NewEnergyNews: TODAY’S STUDY: How To Pay For Tomorrow’s Transportation System

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YESTERDAY

  • Weekend Video: Forget The Planet, Save The Pizza
  • Weekend Video: Wind Power Shines Its Light
  • Weekend Video: Storing Solar As A Liquid
  • THE DAY BEFORE

  • FRIDAY WORLD HEADLINE-The Inner Circle Of Climate Action
  • FRIDAY WORLD HEADLINE-Europe Building Wind For A Continent
  • FRIDAY WORLD HEADLINE-Global Solar Is A Better And Better Buy
  • FRIDAY WORLD HEADLINE-Big Wind A Go-Go Near Home of Beatles’ Beat
  • THE DAY BEFORE THE DAY BEFORE

    THINGS-TO-THINK-ABOUT THURSDAY, May 18:

  • TTTA Thursday-Methane From Alaskan Tundra Accelerating Climate Changes
  • TTTA Thursday-U.S. Voters Back Paris Climate Deal 5 to 1
  • TTTA Thursday-The Tesla Solar Roof Value Calculation
  • TTTA Thursday-Senator Slams Tilted DOE Grid Study
  • THE DAY BEFORE THAT

  • ORIGINAL REPORTING: How To Plan For New Energy
  • ORIGINAL REPORTING: What New Wires Could Do
  • ORIGINAL REPORTING: The Questions To Answer To Get New Energy Right
  • AND THE DAY BEFORE THAT

  • TODAY’S STUDY: The Big Benefits In Big Wind
  • QUICK NEWS, May 16: Why New Energy Won’t Be Stopped; Silicon Valley Takes On Laptop Wind; Floating Solar To Cut Costs
  • THE LAST DAY UP HERE

  • Why Coal Ain’t Comin’ Back
  • QUICK NEWS, May 15: Why Doubters Deny Climate Change; U.S. Cities Are Getting Greener; Electricity Choice Movement Faces Pushback From Utilities
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    Anne B. Butterfield of Daily Camera and Huffington Post, f is an occasional contributor to NewEnergyNews

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    Some of Anne's contributions:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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  • ---------------
  • TODAY AT NewEnergyNews, May 22:

  • TODAY’S STUDY: Solar For Everybody Else
  • QUICK NEWS, May 22: The Plan To Beat Climate Change; Ready For The Offshore Wind Boom; Solar Research Faces Trump Cuts

    Tuesday, May 02, 2017

    TODAY’S STUDY: How To Pay For Tomorrow’s Transportation System

    Beyond The Gas Tax; Funding California Transportation in the 21st Century

    April 2017 (Beacon Economics via Next 10)

    Executive Summary

    As more roadway repairs become backlogged, maintenance and repairs become more difficult and more expensive. However, the state’s revenue from motor vehicle fuel taxes – which is used to fund roadway maintenance and transportation programs – continues to decline as a result of low gas prices, issues with the gas tax structure, and fuel use reduction driven by the state’s efforts to reduce greenhouse gas emissions from transportation. In order to address the issue of poor roadway conditions while continuing to reduce transportation-related emissions, new funding mechanisms will be necessary.

    California is committed to reducing greenhouse gas (GHG) emissions. The state has passed extensive legislation designed to reduce emissions and kick start the state’s clean energy economy. With light-duty vehicles serving as the largest single source of the state’s GHG emissions –– emitting more than industrial activities and more than three times as much as agricultural activities1– California has created an ambitious set of programs geared towards reducing the GHG emissions and pollution of the transportation sector.

    Nationwide, newer model-year vehicles are becoming more fuel-efficient, saving consumers hundreds of dollars each year. At the same time, California has been promoting the sale of zero emission vehicles (ZEV) with generous financial incentives and other perks, such as access to the high-occupancy vehicle (HOV) lane. These initiatives have kick-started the ZEV market – a market that’s set to grow as California strives to put 1.5 million ZEVs on the road by 2025. However, meeting this goal will drive a revenue loss for transportation infrastructure of $572 million and $276 million in state and federal gasoline excise tax revenues, respectively. As California transitions its economy away from fossil fuels, the state’s vital transportation funding cannot continue to rely on the sale of gasoline.

    The recent passing of Senate Bill 1 (Beall, hereinafter SB1) will provide an estimated $52.4 billion in transportation revenue over a ten-year period to begin to repair some of the state’s failing infrastructure. This bill features a number of changes to California’s roadway maintenance and vehicle fee structures, but will require further adjustments over time. While the passing of SB1 is a great start to bridge the transportation funding gap, it must serve as the start, rather than end, of a transportation funding discussion. The bill still falls short in addressing the $137-billion2 backlog of repairs to state highways and bridges and local streets. If California is to adequately address the backlog of repairs and ensure that emission goals and roadway infrastructure maintenance can be cost-effectively and sustainably achieved, the state needs to look at new funding models designed for the 21st century.

    This comparative brief analyzes statewide data in California and across the country to better understand trends in vehicle use, fuel efficiency, and transportation finance. Based on findings from across the country, the authors also identify policy options for providing alternative finance mechanisms to support road infrastructure in an increasingly fuelefficient vehicle market.

    Key Findings

    Roadways Infrastructure

    • 68 percent of the Golden State’s roadways are in either poor or mediocre condition compared to the 24.4 percent national average. Half of California’s public roads are in poor condition; only Rhode Island (54%) and Connecticut (57%) had higher percentages of roads in poor condition.3

    • Most California roads are at least 40 years old, meaning they’ve reached or exceeded their designed useful life.

    • In its 2017 Infrastructure Report Card, the American Society of Civil Engineers estimated that driving on poorly maintained roads costs each motorist $844 in vehicle repair costs per year in California — the highest behind Connecticut’s $864 per motorist per year.

    • Fuel taxes do not account for vehicle-specific road damage and heavy trucks disproportionately account for more costs and damages on roadways across multiple factors on a per-mile basis.

    • During the last 10 fiscal years, the federal government has had to borrow from the General Fund 7 times in order to cover the shortfall of the revenue generated from the federal excise tax versus needed funds for road maintenance.

    Motor Vehicle Fuel Taxes

    • Californians have been driving more than ever. Collectively, Californian motorists logged 335 billion vehicle-miles traveled in 2015 – a record high. On the other hand, refiner motor gasoline sales averaged 4.34 million gallons per day in 2015, which was only about half as much as 2002, the year with the highest daily average motor gasoline sales of 8.71 million gallons.

    • Light-duty vehicles are becoming increasingly fuel-efficient. Compared to 10 years ago, new vehicles have an average improved fuel economy of 5.5 miles per gallon nationally, or 27.4% compared to vehicles of model year 2006.

    • California has some of the highest state gasoline and state diesel fuel sales taxes. As of January 1, 2017, California’s taxes on motor vehicle fuels, excluding the 18.4-cents-per-gallon federal excise tax, are: ∙ 38.13-cents-per-gallon for gasoline (7th highest), and ∙ 40.01-cents-per-gallon for diesel (8th highest)

    • Motor Vehicle Fuel Tax Revenue has been on a decline. Whereas gasoline consumption in 2015 declined less than 2% compared to 2010, inflation-adjusted fuel tax revenue declined 20% in the same period. In 2016, motor vehicle fuel tax revenue accounted for just 3.3 percent of total tax revenue compared to 5.3 percent in 2010. The main contributing factors are:

    ∙ Improved fuel efficiency of vehicles: light-duty vehicles have improved fuel efficiency by 27.4% in the last ten years, resulting in lower gasoline consumption, saving consumers a few hundred dollars per year on fuel.

    ∙ Decrease in gasoline price in recent years: the decrease in gasoline price means lower gasoline sales tax revenue.

    ∙ Decrease in state excise tax on gasoline: The current state excise tax of 27.8-cents-per-gallon is 7.7 cents lower compared to the state excise tax of 39.5-cents-per-gallon implemented in July 2013.

    ∙ Adoption of zero emission vehicles: thought these vehicles are a minority of all vehicles on the road, the state collects very little gasoline-related tax from plug-in hybrid electric vehicles and no gasoline-related tax from battery electric vehicles and fuel cell electric vehicles.

    Zero Emission Vehicle Adoption:

    • Having sold almost half of all the nation’s Zero Emission Vehicles (ZEVs) to date, California has made truly remarkable progress toward ZEV adoption compared to the rest of the nation. ∙ Almost 530,000 zero emission vehicles have been sold as of the end of 2016 in the United States; almost 258,000 of those ZEVs were sold in California alone.

    • While issues such as lack of consumer awareness, lack of affordable options, and limited public infrastructure have challenged ZEV sales, year-over-year growth remains impressive.

    • If the state meets its 2025 goal of putting 1.5 million ZEVs on the road, CARB estimates it would displace 1.5 billion gallons of motor fuels. If state gasoline and federal excise taxes were to remain unchanged at 38.13 cents and 18.4-cents-per-gallon, respectively, the displacement would mean a revenue loss of $572 million and $276 million.

    Alternative Approaches to Vehicle Fuel Tax Based Revenue

    As both California road conditions and fuel tax revenue continue to decline, this funding gap will be further exacerbated by continued fuel efficiency improvements and broader adoption of ZEVs. Growth of ZEVs in the marketplace will not only decrease fuel tax revenue but will also require investment in new infrastructure. The new transportation package helps create new revenue opportunities for transportation funding, but further measures will be necessary in order to close the gap in an evolving vehicle marketplace.

    A number of tax reform considerations are outlined in this report and some have been incorporated into the newly passed SB1. SB1 addresses some of the opportunities outlined for additional transportation infrastructure finance outlined in this brief. Alternative approaches to help bridge the gap in funding include:

    • Flat Rate Fees: Although it is the simplest and least costly scheme to implement, the flat rate fee approach is inefficient as it ignores relative road usage, favoring motorists who drive more. In addition, it does not address externalities such as congestion costs. Our current rate structure incorporates flat rate fees like the gasoline and diesel excise taxes.

    • Fuel Taxes Indexed to Inflation: Although the cost to implement is low, this approach suffers the same pitfall as the current system - increasing fuel efficiency will continue to erode revenues in the long run. In addition, public perception that gasoline tax increases would place a high relative burden on the poor will continue to persist. Historically, California did not index its fuel tax rates to inflation. However, SB1 requires these fees now be annually adjusted based on the California Consumer Price Index. The federal excise tax, however, has remained unchanged since 1993, over which period the Consumer Price Index has risen by 67% nationally and 70% in California.

    • Fund Toll Roads Through Public-Private Partnerships:4 Similar to the HOV/HOT Lanes Program that is currently in place in Los Angeles, this approach has the potential to be efficient, especially with real-time pricing updates. However, specificity of pricing comes at the cost of privacy and discriminates against motorists who may have a need but otherwise cannot afford the toll fees. SB1 does not include any specific provisions for expanded toll road programs, but this could provide opportunities for additional revenue over time.

    • Mileage Based User Tax: While this approach has the potential to achieve the desired goal without compromising efficiency and equity, the collection costs of the necessary driving data are higher compared to other alternative approaches. Previous studies on mileage based user tax pilot programs also cite privacy concerns as potential hurdles. The new bill also does not incorporate mileage-based taxes, but California is currently piloting a road use fee program that could be utilized in the future.

    The newly passed SB1 has already required fuel taxes rates to be indexed annually based on the California Consumer Price Index (CPI).5 In addition, the newly created transportation improvement fee and road improvement fee (both additional to annual registration fees) are also subject to annual adjustments based on the California CPI. On the other hand, it is clear that SB1 favors a progressive rate instead of a flat rate fee, as demonstrated with the transportation improvement fee. Instead of requiring each motorist to pay the same fee, the transportation improvement fee is positively correlated to the market value of the vehicle. These changes to rate structures will help marginally increase annual fuel tax revenue and the newly created improvement fees will create a new source of revenue for the state’s transportation infrastructure. However, the state can expect to see a continued trend in decreasing fuel tax revenue over time, which may call for additional changes to the rate structures and fee programs. This report further analyzes these alternative approaches for transportation infrastructure funding in light of both equity and efficiency considerations.

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