Comments on: How Would Cap and Trade Affect Transportation? http://www.freightpublicpolicy.org/2009/11/how-would-cap-and-trade-affect-transportation/ Freight Transportation & Logistics Thu, 16 Jun 2011 18:08:49 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: pfswan http://www.freightpublicpolicy.org/2009/11/how-would-cap-and-trade-affect-transportation/comment-page-1/#comment-5 pfswan Tue, 17 Nov 2009 16:25:30 +0000 http://www.freightpublicpolicy.org/?p=174#comment-5 Whether a cap-and-trade carbon program would do grave damage to transportation depends on how you define grave damage. If one defines grave damage as reductions in the tons-miles per capita then yes, it clearly would do grave damage. If one defines grave damage as higher cost for transportation then again, it would do grave damage. However, one could also define grave damage as retaining a market structure that encourages increasing use of transportation in the face of rising costs associated with its use. The entire point of cap and trade is to use economics to provide incentive to force people and firms to make choices that result in fewer CO2 emissions and yes, fewer VMTs. Several researchers have long argued that freight transportation is too cheap both because it often generates but does not pay external costs associated with pollution and because user charges for infrastructure are inadequate to maintain the current system. Add to that the instability in the price of oil and we clearly have an unstable and unsustainable transportation system. The real crime here is under-pricing a costly good. Eventually we will have to pay the full price for freight transportation, but the longer we put off paying that bill, the higher it will be, with possibly catastrophic results for society. So the real discussion should be not about how awful it will be having expensive transportation, but how awful it will be if we make our grandchildren pay the bill. Pete Swan <em><strong>Editor's Note: Pete Swan is assistant professor of logistics and operations management, Smeal College of Business, Penn State University.</strong></em> Whether a cap-and-trade carbon program would do grave damage to transportation depends on how you define grave damage. If one defines grave damage as reductions in the tons-miles per capita then yes, it clearly would do grave damage. If one defines grave damage as higher cost for transportation then again, it would do grave damage.

However, one could also define grave damage as retaining a market structure that encourages increasing use of transportation in the face of rising costs associated with its use. The entire point of cap and trade is to use economics to provide incentive to force people and firms to make choices that result in fewer CO2 emissions and yes, fewer VMTs. Several researchers have long argued that freight transportation is too cheap both because it often generates but does not pay external costs associated with pollution and because user charges for infrastructure are inadequate to maintain the current system. Add to that the instability in the price of oil and we clearly have an unstable and unsustainable transportation system. The real crime here is under-pricing a costly good. Eventually we will have to pay the full price for freight transportation, but the longer we put off paying that bill, the higher it will be, with possibly catastrophic results for society.

So the real discussion should be not about how awful it will be having expensive transportation, but how awful it will be if we make our grandchildren pay the bill.

Pete Swan

Editor's Note: Pete Swan is assistant professor of logistics and operations management, Smeal College of Business, Penn State University.

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