For this week’s blog I’m to discuss a traffic minimization policy of my choosing. I think I’ll take an opportunity discuss the legislation in my home state of Washington. The I-5 corridor, in particular the bustling metropolis of Seattle, is well known to have some of the worst traffic in the United States with an annual loss of 48hrs and 22 gallons (83.3L) of gas. The Weather Channel estimates the per driver cost of congestion to be $1,050. The state legislature has taken modest measures in an attempt to decrease congestion. One policy in particular, the 1991 Commute Trip Reduction Law (CRT), will be the focus of this blog.

RCW 70.94.521 defined and publicly acknowledged the social, economic, and environmental cost of freeway congestion for Washington State and outlined the general protocol for local implementation of congestion reduction policies. Essentially the report dictated the primary focus of any future policy would be to reduce single occupancy vehicles, and to mandate that all areas of high congestion implement traffic reduction policies. The report dictates that the local jurisdictions should be able to choose and implement the mechanisms they deem most useful, but that they must do something.  In 2006 the policy was refined in the CRT Efficiency Act explicitly designed to reduce single occupant commuting. As of 2009, the State DOT claims that “week day morning trips were reduced by 30,000, delays were decreased by 8% and the average rush hour commuter saved $59 per year.” With a net result of 154 million miles reduced and over 69,000 tonnes of greenhouse gas emissions prevented.

The policy primarily targets large business in highly congested areas. The DOT claims “More than 1,050 worksites and 530,000 commuters statewide participate in the CTR program.” Practices differ between regions and individual companies, but the primary strategies seem to be corporate carpooling and company support transit passes. An example would be my brother who works for a major financial institution in the heart of downtown Seattle. In conjunction with this policy his employer is required to encourage all employees to take advantage of Seattle metro, as such all employees receive transit passes. But this begs the question, where does the funding come from? The answer, it comes in part from my brothers pay check, and in part is subsidized by the corporation. The result being that the price paid directly by my brother for his transit pass is heavily subsidized by his employer, but it could be observed that the rest of the cost is implicitly paid through a reduction of his pay. See, by requiring that these corporations provide transportation options for their employees, the policy implements an implicit tax on the labor market. Depending on the elasticity of demand and supply for a given position, an employee would bear a variable percentage of the total cost. In layman’s terms, positions with many qualified candidates would likely bear a greater burden implicitly within their wage than positions with few qualified candidates. Essentially the tax burden is determined by the bargaining leverage of the employee/employer relationship.

This policy only applies to commuters who work with in congested areas, and only those commuters who work for large businesses. The tax dollars generated are levied on the employers and go toward the funding of traffic reduction research, investment in infrastructure, and other DOT general costs. In addition the CTR highly encourage the use of mass transit. This would likely result in an increase in ridership and as result revenue, however, I was unable to find any concrete assessment of the impact on ridership or transit revenue.

This policy has without a doubt made an impact on congestion within major urban areas. It does so in a moderate way by encouraging the use of existing infrastructure and allowing flexibility on a jurisdictional basis. Of course this flexibility comes at a cost. The more flexible the policy the more loop holes, but 530,000 commuters is a solid start. I find this policy to be economically positive as it does not hinder the states shipping infrastructure nor does it hurt daily retail traffic in the targeted urban areas. If anything, by reducing daily traffic loads, it expedites shipping and encourages retail activity. All in all the CTR is an interesting and innovative mechanism for congestion reduction in the Pacific North West.

To find out more see,

CRT Overview

1991 http://apps.leg.wa.gov/rcw/default.aspx?cite=47.50.010

2006 http://apps.leg.wa.gov/WAC/default.aspx?cite=468-63&full=true

“Reduce, reuse, recycle,” The motto of the resource conservation crowd, and a mantra for the environmentally conscious. The fact is that resources are scarce by their very definition. The sources of some can be renewed via natural means, but the availability of others is fixed.  Each time we consume a nonrenewable resource, we are decreasing the availability of that resource for all future generations. It has been asserted that it is duty of all conscious consumers to reduce their waste, reuse what they can, and whenever possible recycle their waste so that the raw materials of their products can be reused in future products. The concept being if we can’t make more, we must make do.

However, reclaiming the raw materials from the products we consume is not without costs. Energy is required to ship, process, and distribute the reclaimed materials and labor is required to collect the materials, run the machines, and market the products. And while these resources hold a certain market value, that value rarely considers demand of future generations. The result is an under valuation of the market value of recycling.

BC’s Eco fee attempts to fund reclamation of the raw materials by charging the cost of the reclamation in the price of the product. Each time a consumer purchases a product with recyclable potential, a small fee is added at the retail level that is then reallocated to the recycling firms to subsidize the cost of the recycling process. Of course not all products are recycled equally, the cost to benefit ratio varies across products and forms. To address this inconsistency, the assignment of tax rate has been deferred to a specific steward associated with the recycling for each of eight product sets (for the complete list of products and their associated stewards see link). These stewards assess a product and attempt levy a fee associated with reclamation cost for all of the recyclable materials within the products. In example, a box of cereal might have a fee for the box and a separate fee for the bag within, a drill would have separate fees for the internal wiring and the outer case. This allows the price each product to accurately represent the holistic cost of reclaiming its raw materials at the end of its useful life. The fee ranges from as little as a fraction of a cent on paper products and aluminum cans to $10 for certain household appliances. The goal is to keep the cost feasibly low and generate revenue on a not for profit basis with the stewardship groups responsible to annual reports, financial statements and third party audits.

This policy is not without its opposition. The nature of this tax is recessive. With the increase in the price of a wide range of products, the poor stand to bear a greater income proportional burden then the wealthy. Moreover, the revenue generate will not be distributed to the low income in a way to reduce this burden. The entire fee goes to the stewardship agency to pay for the cost of recycling, whether the product is recycled or not.

The program is also seen by some as overly complex with excessive administrative costs and redundancies between the various stewardship groups. There is no regulation as to how the fees are reported on the retail front. As it stands the fee is listed at the manufacturer’s discretion, causing transparency issues for consumers. However the intricacy of the policy does encourage recycle friendly products and innovations. By allowing the fee to be so product specific, recycle minded firms gain a competitive advantage. Read more about public perception of BC’s Eco Fees here.

This policy is still in its infancy, so it difficult to pass judgment on its merits. It will most certainly decrease the marginal cost of the recycling process, allowing firms to feasibly recycle materials with an intrinsically higher marginal cost of reclamation, increasing the amount of material that can be recycled economically. The goal of this policy is to encourage recycling rates in BC, and by all measures it most likely will. The question to address is at what cost?  There are uncertainties as to the full cost to households and firms today and into the future, and what potential benefits they stand to gain. The success of this policy will take decades before it can be justly measured.

Still have questions? Check Consumer Protection BC for more information. Look here for more resources.

Ireland was one of the European countries hardest hit during the ‘08-‘09 financial crisis. Despite economic collapse and mounting debt, the Irish Government made a resounding commitment to carbon reduction. To the uninitiated it would seem that passing measures that would restrict economic development in any way during a time of economic crisis is an action nothing short of suicidal, collaring the Celtic Tiger as one might say. However, given Ireland’s unique economic, social, and geographic characteristics, the carbon control policies have been wildly successful.

Directly, all fuels that are linked with carbon emissions are taxed proportionally to their relative marginal social cost. Additionally, fees and taxes were levied on all new automobiles in proportion to their fuel efficiency and expected environmental impact. Garbage collection is now priced by weight of output, with the omission of properly sorted recyclables, which are collected free of charge. Together these measures reduce the CO₂ emissions from fossil flues and methane from decomposing garbage.

The net result is a 15% reduction in CO₂ emissions since the implementation in 2008. While some of the total emission reduction can be credited to a slowing economy at the beginning of the policy, emissions continued to fall despite a moderate economic rally in 2011. This growth rate (or reduction rate as it may be more aptly described) puts Ireland well on its way to fulfilling its Kyoto protocol obligations.  Breaking down the 2011 reductions by industry shows that energy emissions are down by 10.5%, residential emissions are down by 15.6%, industry and commercial emissions are down by 10.7%, transportation emissions are down 2.7% and agricultural emissions are down 1.9%.

The tax revenue raised by the policy has played a crucial role in Ireland’s obligation to pay back the bailout it received at the peak of its economic crisis. Over the first three years the policy raised 1.3 billion euros, money that was used in large part to pay back its finical backers. Some in the Irish government are now making the case to raise the taxes further to increase the rate of pay back, however, I was unable to find any source capable of providing an antiquate dynamic analysis of the effect of bumping the tax further.

Despite the undeniable effectiveness of the policy at diminishing the net carbon emissions, the policy is not without its opponents. First and most glaringly is the effect upon low income citizens. Low income citizens have the least flexibility in choice of automobiles. Highbred and other cutting edge low emission vehicles are often out of the price range of even moderate income families.  As such, these families will end up paying a larger percentage of the tax at the time of purchase of a new vehicle, as well as more tax per mile due to the poor mileage of the vehicle.  This would have the greatest effect on the rural poor who have the fewest alternative transportation choices and the furthest average trip distance. It is worth a note that the fuel efficiency is only in place on new cars, not used. In any case, lower income individuals with used cars will still be paying a higher tax rate per mile traveled as they are priced out of the most efficient technologies.

Export industries face massive challenges in remaining cost competitive. The agricultural sector is the largest GHG emitter with 32.1% of total emissions. Considering Irish producers must compete with countries in North and South America and Africa with little or no carbon tax policy as well as other production advantages, a stringent tax policy complicates Ireland’s competitiveness on the global stage. In my opinion, any attempt to protect domestic producers through import or export policy could cause diplomatic issues and or dead weight loss to the economy. It seems for the time being the Irish production economy has its hands tied

It is also important to point out that little of the tax revenue is being directed into the Irish economy in form of growth, but rather being used to pay off outstanding debt. While paying off the bailout is an understandable priority, failing to reinvest in the domestic economy indirectly affects other sources of tax revenue. As citizens cut back on purchases, the tax revenue of a given products supply chain diminishes.  Ideally the tax revenue would be reinvested in infrastructure for more efficient access of good and services to help to offset some of the economic reduction. While reduction in GHG emissions will benefit citizens in the long run in the form of a reduced social cost, in the short term the increase in cost of living stands to hurt the economy at all levels and may work against economic growth. In the long term, as Ireland pays off its obligations, it can redirect more of this tax revenue into its own economy. Smart investment in green technology and infrastructure will help to further reduce the country’s carbon emissions and help to stimulate economic growth.

For the time being Ireland’s carbon policy is working. Carbon emissions continues fall, GDP grows, and Ireland manages to maintain its obligations to its benefactors. Only time will tell if Ireland’s carbon tax pays off, both in terms of the environment and the economy. Despite the drawbacks of the policy, as it stands, it appears that the carbon tax is a net win for Ireland.

Statistics and figures cited in this blog were drawn from the Oct 11 2012 EPA report of 2011 emissions. This report can be found at;

http://www.epa.ie/news/pr/2012/name,33923,en.html

Further information was found in the Dec 27 2012 New York Times article, “Carbon Taxes Make Ireland Even Greener,” available at;

http://www.nytimes.com/2012/12/28/science/earth/in-ireland-carbon-taxes-pay-off.html?pagewanted=all&_r=0

This semester’s romp through the futures market has been a lesson in discipline, international trade, and the importance of consistence in computer programing. To stage this final blog post I have decided to discuss what I liked about the project, what I didn’t, and ways I think the project could be improved.

What worked

Trading was an excellent opportunity to get firsthand experience in markets. I think everyone involved in the project walked away with a greater respect for the markets. Most felt price shocks first hand, some dabbled in fundamental analysis, and some played the technical game. What’s more, this project created a common ground for members of the class to bond over.

I think this is good place to note that the guest presentations were excellent. Sometimes it’s insightful for someone with hands on trading experience to share with the class; it helps to balance out the curriculum.

What didn’t

Tradesim. It was inconsistent and cumbersome. It had a user interface that was outdated by the time I had started high school. Frankly, it was just unpleasant. This is news for no one involved in the project; however I felt my conclusion would be lacking if I didn’t have a chance to get that off my chest.

As far as the social media aspect is concerned, the blogs were good, twitter could have been better. If I was to change the blog method, I would make it so that each week is a single entry, instead of three. It would make the blogs easier to navigate and would make them easier to grade. Twitter wasn’t used much beyond blog announcements and info gathering. The fact that we spend about twenty hours a week together means  that most info spreads word of mouth. Sometimes, even in this theologically advanced environment, being social beats social media.

How do we improve this program for the next year?

I would highly encourage the administration to keep the futures project in the curriculum. However, under no conditions should Tradesim be used. If we really look at where this project fell apart, it wasn’t in the construction of the curriculum; it was in the failure of the software. I highly encourage the administration to consider StockTrak.com. Other than that, making a single weekly blog post and less emphasis on twitter would be positive changes.

Wheat seems to be approaching its bottom band. I expect the market to turn bullish at the start of the week. Beans continue their long term downward trend. I expect corn to continue to be bullish, recovering from the big drop at the end of October’s descending triangle.

I was long in wheat at the start of the week. I was looking to take advantage of the flag pattern that wheat has been running since the start of the semester. I realized that this project is quickly coming to a close, and I had not yet my midterm goal of breaking $30,000, so I went big with four contracts short. Sure enough the market turned like clockwork and I walked away with a little over $9,000 gain putting me past my goal of 30,000, ending the week at $30,410.

The Wall Street Journal

While it does require a membership, the journal is one of the best sources of finical information out there. With a longstanding tradition of excellence, it is considered a must read in the world of business. While it is not super consistent on futures commentary, when it does take notice its insight is superb. If you’re looking for a top notch new source, look no further.

Corn looks to be heading up, it’s as low as it has been since the start of the month and seem to be rebounding. It could be a good opportunity. Wheat’s volatility has fallen to almost nil as the contracts wind to a close. There is little opportunity for substantial gains in this market at this time. Soybeans seemed to have stabilized as well.

I was shot on corn at the start of the week. I was able to get out right at the bottom of the market. Other than that I didn’t touch any of the other markets. I was concerned about hurricane sandy and the roll it was going to ply in the markets. I found it better to sit this one out than make a bet on a game I didn’t understand.

This will start my three week segment of news sources. Over the past weeks I have focused on charts and discussion boards, I feel it is time to get back to the basics and talk about good old fashion sources of news. This week, bloomberg.com

Well, here it is folks, the gold standard in finical reporting. Besides having the characteristic of being read by darn near every self-respecting trader, it’s easily navigable, up to the minuet, and free! What more could you want from a news source? A dedicated futures forum you say? Well, no it doesn’t have that. That will have to wait for next week.