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This Is the Time for a Long-Term Solution to Highway Funding

In this series of blog posts, RFF researchers take a look at the current state of the Nation’s transportation infrastructure and evaluate various policies for financing the Highway Trust Fund.

Facing a May 31st deadline to extend surface transportation funding, Congress is opting for a two month extension, the 33rd short-term measures to shore up  the Highway Trust Fund in the last 6 years. The Fund faces insolvency at the end of this very short time frame, forcing a discussion about a much-needed long-term solution to the Fund’s continuing deficit.

The Fund was established in 1956 to launch the Interstate Highway System and finances roughly one quarter of all roadway spending nationwide, including highway and bridge expansion and maintenance. The major sources of revenue for the Fund are taxes on gasoline and diesel fuels. The per-gallon tax rates on these fuels, 18.4 cents for gasoline and 24.4 cents for diesel, have remained unchanged since 1993. In real terms, the value of these taxes has decreased by nearly 40% since that time.

Offsetting the effect of inflation on Highway Trust Fund revenue, gasoline consumption steadily rose from 1990 to 2007. Figure 1 shows that the Fund’s expenditures and revenues matched quite well during this period.  In 2008, however, the Great Recession marked declines in both economic activity and miles driven. Following the first decline in vehicle miles traveled in 20 years, gasoline sales and Highway Trust Fund revenues have remained low.

Yet, federal spending for roads and bridges continued its upward trajectory.  Over the past twenty years, Highway Trust Fund outlays have been growing at about 2.5% a year, roughly on pace with the growth rate in economic activity. The widening gap between expenditures and revenues, displayed in Figure 1, has increased the need for a long-term funding solution.

Figure 1. Highway Trust Fund Outlays and Revenues (current dollars)

highway fund chart 2

With no surface transportation funding bill since 2005 lasting longer than two years, Congress has continually propped up the Fund with transfers from federal funds — totaling $62 billion since 2008. Despite these infusions, the United States has dropped from eighth to sixteenth globally in road infrastructure quality during that time (World Economic Forum 2008, 2014).

Without Congressional fixes – whether short or long term – these troubling trends are likely to continue, even with a recovering economy. New Corporate Average Fuel Economy (CAFE) standards starting at the 2012 model year will gradually require much better fuel economy from all cars through the 2025 model year. With vehicles using less gasoline, the Fund will generate decreased revenue. Despite low oil prices and a rebounding economy, the Federal Highway Administration projects that it is unlikely that vehicle miles traveled will reach the high growth seen in the 1990s and early 2000s.

Given these trends, CBO sees shortfalls reaching $168 billion by 2025, with annual shortfalls over the next decade increasing from $13 to $22 billion. Without a departure from current policy, this deficit will need to be addressed by either continued General Fund transfers or significant cuts to federal surface transportation funding—an unattractive proposition given the poor state of our roads and bridges.

In the two months leading up to the July 31st deadline for Congressional action, we will continue the debate on how to address the Nation’s crumbling infrastructure and the Highway Trust Fund’s precarious financial situation. In next week’s blog post here on Common Resources, we will discuss the poor state of roads and bridges in the United States. After outlining the need for highway funding, we will discuss various funding mechanisms in subsequent posts.

Parks and Recreation this Memorial Day Weekend

This weekend, local, state, and national parks around the country are opening their beaches, offering discounted admission, and providing a host of special programs to attract the thousands of people looking to head outside for Memorial Day weekend. Of course, they’re also hoping to attract the associated revenue, as many parks attempt to address funding issues in the face of continuing budget cuts.

RFF experts Margaret A. Walls and Juha V. Siikamäki have been working to help decisionmakers better understand the costs and benefits of parks, and provide options for parks that are facing such challenges. Below are samples of their recent research.

Private Funding of Public Parks: Assessing the Role of Philanthropy

Margaret A. Walls

“Is there a role for philanthropy in all of this? The short answer is yes. However, the real question lies in what this role should be. In some cities, conservancies and other park organizations are well established. But other communities should explore the potential of direct-giving mechanisms through the establishment of endowment or trust funds. Ultimately, these funds might be able to provide sustainable year-to-year funding through their interest earnings.”

Paying for State Parks: Evaluating Alternative Approaches for the 21st Century

Margaret A. Walls

“It is important to understand that no one-size-fits-all approach will work for state park systems given the diversity in their lands and facilities and the differences in size and scope. Moreover, the problems facing many states vary in degree of severity, with some states facing a genuine crisis and others on better footing.” Walls notes that some options to explore include: user fees, privatization, dedicated public funding, and voluntary private contributions.

State Parks: Assessing Their Benefits

Juha V. Siikamäki

“The estimated recreation services from the two million acres of state parks established between 1975 and 2007—about one-fifth the total acreage of state parks—already exceed the currently reported operation and management costs of the entire U.S. state park system ($3.85 billion versus $2.3 billion, annually). In total, the entire U.S. state park system is estimated to generate about 2.2 billion hours of nature recreation, worth an estimated time value of about $14 billion, annually. Although the capital cost sunk in park real estate is not included in this calculation, it is unlikely that adding it to the assessment would make the overall costs of state parks greater than their benefits.”

The State of the Great Outdoors: America’s Parks, Public Lands, and Recreation Resources

Margaret A. Walls, Sarah R Darley, Juha V. Siikamäki

“Some … have expressed concern about a decline in participation in many outdoor activities, not just hunting and fishing. They have decried what they call “nature-deficit disorder” among children and a general lack of connection with nature and the outdoors by all Americans. The decline in outdoor recreation … is thought to be contributing to the nation’s obesity problems, another particular concern for children. Indeed, … recreation is down from previous years. On the other hand, other survey information seems to show that overall participation has held steady, but that shifts have occurred among specific activities.”

Examining the Benefits of Invasive Species Prevention: The Role of Invader Temporal Characteristics

Hemlock woolly adelgid

Hemlock woolly adelgid (Adelges tsugae), Jacobsburg Environmental Education Center, Northampton County. (source: Nicholas A. Tonelli / flickr)

International trade and travel can enable otherwise innocuous species to wreak havoc in new and novel environments. Evaluating the economic benefits of preventing the arrival and establishment of a damaging, invasive species through quarantine or preventative measures requires considering its total long-term damages from the time of its arrival onward.  Previous literature has recognized that the spatial dynamics of bioinvasions—including spread rates, invasion range sizes, and geographic resource distribution—must be considered when estimating total invasion costs. However, most empirical studies of invasion impacts abstract away from invasion dynamics by only estimating short-term damages, limiting the usefulness of such estimates for evaluating quarantine and prevention policy.

In a new article in the journal Ecological Economics, Benefits of Invasion Prevention: Effects of Time Lags, Spread Rates, and Damage Persistence,* my colleague Andrew Liebhold, of the US Forest Service, and I theoretically examine a broader set of temporal factors affecting long-term damages, including invasion lags (i.e., the time between an invader’s arrival and the initiation of damages) and damage persistence. These attributes address the substantial invasion lag that most invading species exhibit and the considerable variation across species in how long damages last at an invaded location. We also empirically estimate long-term damages for three bioinvaders in the United States, from the time of their introduction to their potential future saturation of the eastern United States. The invaders in question are three forest insect species currently spreading through North America: the gypsy moth (Lymantria dispar), the hemlock woolly adelgid (Adelges tsugae), and the emerald ash borer (Agrilus planipennis). Each of these damaging forest pests differs in terms of its spread rate, damage persistence, and lag between introduction and spread, offering useful illustrations of the temporal patterns in question. Read More

A Look at New Markets for Credit Trading under US Standards for Automobile Emissions and Fuel Economy

In the United States, the Corporate Average Fuel Economy (CAFE) standards that require automakers to produce fuel-efficient vehicles have been in place since the late 1970s. But major changes have come about in recent years to both the rules themselves and how they are to be implemented. Perhaps the most significant change is that automakers must reduce not only oil consumption but also greenhouse gas (GHG) emissions from their vehicles. Specifically, the new rules require significant reductions in both fuel use and GHG emissions by 2025. The figure included here shows the reductions in fuel consumption under the CAFE rules since their inception, as regulated by the National Highway Traffic Safety Administration (NHTSA), as well as the reductions in both fuel consumption and GHG emissions that are forecast under the new rules up to model year 2025. GHG emissions are regulated separately, by the US Environmental Protection Agency (EPA), but the two agencies have attempted to harmonize the rules. The standards require each manufacturer’s fleet of vehicles to meet a minimum average miles per gallon (NHTSA rules) and a maximum GHG emissions rate (EPA rules). Cars and light trucks are subject to separate standards, and those for trucks are less stringent.

CAFE Standards (gallons per 100 miles) and EPA GHG Standards (grams CO2 per 100 miles). Note: See the RFF discussion paper  referenced in this blog post for source information and more details.

CAFE Standards (gallons per 100 miles) and EPA GHG Standards (grams CO2 per 100 miles) 
(Note: See the RFF discussion paper referenced in this blog post for source information and more details.)

Because the new regulations become much stricter over time, requiring fuel consumption and GHG emissions to fall by roughly 50 percent, a number of new provisions were added to give automobile companies more flexibility to meet the standards. In a new RFF discussion paper, we examine these new flexibilities, which include the ability for manufacturers to trade fuel consumption and emissions credits between cars and trucks in their own fleets, and to trade credits with other manufacturers. We take a close look at this latter provision, which for the first time allows for the creation of a market for buying and selling emissions and fuel consumption credits. In addition, EPA’s rules allowed manufacturers to over-comply with target levels of GHG emissions before the rules went into effect and bank those credits for future compliance beginning in 2012. NHTSA has always allowed some banking of credits to meet the fuel economy standards. Read More

Joel Darmstadter: If Not a Carbon Tax and Universality, What Then?

RFF’s own Joel Darmstadter gave the commencement speech at Penn State’s College of Earth and Mineral Sciences’ graduation ceremony on May 8.  His remarks touched on the very difficult policy challenges associated with addressing climate change against the background of two important impending milestones: the implementation of the Clean Power Plan and the international climate negotiations in Paris this winter.

 

Remarks by Joel Darmstadter, Senior Fellow, Resources for the Future. May 8 2015

President Barron, Trustee Pope, Dean Easterling, Honored Faculty, Class of 2015, Ladies and Gentlemen:

When a college — whose very name signals attention to the world’s natural resources — honors its graduates in a year when concern over those resources is particularly in the spotlight, it’s a unique occasion. And I’m grateful for having been asked to share in the occasion.

RFF Sr. Fellow Joel Darmstadter

RFF Sr. Fellow Joel Darmstadter

On the key issue of greenhouse warming — my topic tonight — two especially notable milestones await us. In the first case, although it continues to face some defiant hostility, EPA’s ambitious carbon abatement strategy—labeled the “Clean Power Plan”— is due to be implemented within the next several months.

As significant as that achievement will be, it will be followed not long after by perhaps an even more pivotal event: the November international Paris conference — perhaps the last opportunity for some years — to negotiate a global protocol of policies required to confront the climate change threat.

My remarks, which take the science of climate change as a given, are primarily directed to some of those key policy challenges, especially the elusive pursuit of a U.S. and global tax on carbon dioxide emissions, which might help us achieve, rather than merely stumble toward, a multi-country climate accord. (I should add that what you’ll be hearing are my personal views — not necessarily those of my colleagues at Resources for the Future.)

A very old joke pokes fun at some economists’ predilection for theoretically elegant, but useless, solutions. Several marooned and starving fellows, with just one unopened can of beans at hand, turn to the economist in their group, who, without hesitation, says “let us assume we had a can opener.”

A Global Carbon Tax: Advice and Dissent

Fast forward to a proposition you wouldn’t expect to be almost as evasive: let us assume we had a global carbon tax (i.e., a price on carbon) — a measure that would oblige all the world’s countries to   limit emissions of CO2 to levels beyond which dangerous climatic change appears likely. A global carbon tax set at, say, around $30 per metric ton of CO2 is meant to avoid the damage that that additional ton would inflict on worldwide society. (Time doesn’t allow consideration of non-carbon greenhouse gases.) Read More

RFF ON THE ISSUES: Fracking contamination concerns; Clean Power Plan legality

In this edition:

  • A survey of homeowner opinions on shale gas development risks
  • Commentary on legal challenges to EPA’s Clean Power Plan 

Fracking Contamination Concerns                                       

A new report in the Proceedings of the National Academy of Sciences offers “the first case published with a complete story showing organic compounds attributed to shale gas development found in a homeowner’s well.” The study’s authors analyzed drinking water from three Pennsylvania houses, noting that “contamination may have stemmed from a lack of integrity in the drill wells” rather than the fracking process itself. Read More

This Week in the RFF Library Blog

Each week, I review the papers, studies, reports, and briefings posted over at the RFF Library Blog.


The Total Cost of Saving Electricity Through Utility Customer-Funded Energy Efficiency Programs: Estimates at the National, State, Sector and Program Level

[From Press Release] What does it cost to save electricity? Researchers at Lawrence Berkeley National Laboratory (Berkeley Lab) have conducted the most comprehensive study yet of the full cost of saving electricity by U.S. utility efficiency programs and now have an answer: 4.6 cents. That’s the average total cost of saving a kilowatt-hour in 20 states from 2009 to 2013, according to a Berkeley Lab report… - via Lawrence Berkeley Laboratory / Ian M. Hoffman, Gregory M. Rybka, Greg Leventis, Charles A. Goldman, Lisa C. Schwartz, Megan A. Billingsley, and Steven R. Schiller

Insights from Modeling the Proposed Clean Power Plan
The Bipartisan Policy Center’s (BPC) Energy Project explores national- and regional-level impacts of the U.S. Environmental Protection Agency’s proposed Clean Power Plan in its new economic analysis. The analysis, based on economic modeling of the electricity sector, explores the impacts of various policy choices for state consideration in developing state plans. In particular, the study compares single state versus multi-state implementation, rate-based versus mass-based compliance, and the policy treatment of new natural gas plants. The analysis also investigates how the availability of end-use energy efficiency and expectations for future natural gas prices could influence how the electricity sector responds to the Clean Power Plan. – via Bipartisan Policy Center / by Jennifer Macedonia, et al.

Spike in Fracking-Associated Air Pollutants Found Hundreds of Miles from Drilling Sites: UMaryland Study
[Baltimore Sun] Even though Maryland has yet to permit any hydraulic fracturing for natural gas, emissions linked to the controversial drilling technique have been detected in the air in Baltimore and Washington, according to a new study. – via Atmospheric Environment v110 (2015, 144e150) / by Timothy Vinciguerra, et al.

The US Shale Gas Revolution and its Impact on Qatar’s Position in Gas Market
…The US Shale Gas Revolution and its Impact on Qatar’s Position in Gas Markets is a collaborative study between CGEP, Columbia and the Oxford Institute for Energy Studies that examines how Qatar may be impacted by major changes to the global LNG market. – via Oxford Institute for Energy Studies | Center on Global Energy Policy | Columbia SIPA / by Bassam Fattouh, Howard V. Rogers, and Peter Stewart

Adaptation, Sea Level Rise, and Property Prices in the Chesapeake Bay Watershed
While the mean global sea level has climbed by an average of 3.2 mm/year since 1993—and is projected to increase another 0.18 – 0.82 meters by 2100—coastal populations have continued to expand. Coastal communities may be compelled to adapt to these competing forces, and at an increasing frequency in the near future. This paper explores the property price impact of several adaptation structures that can help bolster the shoreline and protect homes from sea level rise (SLR) in Anne Arundel County, MD. Our study uses a novel dataset on coastal features that is very spatially explicit, and contains the location of all adaptation structures. We also use maps of SLR zones to explore how property price impacts vary depending on vulnerability to sea level rise. – via National Center for Environmental Economics, US EPA / by Patrick J. Walsh, Charles Griffiths, Dennis Guignet, Heather Klemick

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Assessing the Energy-Efficiency Gap

This post originally appeared on Robert Stavins’s blog, An Economic View of the Environment.

Global energy consumption is on a path to grow 30-50 percent over the next 25 years, bringing with it, in many countries, increased local air pollution, greenhouse gas (GHG) emissions, and oil consumption, as well as higher energy prices.  Energy-efficient technologies offer considerable promise for reducing the costs and environmental damages associated with energy use, but these technologies appear not to be used by consumers and businesses to the degree that would apparently be justified, even on the basis of their own (private) financial net benefits.

For some thirty years, there have been discussions and debates about this phenomenon among researchers and others in academia, government, non-profits, and private industry, typically couched in terms of potential explanations of the so-called “energy efficiency gap” or “energy paradox.”

Thinking About the Energy-Efficiency Gap

I wrote about this some two years ago at this blog ().  I  noted then that Professor Richard Newell of Duke University and I had just launched an initiative – sponsored by the Alfred P. Sloan Foundation — to synthesize past work on potential explanations of the energy paradox and identify key gaps in knowledge. We subsequently conducted a comprehensive review and assessment of social-science research on the adoption of energy-efficient technologies. Read More

Congress Doesn’t Have Veto Power Over the Clean Power Plan

Last week, during testimony by EPA Administrator Gina McCarthy, Senate Majority Leader Mitch McConnell raised a new argument against EPA’s Clean Power Plan (CPP), claiming §102(c) of the Clean Air Act gives Congress the authority to veto EPA’s planned regulation. Since EPA’s authority comes from Congress, this provision—if the Senator is reading it correctly—would claw back some of that authority. However, §102(c) appears to do no such thing.

Specifically, §102(c) says:

“(c) Consent of Congress to compacts

The consent of the Congress is hereby given to two or more States to negotiate and enter into agreements or compacts, not in conflict with any law or treaty of the United States, for

(1) cooperative effort and mutual assistance for the prevention and control of air pollution and the enforcement of their respective laws relating thereto, and

(2) the establishment of such agencies, joint or otherwise, as they may deem desirable for making effective such agreements or compacts. No such agreement or compact shall be binding or obligatory upon any State a party thereto unless and until it has been approved by Congress.” Read More

RFF ON THE ISSUES: New Report on health benefits of the Clean Power Plan; Oil export ban assessed

In this edition:

  • A new report examining the air quality and health benefits expected under the Clean Power Plan
  • Analysis on the impacts of removing the US crude oil export ban

New Report on Health Benefits of the Clean Power Plan            

The American Lung Association has released its State of the Air 2015 report, which reveals that about 40 percent of Americans live in counties that have “unhealthy levels of either ozone or particle pollution.” The report endorsed a number of actions aimed at improving US air quality, including the adoption of a “strong final Clean Power Plan” with “tough final requirements.” Read More