higher fuel economy standards are not a bad thing, they need to be viewed as part of an overall plan to create a clean, healthy and robust American transportation sector.

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Photo courtesy of the New York International Auto Show.

How will Chrysler save itself (and maybe even the auto industry)? With a tiny blue coupe tricked out with italian-leather seats, of course. 

If there was any doubt about how large a role Fiat will play in Chrysler's restructuring, Chrysler vice chairman Jim Press silenced those questions by driving on stage in a cobalt blue Fiat 500 at the New York International Auto Show on Wednesday.  The point of Chrysler's press conference was supposedly to announce the new Jeep Grand Cherokee, but Press took a few minutes to make his bravissimo arrival and wax poetic about the virtues of Fiat.

"Saving the environment and gas money never looked so good ... and don't you think this would be the perfect car to get around New York City?" said Press, playing to the New York audience. He also said that President Barack Obama was "happy" with Fiat's role in Chrysler's restructuring plan, which might be a small exaggeration of the Obama administration's actual attitude toward the American automakers.

Press made no indication of when the Fiat 500 would be available in the United States, but he hinted that it might be included in Chrysler's plan to launch eight new vehicles in the next 18 months.

Depending on the engine and transmission, the Fiat 500 gets between 37 and 56 mpg in Europe.

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Recently I've been flogging the concept of a mileage tax, a system of per-mile road usage fees that over time can replace our dysfunctional gasoline tax as a way of funding transportation infrastructure. Although people have raised a lot of interesting objections, I'd like for now to skip ahead and simply describe Oregon's successful experiment with a mileage tax. A single real-world example can be a lot more illuminating than an entire internet's worth of abstract debate.

Way back in 2001, Oregon recognized the problem that many state legislatures are now staring down: gas tax revenue is falling inexorably as vehicles become more fuel-efficient, threatening transportation budgets. The state launched a task force that investigated 28 alternative funding mechanisms before selecting a mileage tax as the one that best met a wide range of criteria: fairness, efficacy, ease of implementation, public acceptance, enforceability, privacy protection, etc.

In 2006, the state recruited 299 volunteers for participation in a year-long trial of a prototype system. Because any real-world mileage tax will be phased in over a long period of time, it has to harmonize with the existing gas tax. The Oregon experiment neatly solved this problem with a pay-at-the-pump system:

The Oregon Department of Transportation (ODOT) has compiled a 100-page report on the experiment [PDF] that covers a lot of ground, but basically describes the trial as a roaring success. Note several features of this system:

Technically, the system worked. Just as importantly, public acceptance was high; 91 percent of test participants preferred the system to paying gas taxes. Obviously this was a self-selected group of people, but the broader public response was equally telling. Before the experiment began, media portrayals of the system were almost uniformly negative -- and inaccurate. By the middle of 2006, media coverage ranged from neutral to positive, and were far more accurate. Citizen comment reflected this broader trend. ODOT concludes, "Effective communication can lead to public acceptance."

Perhaps most exciting from an environmental perspective are the ancillary benefits that such a system can provide. Halfway through the experiment, ODOT divided participants into two groups (plus a control group). One group paid a flat per-mile fee. The other paid a congestion fee of 10 cents per mile during peak driving times in the Portland metropolitan area. The congestion fee was separately itemized on participants' fuel receipts.

It turns out that all participants reduced their driving relative to the control group -- a somewhat surprising finding, because the mileage tax was designed to be revenue neutral. Anecdotally, many participants reported changing their driving habits in response to the GPS mileage displays in their cars. "One person commented that she began walking to neighborhood places when she realized by looking at the display how short the distance from her home actually was. Other people said they began organizing short trips from home to consolidate to one trip."

The results among the congestion-fee group were even more dramatic. These participants dropped their peak hour driving by 22 percent compared to the control. And this group also reduced their total driving by more than the flat-fee group, indicating that they didn't just shift their driving to other times.

These results are preliminary, but suggestive. And they only scratch the surface of the possibilities opened up by a mileage-based pricing system. As the report notes, the system could provide a powerful tool to "metropolitan planning organizations (MPOs) looking for fair and stable means to fund regional plans, manage growth, contain air pollution and support better land use decisions."

Oregon currently faces a $10 billion dollar revenue shortfall for transportation financing. Earlier this year, the governor of Oregon called for state-wide implementation of a mileage tax.

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Whether they are called "revenue enhancements" or "user charges," fear of the political consequences of taxes restricts debate on energy and environmental policy options in Washington. In a March 7 post on "green jobs," in which I argued that it is not always best to try to address two challenges with a single policy instrument, I also noted that in some cases such dual-purpose policy instruments can be a good idea, and I gave gasoline taxes as an example.

Although a serious recession is clearly not the time to expect political receptivity to such a proposal, the time will come -- we all hope very soon -- when the economy turns around, employment rises, and a sustained period of economic growth ensues. When that happens, serious consideration should be given to increases in the federal tax on gasoline.

A gas tax increase -- coupled with an offsetting reduction in other taxes, such as the Social Security tax on wages -- could make most American households better off, while reducing oil imports, local pollution, urban congestion, road accidents, and global climate change. This revenue-neutral tax reform would exemplify the market-based approaches to environmental protection and resource management I examined in previous posts.

Such a change need not constitute a new tax, but a reform of existing ones. It is well known ­-- both from economic theory and numerous empirical studies ­-- that taxes tend to reduce the extent to which people undertake the taxed activity. In the United States, most tax revenues are raised by levies on labor and investment; the resulting reduction in these fundamentally desirable activities is viewed as an unfortunate but unavoidable side-effect of the need to raise revenue for government operations. Would it not make more sense to raise the revenue we need by taxing undesirable activities, instead of desirable ones?

Combustion of gasoline in motor vehicles produces local air pollution as well as carbon dioxide that contributes to global climate change, increases imports of oil, and exacerbates urban highway congestion. Can anyone really claim that -- given a choice between discouraging work and discouraging gasoline consumption -- it is better to discourage work?

According to the Department of Energy, a 50-cent gas tax increase could eventually reduce gasoline consumption by 10 to 15 percent, reduce oil imports by perhaps 500 thousand barrels per day, and generate about $40 billion per year in revenue.

Furthermore, this approach would be far more effective than ongoing proposals to increase the Corporate Average Fuel Economy (CAFE) standards, which affect only new vehicles and lead to serious safety problems by encouraging auto makers to produce lighter vehicles. Also, remember that a major effect of CAFE standards has been to accelerate the shift from cars to SUVs and light trucks (so that overall fuel efficiency of new vehicles sold is no better than it was a decade ago, despite the great strides that have taken place in fuel efficiency technologies). As my Harvard colleague Martin Feldstein pointed out in The Wall Street Journal in 2006, the conventional approach "does nothing to encourage individuals to drive less, to use their cars more efficiently, or to shift sooner to new and more fuel efficient [and cleaner] vehicles." A more enlightened approach ­-- a market-based approach -- would reward consumers who economize on gasoline use. And that is what a revenue-neutral gas tax is all about.

The revenue from the gas tax could be transferred to the Social Security Trust Fund and credited to current workers. If $40 billion per year from new gas tax revenues were transferred to Social Security, the payroll tax -- the employee contribution to Social Security -- could be cut by perhaps a third: a worker with annual wages of $30,000 would take home an additional $750 per year! The extra income would more than offset the cost of the gas tax, unless the worker drove over 35,000 miles per year in a car getting 25 miles or less per gallon. Rebating the gas tax in this way addresses the greatest concern about higher gas taxes -- that they can hit hardest those workers who drive to their jobs. Further, a tax of this magnitude could be phased in gradually, perhaps no more than 10 cents per year over 5 years, allowing individuals and firms to adjust their consuming and producing behavior.

Proposals for gasoline tax increases in recent sessions of Congress would have dedicated the revenue to public spending (for transportation and other programs). A key difference is that the proposal I have outlined here is for a revenue-neutral change in which the gas tax revenue would be returned to Americans through reduced payroll taxes. To adopt some of the language I developed in my previous posts, such a change can be both efficient and equitable, and -- for those reasons -- perhaps even politically feasible.

Of course, such a scheme is not a panacea for U.S. energy and environmental problems. But it would make a significant contribution if enacted. On the other hand, political fear of the T-word in Washington may mean that it is never discussed seriously in public, let alone adopted. Most fear of taxes is due to politicians' anxieties about asking their constituents to pay more. But an increase in the Federal gas tax, rebated through reduced payroll taxes would not cost most Americans any more and would have significant long-term benefits for the country. Still, fear of the T-word looms large; maybe it should be called an "All-American Ecologically Sound, Fully Recyclable, Anti-Terror, Energy-Independence Assessment."

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The post on the mileage tax stirred up a lot of reaction, much of it negative. As it happens, the state of Oregon recently wrapped up a successful trial of a mileage tax system, so for the next few posts I'm going to be relying heavily on an excellent final report on the system (PDF) from the Oregon Department of Transportation (ODOT).

The primary objection to a mileage tax is that we already have one: it's called the gas tax, and it's easy to administer, fair, and has the added bonus of rewarding fuel-efficient vehicles and driving behavior. ODOT says, "From the standpoint of tax policy, the gas tax is close to perfection."

Or at least, it was close to perfection. It has one fatal flaw and a few subsidiary issues. Any discussion of the mileage tax must be grounded in an understanding of the gas tax's growing problems.

First, keep in mind that the gas tax is meant to raise funds for road infrastructure. Any environmental benefits are incidental. And with regard to its primary function, the gas tax is nearing the end of its useful life, because its tax base is steadily and inevitably dwindling. Cars have become more fuel-efficient -- as they must under the nation's CAFE laws -- and these efficiency gains will grow as hybrid electric and fully electric vehicles make up a greater proportion of the national fleet. States across the country today face budgetary shortfalls from this trend. ODOT says, "In about 10 to 15 years the state's gas tax revenues will enter permanent decline. While this crisis is only a few short years off, the pain of lost revenues has already begun." (Ten years might sound like a long time, but ODOT's plan for phasing in a mileage tax stretches all the way to 2040.)

Second, the environmental benefits of the gas tax are largely theoretical. The tax is too low to have much effect on either vehicle choice or driving behavior. According to ODOT, "the average passenger vehicle driving 12,000 miles per year only pays $12 in state gas tax per month," a tiny fraction of fuel cost, insurance cost, and vehicle cost. While it's great that a Hummer driver pays more in gas taxes than a Prius driver, a Hummer driver also pays a lot more for gas. In truth, neither driver is sweating the tax very much.

A sharp upward adjustment to the gas tax could address both these issues. Which brings us to the third problem: decades of experience show the near impossibility of raising the gas tax even to the extent necessary to match inflation. Last year, two of the three leading presidential candidates campaigned on a suspension of the gas tax -- and they weren't even from the same party. Politicians usually take the heat for this situation, but much blame lies with gas-obsessed voters.

Would a mileage tax address these issues? Clearly it addresses the first. The only source of revenue erosion under a mileage tax would be a drop in miles driven, which are far more stable over time than gallons purchased. Note that this issue alone dictates the eventual replacement of the gas tax.

Regarding the second issue, a mileage tax can easily be designed to reward vehicle fuel efficiency in the same manner that a gas tax does. In fact, more exotic mileage taxes can specifically target drivers who bear a disproportionate share of responsibility for greenhouse gas emissions or are most able to seek transportation alternatives -- say, people who drive gas guzzlers in urban centers. Will such a system be any better than a gas tax at encouraging conservation? Probably, and it's unlikely to be any worse.

Finally, will politicians be able to raise a mileage tax to keep revenue in line with expenditures? Uncertain. On the one hand, the level of emotion surrounding the gas tax springs in part from the high volatility of gas prices. Separating the road fee from the fuel bill might lower the temperature of this issue. On the other hand, Americans pretty much hate to pay for anything. At the very least, the lack of revenue erosion with a mileage tax will reduce the need for constant price hikes. Again, it seems unlikely that the new system could be worse than the old.

So the scorecard thus far is that a mileage tax corrects the huge, gaping flaw in the gas tax and performs at least as well on two secondary issues. Next up: the complexity issue.

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