The Transit Referendum and Congestion

March 20th, 2015 § 2 comments § permalink

The yes side wants me to believe that supporting the Mayors’ Council Transit Plan will reduce congestion in Metro Vancouver. Their transit plan will increase bus, SeaBus, and Skytrain service, build a infuriatingly incomplete Broadway subway, increase bicycling infrastructure, and expand and improve our road infrastructure. But it will not reduce congestion.

Some simple economics explains why we have congestion. Before we take a trip, we weigh the cost of driving—fuel, parking fees, and our time, against its benefit. If the benefit of driving is higher than the cost, we drive. When benefits are higher, say from going to work, we tolerate more congestion. If the cost of driving is lower, from the opening of a new 6 lane freeway, we drive more.

On entering a road we also create a small delay to all other drivers already on it. As the number of cars increases this small delay becomes long waits at traffic lights, higher emissions, accidents and frustration. This is what one experiences when almost 2200 drivers pass through the Boundary intersection on Hastings in a single rush hour (from city data). As there are many drivers and we are anonymous, we never consider how we impact others on the road. Even if we do, and choose not to drive today—in an effort to make Hastings less congested—we only encourage someone else to drive tomorrow. This is the logic underlying the “Fundamental Law of Highway Congestion,” by Andrew Downs. If we double road capacity, we also double long run traffic. The net effect on congestion: zero. A corollary to this law implies that if investment in transit removes vehicles from the road, other vehicles fill in to take this space.

So unless the Mayors amend the transit plan to include more than just a discussion of congestion pricing, our vote has no influence on long run congestion.

Instead our vote influences the future of our region. Expanding road capacity, and transit, induces development and growth. More transit induces greater growth around transit corridors and higher density, which in turn encourages alternative transportation like bikes and car sharing. Expanding road capacity induces lower density development, suburban expansion, additional cars, and more driving and emissions overall. This is the choice you make as you fill in your ballots.

Regulating E-autos in India

January 8th, 2015 § Comments Off on Regulating E-autos in India § permalink


An Electric Auto-Rickshaw at Tilak Nagar, Delhi.

Over the last few years, New Delhi saw the swift and stealthy rise of the electric auto-rickshaw, till they were banned earlier this year. Passengers travelled on fixed routes for an affordable flat rate fare of Rs10-15 on some 1 lakh e-rickshaws, all of which functioned without official sanction. Regulating e-rickshaws has been tricky. Proponents first claimed a majority of the fleet was below the 250kW threshold, classifying them as non-motorised vehicles under the Motor Vehicles Act, thus precluding regulation. This was not true. Compliance with the act requires mandatory commercial licences for e-rickshaw drivers. This mandated a removal of the entire fleet, impacting both urban transport and driver livelihoods. A protracted discussion is still ongoing among the judiciary, Delhi government and the transport department. As per a court order, authorities could allow e-rickshaws only after making necessary changes to the law. While Parliament passed a bill to regularise e-rickshaws by bringing them under the Motor Vehicles Act, the Delhi government and police are still taking action against e-rickshaws operating in violation of court orders.

While there are many opinions on how e-rickshaws should be regulated, nobody asks “Why regulate?” What is the public benefit? Regulation might protect a passenger from an unsafe machine. With almost no reports of accidents involving mechanical failures, this new technology has performed quite well. However, even if the technology is safe, it could be driven rashly. Regulation can protect people from dangerous driving. Delhi’s e-rickshaws operate at low speeds, causing fewer accidents. Although there were 36 accidents involving e-rickshaws till this July, there were only two fatalities in Delhi. In contrast, in just 2012, 205 people died in cars and 489 on motorcycles. E-rickshaw seems safer than most other vehicles on Delhi’s roads.

Even if we accept e-rickshaws are safe, there is still what economists call “asymmetric information” — not knowing the right fare, passengers can be overcharged. However, this does not apply to Delhi’s fleet, as most ran on fixed routes with a flat fare. Regulation can minimise externalities, such as congestion and pollution. But cracking down on the potential impact of a fleet of small electric vehicles rather misses the point in a city adding more than 600 fossil-fuel powered private vehicles per day.

E-rickshaw drivers are also part of the “public”. An “open-access” market for passengers can reduce efficiency spreading passengers, and thus income, thinly across a growing number of drivers. However, deciding on numbers, usually through a permit system, is difficult. For many years, a strict permit system for auto-rickshaws created a permit raj in which non-driving permit holders received half the driver’s daily revenues.

If we don’t need to protect passengers or operators, why regulate? Regulating the e-rickshaw sector is justified for a single reason common to both passengers and drivers — insurance. The Delhi High Court judgment directs e-rickshaws to be allowed only after ensuring insurance coverage, among other things. Passengers injured in an uninsured e-rickshaw cannot make insurance claims. Without insurance, the e-rickshaw is vulnerable to accident or theft. Without state regulation and legal status, obtaining insurance coverage is impossible. Solving the insurance problem should be at the heart of any regulatory strategy. Authorities should implement light-touch regulation, refraining from imposing unrealistic burdens on operators and enabling insurance companies to access the e-rickshaw market. This might include a register of drivers and a database linking vehicles to owners. Some form of basic driver-training should be instituted too.

However, all this should stop well short of the permit raj that hampers auto-rickshaw drivers.

This post is jointly written with Simon Harding, and first appeared on the Indian Express Daily:

Why climate change is not on India’s radar

March 7th, 2012 § Comments Off on Why climate change is not on India’s radar § permalink

I am going to India, amongst the fastest growing economies of the world. Measured by purchasing power parity (how much it takes to buy a uniform set of goods), India’s economy is now the world’s third largest. Isn’t now the time for India to take part in the battle against climate change?

It’s midnight, as Cathay Pacific 695 descends into Delhi. Through the haze its passengers see a brightly lit freeway. Even at this late hour, a constant flow of traffic. The visibility is a distinct improvement over January, when some nights, almost nothing can be seen. I take a taxi from the airport to Hari Nagar, an Ambassador—a uniquely Indian car—its body unchanged from a 1956 Morris Oxford III. Sitting on a flat sofa backseat, I smell fumes from the engine leaking into the interior, a slightly open window lets in Delhi’s smoky air. Indoors after forty five minutes, I wash my face; dark water drips from it, my nostrils are black with soot.

The next morning, I am on the Shatabdi Express from New Delhi to Chandigarh. Indian Railways, even during a budgetary crisis, lavishes service on its first class customers. Six newspapers are on each seat pair: three english dailies, reporting in the the language of the elite; three in hindi, the preferred language of the masses. Hindi newspapers ignore the environment. Their pages focus on politics, corruption, income inequality, and sport. Based a study by the Energy and Resources Institute and Unicef, the Times of India reports how a fourth of children living along Delhi’s Yamuna have over 10 micrograms of lead in their blood (widely considered as the threshold for public intervention). Lead levels in children exposed to the polluted north Delhi riverbank eight times higher than those upstream. The Financial Express reports on bans recommended on mining and quarrying in Goa’s ecologically sensitive areas, and near Kaziranga national park, home of India’s one-horn Rhino. India’s richer elite are marginally concerned with the environment, the poorer, hindi speaking majority are not.

Just a few weeks ago, Yale University’s Environmental Performance Indicators (EPI) for 2012 rated India as having the world’s worst air. Overall, India’s pollution ranked 125 out of 132 countries. Responding to the report, a Department of environment scientist said: “it is a non-issue, we have other pressing problems like poverty.” His comments reflect India’s mood. The poor crave food to survive, India’s growing middle class, crave the material trappings of economic growth.

As the western world got richer its environment improved. The first reductions were in smog (the concentration of fine particulates in air). A visible, constant reminder to how dirty our air is, smog causes emphysema, bronchitis, asthma and lung cancer. Fine particulates are still actively targeted by most developed countries. As its development continued, the western world turned its attention to harmful, but less visible pollutants such as lead. Causing nervous system and kidney damage, lead is particularly damaging to children. Blood levels lower than 10 micrograms impair their cognitive development. Climate change is a more abstract concept. It affects our physical environment, seriously impacts our ecology, causes floods or droughts, but presents no immediate impact on human health. Even within the developed world, strong action on climate change is still lacking.

One day into my trip I realize it is unrealistic to expect India to meaningfully address climate change. The country is blanketed in polluted air, and flooded in polluted water. In the face of severe health impacts the government presents ineffectual action on local pollutants. Expecting India’s government to incur costs for reducing greenhouse gases is to fool ourselves. We must wait for a will to tackle local pollutants, before action on climate change will occur.

This post was first published at the Global Exchange Blog of the Globe and Mail. Here is a link to that version.

Environmentally Friendly and Unaffordable Electric Vehicles

July 22nd, 2011 § Comments Off on Environmentally Friendly and Unaffordable Electric Vehicles § permalink

On rebound from an SUV, last week I flirted with the idea of an electric vehicle (EV). It is now time for a reality check. EVs are really expensive. Nissan’s ‘Leading, Environmentally friendly, Affordable, Family car (LEAF)’ starts at $38,395. Nissan is redefining affordability, but I am not buying it. Even if an EV has an impressive range, where will I charge it on the road? Realistically, it can only be an extraordinarily expensive second vehicle — unless somebody else pays for it.

If you live in Ontario or Quebec, this can be arranged. Ontario’s Electric Vehicle Incentive Program pays $5,000 to $8,500 towards the purchase of a new EV. The LEAF gets $8,500 (by the way Nissan, it still isn’t ‘affordable’). When you purchase an EV in Quebec, the refundable tax credit for green vehicles takes $8,000 off your taxes.

These incentives encourage consumer adoption. Until recently, similar incentives were widely used to encourage hybrid vehicle adoption. Programs in B.C., Ontario, Quebec, and PEI provided up to $3,000 for the purchase or lease of a hybrid. The Quebec program is still continuing.

On analyzing these programs, we (two colleagues and I) found them to be not very effective. Approximately two-thirds of consumers buying hybrids during the programs would have bought them anyway. Taxpayers just subsidized their purchases.

Only a third bought hybrids due to the incentives. If they had not been offered the incentives, they would have bought small fuel-efficient cars instead. Consequently, overall fuel savings were small, and our governments spent a lot of money to generate them. The average cost to save a litre of fuel was 47 cents, and was $195 to save a tonne of CO2. At incentives of upwards of $8,000 per EV, we expect Ontario and Quebec to bear much higher costs for gasoline or carbon savings.

In Ontario, in addition to the cash incentive, EV owners also get green license plates allowing unrestricted access to High Occupancy Vehicle (HOV) lanes. Antonio Bento (from Cornell University) and his co-authors study a similar Clean Air Vehicle Stickers program in California. This program provides unrestricted HOV access to a limited number of hybrid vehicles. Even though the number of stickers is relatively small, they find significant congestion effects. Due to California’s program, driving time in HOV lanes rises by 9 per cent in morning peak hours. The authors argue that the combination of high congestion costs and restrictive benefits makes this policy very inefficient in transferring benefits to hybrid owners, approximately five times less efficient than cash incentives.

Whether it is cash incentives funded by all taxpayers, or reduced commute times underwritten by carpoolers, should we subsidize the rich buying EV’s? Is this the best way to promote a large-scale diffusion of the EV technology? Wouldn’t it be a better use of our resources to invest in charging infrastructure?

The inability to charge the EV away from home is probably the biggest impediment to their large scale adoption. Portability of fuel and an extensive network of fuel stations has allowed a proliferation of the internal combustion engine for personal transportation. However, developing such a network is the classic chicken and egg problem. There should be a large enough number of EVs for private companies to set up charging stations. If there aren’t enough charging stations, no one is likely to buy an EV. If our governments are serious about promoting EVs they would focus their investment entirely on providing minimal charging infrastructure. Equipping a few GO transit stations with charging points and hoping that retail stores do the same is not enough.

A shorter version of this post appears in the Globe and Mail’s Economy Lab blog.

» Read the rest of this entry «

The Misperception of Safety in an SUV

July 15th, 2011 § Comments Off on The Misperception of Safety in an SUV § permalink

Sports Utility Vehicles are bigger, taller and heavier than cars. They are designed to rule our roads. Sure, it would be hard to find a parking spot, and I can foresee begging for an increase in my credit limit to fuel the monster, but me and my family would be safer in a Sports Utility Vehicle (SUV). Wouldn’t we?

I need that truck.

In this post at the Globe and Mail’s Economy Lab I argue that a perception of being safe in an SUV is incorrect.

Suggested Reading:

Bradsher K. (2002), “High and Mighty: The Dangerous Rise of the SUV,” Public Affairs, ISBN-10: 1586482033.

Anderson, M. (July 2008), “Safety for Whom? The effects of light trucks on traffic fatalities” Journal of Health Economics, 27($):973-989. doi: 10.1016/j.healeco.2008.01.001


Somewhere on the Canada United States Border

June 13th, 2011 § 2 comments § permalink

I am waiting besides an empty Customs and Border Protection counter. In a room behind me, the officer speaks on the phone.


“Yes.” I walk to her.

“What is the name of the conference you are going to?”

“The Association of Environmental and Resource Economists’ Summer Conference.”

She speaks into the phone, “The Association of Environmental and Resource…” She is looking at me.

I too have trouble with the word ‘economist’ sometimes, so I say it again.

She repeats. Listens.

She asks the person on the phone: “Do you know of the association?”

She listens. Hangs up.

“He has not heard of this conference. He does not know the association.”

This was her conversation with Marilyn Voigt’s office, the Resources for the Future (RFF). Marilyn, the association’s business manager, is already at the conference. It seems that the rest of RFF does not share Marilyn’s intimate knowledge of our association.

The bus taking me to Seattle has been waiting for half an hour.

I think about how hard it is to get back home from the border.

Again on the phone, the officer starts describing her concerns to—presumably—a superior. I start searching through my email to find something to convince her. An invitation from!? Couldn’t the organizers use a university address? This is only going to convince her that I am faking it. I show it anyway.

At least the email begins cheerfully, “Dear Presenter: We are happy to inform you that your paper ….” She reads it and continues speaking into the phone.

“I am going to let him go based on an email invitation. The next time, he should have a formal one.”

The Conservative Environmental Record: Four Ministers and Insignificant Policy.

May 1st, 2011 § Comments Off on The Conservative Environmental Record: Four Ministers and Insignificant Policy. § permalink

April 7th 2006, Rona Ambrose, the first of four conservative ministers of the environment, declares Canada’s Kyoto commitments unachievable. She is right. After nine years of inaction, emissions have increased significantly. Hers is not a statement of dismay. It might even reflect pride. Her government cuts greenhouse gas (GHG) regulations proposed by the outgoing government. Canadians are disappointed.

Responding to public sentiment, in 2007, John Baird, the second Minister of the Environment, reintroduces a Liberal plan for climate change. Despite weaker objectives than its precursor, John claims climate leadership at home and abroad. The plan is never implemented. Amongst his other achievements, setting aside parts of northern Canada for conservation and his government’s ban on Bisphenol A in baby bottles.

Obama’s election makes US GHG policy likely. In a departure from its roots, the conservative government proposes harmonizing up. Jim Prentice, the third minister of environment, is to persuade Alberta that this is in their benefit; the only way to continue energy exports to the US. Political compulsions prevent US legislation on GHGs.

In May 2010, the US EPA issues a GHG regulation timeline for large industrial sources. In its first stage: coal-fired power plants and refineries. In June 2010, Jim presents Canada’s plan for GHG emissions from coal-fired power plants. These are yet to be implemented. In October 2010, he harmonizes Canada’s vehicle fuel economy and emission standards with the US.

In November 2010, Jim quits to be Vice President of the Canadian Imperial Bank of Commerce. John finds himself the minister again. Peter Kent, the fourth Minister of the Environment, is appointed in January 2011.

In the meanwhile, Rona, John, Jim and their counterparts in Natural Resources spend. They create boutique tax credits and grants to support public transit passes (2006), fuel efficient – conventional, and not so fuel efficient – E85 vehicles (2007), the production and retail of biofuels (2007), energy efficient retrofits of home and business (2007), and “clean energy technologies such as carbon capture and storage” (2009).

The conservative environmental record splits into two periods. Before 2008, they scuttle, reintroduce, or claim credit for work done by the outgoing liberal government. After that, they enact the minimum needed to match US environmental policy. Five years yield no substantive action on climate change, minimum progress in other environmental areas, and minor spending programs with insignificant effects. Can we expect better from a centre-right government of a resource economy in a global recession?

Yes we can.

While centre-right governments in France, Germany, and Italy implement the second stage of European carbon trading, New Zealand’s adopts carbon trading, and coal dependent Australia proposes a carbon tax, our government does everything possible to avoid regulating carbon. If these countries can get serious about the environment, so can we.

Maybe the conservatives need to look outside their ranks for their next Minister of the Environment. I hear Elizabeth May is leading an opinion poll in Saanich-Gulf Islands.

Postscript: This is a post written for the Province newspaper’s Money Section. You can see their version here.

Anything but the One Tonne Challenge: A Case for Transferable Development Rights

April 21st, 2011 § Comments Off on Anything but the One Tonne Challenge: A Case for Transferable Development Rights § permalink

Once I realized that a comprehensive national carbon policy was not in the near future (see my last blog post) I started looking for alternatives. What else could our government do to help us reduce emissions? Anything but Rick Mercer’s One Tonne Challenge, I thought.

In this post on the Globe and Mail’s Economy Lab, I investigate policies that might encourage us to live in greater density. Read more here.

Suggested Reading:

Glaeser E. L., and M. E. Kahn (May 2010), “The greenenss of cities: Carbon dioxide emissions and urban development,” Journal of Urban Economics, Volume 67, Issue 3, pp 404-418.

McConnell, V, and M. Walls (2009), “U.S. Experience with Transferable Development Rights,” Review of Environmental Economics and Policy, 3(2): 288-303. doi: 10.1093/reep/rep008

Reality Sinks In

April 19th, 2011 § Comments Off on Reality Sinks In § permalink

Okay I get it. Canada will not have a national carbon tax anytime soon. There will be no upstream cap and trade system either.

There is a slim possibility that we might see a federal version of the Western Climate Initiative. This version will include weak and mostly ineffectual incentives to encourage the participation of provinces not already committed. Even this slim possibility depends on two unlikely conditions. First, we need either a Liberal, or NDP, or a Liberal-NDP coalition government to form in the 41st Parliament.  Second, we need all parties other than the conservatives to continue to agree (see Pembina Survey) on the merits of pricing carbon. This would be a much harder once they are in government.

Realistically, irrespective of which government forms in the upcoming parliament, the federal government of Canada is not going to do anything different from what the United States does on climate change. The Environmental Protection Agency will mandate command and control regulations on large sources in the United States. Faced with the threat of border tax adjustments, we will follow.

So reluctantly I accept that incentive based climate policy is not in the near federal future.  There is no way a climate change bill is getting through a republican house of representatives in my lifetime.

A Wish List for Environmental Policy in Canada: A National Carbon Tax

April 7th, 2011 § Comments Off on A Wish List for Environmental Policy in Canada: A National Carbon Tax § permalink

The campaign for the 41st Parliament got me thinking about Canadian Environmental Policy. Inspired by Stephen Dion’s ‘green shift,’ the last federal election generated the most vibrant debate on environmental policy ever seen at a national scale. Two spectacular crashes later, that of Stephen Dion and the World Economy, this election campaign will at best, pay marginal attention to environmental issues.

My theme for the first series of posts on this blog: what would I like to see in environmental policy announcements from the major political parties?

The first item on my wish list, a national carbon tax, that is, a tax on the carbon content of fossil fuels. Clearly, I am not easily discouraged by reality.

Most economists know that a carbon tax is the best instrument to address climate change. It is cost-effective, that is, it reduces carbon emissions at the lowest cost. The revenue collected provides the best chance for a government to reduce the burden imposed by the tax on the poor. It is the best policy instrument if we are uncertain of the cost of reducing carbon emissions in the future. This cost depends on unpredictable fuel prices, energy demand, or the growth of energy saving technologies. Finally, it is the simplest climate policy to administer. Institutions to tax fuels are already in place in most countries, including Canada.

A cap and trade system is not too bad either. Eventually, anything that puts a price on carbon emissions is an improvement over our status quo. However, to measure up to a carbon tax, the cap and trade proposals in most policy initiatives, including the Western Climate Initiative (WCI), need a major overhaul.

It is unlikely the costs of building and administering a cap and trade system would ever be lower than that of an equivalent carbon tax. But theoretically, a cap and trade system can be as good as a carbon tax in all other criterion discussed above. If the cap and trade covers as many as the tax, and it allows the banking and borrowing of allowances, it is at least as cost-effective. Simple modifications can render it as good as a carbon tax in case of uncertainty of the future cost of reducing emissions. Finally, if each allocation of permits occurs in an extremely well designed and competitive auction, the government should have as much revenue as under the carbon tax.

However, there are two major problems with all cap and trade proposals in circulation. The first is that they target users of fossil fuels. While this seems sensible as users create emissions, the cost to bring most users into the program is prohibitive. In the first compliance period of the WCI (2012 – 2015) only 40% of British Columbia’s sources are included. Even in the second compliance period, most small producers will not be included due to minimum size provisions. Thus to achieve reductions equivalent to a carbon tax, a much smaller subset of users are targeted. This raises the cost of reducing the same amount of emissions significantly. The second problem is that current cap and trade proposals give away most of their emissions allowances. This is thought of as being a useful way to win political support. The WCI will auction at most 25% of its allowances. Research suggests that at least 50% of allowances be auctioned to prevent creating windfall profits for firms receiving them. By auctioning such few allowances, not only do the programs restrict their ability to help the poor, they are also making firms receiving these allowances richer than before.

Sensible carbon taxes, and cap and trade proposals would target producers upstream in the fossil fuel chain. This would be coal mines, imported and produced petroleum products and natural gas. Even in a economy as large as the USA or Europe this would require regulating only 2000-3000 entities. The administrative costs would be minimal and, directly or indirectly, all consumers of fossil fuels would be included in the system. Further, if a majority of allowances were auctioned in a competitive system, the government would generate revenue that could defray the increased burden of the tax on low income households.

Recommended Readings:

Aldy, J. E., E. Ley, and I. W. H. Parry (July 2008), “A Tax-Based Approach to Slowing Global Climate Change,” Resources for the Future Discussion Paper, RFF DP 08-26. Available online:
Hall, D. (2007), “By the Numbers: Greenhouse Gas Emissions and the Fossil-Fuel Supply Chain in the United States, in Assessing U.S. Climate Policy Options, edited by R. J. Kopp and W. A. Pizer, Washington D.C.: Resources for the Future.
Olewiler, N. (November 2008), “A Cap and Trade System for Reducing Greenhouse Gas Emissions in BC,” Pacific Institute for Climate Solutions, Victoria, BC. Available online:
Parry I.W.H. and  Roberton C. Williams III (February 2011), “Moving U.S. Climate Policy Forward: Are Carbon Taxes the Only Good Alternative?” Resources for the Future Discussion Paper, RFF DP 11-02. Available online :
  • About Me

    I am an Associate Professor in Environmental and Resource Economics at the University of British Columbia, Canada.

    Through my research I try to gauge the efficacy of policy designed to help the environment. This research is usually joint with colleagues from the University of British Columbia---the real brains behind it. I recently studied automobile sales in Canadian provinces to determine if tax rebates for hybrid vehicles were cost-effective. Studying appliance sales in the US, I analyzed whether mail-in rebates for energy star appliances helped promote their adoption. I am currently studying whether British Columbia's vehicle retirement program, BC SCRAP-IT is cost-effective and am trying to understand what motivates someone to participate in it.

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