3 posts / 0 new
Last post
[The Way Out] Will transportation changes be led by industry?

I was really interested in seeing what Lovins and Cohen had to say about transportation - I find it's an issue with a lot of opinions, even within environmentalism. There's a lot of focus on more efficient vehicles and biofuels, followed up much later with the idea of not needing mobility in the first place.

I'm curious about others' thoughts on something that applies elsewhere as well, but particularly here: Do you think that industry-led change could be sufficient to change transportation? A major focus of the book is on capitalism, but our transport is either publicly subsidized (roads) or publicly run (transit). Vehicle producers have an incentive to make more efficient vehicles - particularly for industry use - but do you think that mobility for the general public can shift as a response to climate change or peak oil without very serious (and likely expensive) government intervention? Just a nagging thought in my head. 

bgould132's picture
I'm not reading it, but I'm

I'm not reading it, but I'm happy to join the discussion.

Industry alone will be insufficient to change transportation due to the nature of the market, which is:

1) Vehicle owners don't bear the full cost of negative externalities. 

2) Transportation networks are natural monopolies. 

Because of (1), consumers will drive more than the socially optimum level. Government intervention here, however, is highly afforable but politically infeasible - a high gasoline tax to equal the negative externality from driving would solve this problem. (Accurately assessing the costs of the externalities, however, would be an entirely different problem). Furthermore, without this higher cost of driving, vehicle makers don't have an incentive to make more fuel-efficient vehicles. For example, the Toyota Prius only started selling well once gas prices went up, and sales spiked immediately following the spike of July 2008. Furthermore, while other companies made initial forays into more fuel-efficient vehicles, it wasn't until President Obama started looking at CAFE standards, and subsequently raised them, that companies really invested heavily in hybrid, electric, and efficient vehicles.

(2), however, has potentially even greater impact. A natural monopoly arises when the most efficient method of production is for it all to be concentrated under a single firm, and physical transportation networks fit this description perfectly. Furthermore, land use is regulated by the government to begin with, so you can't improve mobility - whether by expanding transportation networks or improving density - without government involvement; and because of the high costs of public infrastructure, it will be expensive - but not as expensive as doing nothing. (Maybe it can be paid for by the gasoline tax I suggested above).

I don't believe business

I don't believe business itself can change the transportation industry wholesale. It would take a revolutionary leader to do so, and no company has yet demonstrated that they can or will take the drastic lead required. Furthermore, unless technology were to allow such a company to compete with vehicles that were built on subsidized infrastructure (gasoline and roads), then it would be economically impossible no matter how much coporate will existed.

That latter point touches on the main reason business can't lead the charge currently. In a perfect free market, it would be possible for businesses to innovate and improve transportation. Yet as Ben pointed out, the negative externalities are not all captured by companies or consumers. Moreover, they are subsidized. Gas and oil are subsidized in this country, and unless that is eliminated, there will be no market incentive for cheaper vehicles. Even if we weren't paying for some implicit subsidies (emissions, health, military, etc.) but all explicit subsidies were removed, then we would see a change in market forces. Not one that would fully drive industry, but one that might open the door for better solutions.

Yet even with all of that, the reality is that companies do not have the power to address mass transit easily. Issues of right of ways, property rights, financing, and other challenges make it nearly impossible for a single market player to drive the change in transit that we need. "The Way Out" did not really talk much about strategies for mass transit, but the reailty is that without huge shifts here, we cannot cut emissions from that sector as we will have to. It is about rethinking the way we move people and goods.

On that latter point, businesses may have some ability. If companies rethink distribution, production, and even what "goods" are and how we consume them, it is possible that businesses can drive a large shift in transportation for shipping. Online marketplaces and digital goods have already begun this. The question is how far we can leverage our desire for convenience and new technology to replace older, more intensive goods that must be shipped, or find local solutions to production and distribution.