A news item caught my attention today (posted at the end of this entry). Toronto Mayor David Miller has stated he would consider tolling city roads -- as London England did, with great success -- in order to reduce commuting, downtown congestion and smog.

The London mayor who introduced tolling in that city was actually a left-wing mayor (like Miller) and the concept, which is market-oriented, was anathema to his political followers, who decried it as a tax on the poor and said it wouldn't work. Well, it did work. I have been to London twice in recent years and, while there is traffic, there is very little congestion, even during rush hour. The tolls place a "price" on driving downtown from outside the city. If people want to do it, they can, but they pay. Because it's not considered "free" people who have other options (public transit, not going downtown, taking taxis) use them, and the roads are less congested.

Tollling makes sense, if properly implemented, because it solves the "tragedy of the commons" where cars are concerned. When taxes pay for the construction of roads, people perceive their use of those roads as a right, and that their actions are without cost. But when too many cars clog the streets, there is in fact a cost -- loss to the economy from all those thousands of people sitting idle in traffic, wear and tear to the roadways themselves, and (most important) the cost in health care and environmental degradation from smog. It's excellent public policy to recognize this "cost" and to put a "price" on it. The price (market) signal turns the roadways into a market, rather than a commons.

Over time, people adjust their behavior according to the market signals. When the roadways are perceived as free, people behave perfectly rationally -- competing to squeeze out as much of their share of the free public good as they can (by using the roads during peak hours, commuting, etc.). It's utterly predictable that "free" roads encourage suburban sprawl. If you can buy a house in exurbia for, say, two-thirds the price of that same house downtown, and your only penalty is to have to drive a bit more every day and not have access to public transit for your work commute, you will logically move to the cheaper suburban house because you can pay off your mortgage much faster and, besides, enjoy a more "bucolic" existence away from the "trafficy" downtown. (Okay, many people will not make this choice, but a glance at any map of the GTA and it's enormous low-density suburbs shows that millions of people will.

But if you turn the commons into a market, if the roads are suddenly not "free" (at least, the downtown roads) then the equation changes. People don't so readily assume that it makes sense to live far apart from where they work. ?The cost of the impact of their behavior is no longer externalized onto taxpayers (in the form of road repairs, road construction, hospital care, etc.) or the general economy (the drag of millions of person-hours wasted in traffic). The cost is internalized directly back to the consumer of the service (the driver on the road).

There's a further benefit. Not only are costs being appropriately assigned to users of the system, but the system itself changes -- it self-corrects. The very traffic congestion that inspired the tolls begins to melt away as people re-order their affairs. In the short-term, they drive less often to the city. They start to car-pool (i.e., share costs). More than any amount of proslytizing from government (nanny state nagging) could accomplish about the value of car pooling, people do it because it saves them money. Aha! The same force that inspires them to turn down their thermostat or turn off lights in empty rooms, or comparison shop for cheaper shoes, gets them to do the "right thing for the environment." They discover the "Kiss-N-Ride" and jump on the commuter train. They take cabs, trains, buses, street cars, bicycles and (gosh!) they even walk!

Over the long term, the appeal of living in the suburbs and working downtown diminishes. Or, more correctly, people make decisions to follow such a pattern with the correct pricing in their heads. One can imagine that real estate values in urban cores -- even the cores of suburban areas -- will more perfectly reflect the value that one can work/shop/play in close proximity, and the values of outlying properties will be diminished. Butthis doesn't mean that the suburbds will become wastelands, ghettos. The opposite should occur: As municipal politicians see the new pattern, they will introduce planning rules to encourage density, thereby turning each suburban node into a small dense city unto itself, rather than a mere add-on to The Big Smoke. This is precisely what is happening now in the Town of Markham (where i once lived), which is a sad example of low-density sprawl that is reinventing itself and literally dropping a high-density core into its new "city centre." Light rapid transit and other public infrastructure will reinforce the idea over time that you can live in Markham, work there, and play, and only go downtown once in a while of other big city pleasures.

If this same mechanism is applied to other "free" services, a virtuous cycle should ensue. Markham, for instance, is introducing a user-pay system for garbage (bag tags), in combination with free (tag-less) collection of recyclable materials and organic waste. Unsurprisingly, the town is closing in on its goal of diverting 60 per cent of solid waste from landfill. The town already meters water consumption, which appears as a (not buried) line item on bills. Gas and electricity consumption is already metered by suppliers (including discounters with long-term contractual plans that lock in prices). Imagine the further advances that will be achieved in Markham and every other town and city when each appliance in each household is equipped with "smart meters" telling the owner/user exactly how much it's costing them -- in real time -- to use power for a given period. Again, pricing behavior appropriately will lead people to behave rationally, if they're provided a rational context.

If I know, for instance, that it will cost me half as much in electricty pricing to run my dishwasher during the night, while I'm asleep, I will take the time to figure out the slightly complicated digital setting on the front of the machine to make this happen. I will even dig out the owner's manual, or search for it online (by keying in the product name or description). Whereas such a task once sat idle on the endless "to do" task list (along with trimming the hedge in the front yard, or replacing the burnt-out back porch light), it now moves onto my priority "action list" for today, because of pricing. Smart metering will cause me to operate my clothes washer and dryer during non-peak hours for the same reason.

But again, there are other benefits and changes that will occur, that movefrom the individual to the systemic. For example, I will likely take a keen interest in the energy efficiency of every appliance that I own or purchase. I'll start to pay attention to the stickers on these machines, and the issue will become part of my research into what I will buy, beyond bottom-line price and styling. I might decide to retire the inefficient beer fridge in the basement when I learn that it's the single greatest power consumer in my home, sucking up power senselessly day and night. And that's just the "low-hanging fruit." I will eventually replace my standard incandescent light bulbs with fluorescents. I will buy rechargeable batteries instead of throwaways. I will install water-saving shower heads. And I may in fact do away with certain appliances altogether, or use them less. (I have recently discovered that it takes only slighly more time to wash dishes than load and empty the dishwasher. And since it makes for a good "chore" for my kids, it costs me nothing personally.)

Now let's switch to the view from ten thousand feet. If I'm doing this, millions of other people will be as well. Our combined rational behavior in the new system takes many many megawatts of consumption off the grid. But more importantly, market forces smooth out the peaks and valleys of power consumption. And, since electricty production and consumption is virtually instantaneous, new power plants are not required. The existing system can meet demand and even be in surplus, because infrastructure adequately serves the robust "middle" of consumption, rather than strain to meet peak demand (e.g., everyone cranking up their air conditioners on a hot summer's day, and running their dishwashers at the same time, etc., etc.).

And then the planners and the suppliers of power are under less pressure to build mega-projects based on worst-case demand scenarios, and can invest in a more diverse -- dare I say "green" -- array of options. Many people in Ontario, for example, are already buying their power from Bull Frog -- an alternative energy supplier that emphasizes hydroelectricty and wind, etc.

So I've extrapolated quite an arc of opportunities from the initial example of road tolls. Beyond municipal services like roads, drinking water and wastewater treatment, power supply, garbage collection and so on, many further opportunities exist in the realm of such things as extended producer responsibility for packaging, electronics and other products. I haven't even touched on trading/credit systems for emissions, that bring market discipline to another perceived "free" commons -- the atmosphere. But an interesting tie-in, in that regard, is that Toronto Mayor Miller's motivation to introduce road tolls is not directly about relieving traffic congestion, but rather to help get the city into compliance with its own four-year goal of reducing greenhouse gas emissions, and climate change impact.

The the very macro climate change issue is triggering very micro level policy instruments. A perfect example of "think globally, act locally." I believe that over time, more and more environmental activists will embrace market solutions to environmental problems, as command and control regulation proves to be an approach with certain limitations -- namely that it punishes bad behavior rather than reward correct (or, I should say, rational) behavior.

Continue reading "Road tolls, market forces and climate change" »

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I never thought I’d see the day satellite radio rivals XM and Sirius agreed to merge as one. From a business perspective, the proposed merger makes a lot of sense. Double your subscription base and eliminate the need for half your satellites while slashing redundant stations – it’s a recipe for success and will undoubtedly save the company a lot of dough.

But what will it mean for the consumer – particularly the Canadian consumer? For starters, there are issues regarding hardware. I have an XM receiver, and it was built specifically for XM service. There is no compatibility between XM and Sirius radios and that’s the way these systems were designed. Will customers have to buy a new, generic receiver to access the new revised XM/Sirius service? There’ll be a lot of unhappy customers if this is the case – not the least of which are the OEMs who have existing deals with one provider or the other.

Then there’s the issue of Canadian content. The CRTC requires both XM Canada and Sirius Canada to broadcast a certain amount of Canadian content. But these two Canadian entities are not part of the proposed merger. Will Canadian customers have their own service? It seems unlikely a XM/Sirius super-satellite service in the US would comply with CanCon requirements.

Finally, how will this deal affect pricing? With no competition in the marketplace, it’s difficult to imagine pricing will decrease or stay the same. I’m only speculating, but I foresee a tiered pricing system much like you have with cable television, where you pay the base rate and then customize your package by purchasing other channels individually or as packages.

There’s still a whole lot to be worked out logistically before this deal gets done, but as a customer (like many of you, who spend so much time on the road) I do have my concerns. I’ve become dependent on satellite radio to get me through the daily commute and I hope when all is said and done, consumers like us don’t get screwed over.

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A reader recently submitted a question regarding a strange occurrence at Hwy. 400 and the Anne. St. overpass in Barrie, Ont. Since we, at trucknews.com didn’t have the answer, we thought we’d call upon the power of the Internet and see if one of our faithful readers could help solve this mystery:

Good morning,
I have a question, to which I have not been able to find an answer, and would like to pose it to you and your team. I’m not involved in the trucking industry in any way, but have been wondering about this one for some time now.

Thanks for your time,
John

If you have an answer to John’s question, we’d love to hear about it here.

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When doing my monthly Truck Stop Question, I usually end up having a little chit-chat with the driver even after the initial interview is over. Typically this is an opportunity for the driver to vent about whatever happens to be bothering him about the trucking industry, and what I should be doing – or writing – to make things better.

The top two complaints I hear are usually focus on the high costs a driver must incur (including the high price of fuel) and how most four-wheelers don’t have the slightest idea how trucking works. The latter complaint includes, but is not limited to, cars cutting trucks off and slamming on the breaks, cars riding in trucks’ blind spots, cars not letting trucks change lanes; just a general distaste for the egocentric mentality of the automotive community.

Well, I’ve got news for you truckers: you’re far from perfect. During a half hour drive from Scarborough to Bowmanville this week, not once, not twice, but THREE times I saw big rigs driving more than 130 km/h, one which nearly ran a car onto the shoulder while making a last minute lane change. Does this sound like the actions of someone who’s concerned about conserving fuel? Does this sound like the actions of someone who is ready to hit their brakes and prevent thousands of pounds of freight from steamrolling the vehicles in front of them? I think not.

Having said that, are truckers still the best drivers on the road? Almost certainly. Are car drivers usually at fault with most car-truck accidents? Yes, the majority of the time, but that’s no excuse for barrelling down the highway like you’re driving a sports car instead of an 80,000-lb. behemoth. There’s such a thing as respect for your freight, your fellow motorists and your job. It’s time for truckers to take some responsibility instead laying all the blame on four-wheelers. Drivers should be approaching these reckless cowboys in their own companies or the industry’s name will continue to be dragged through the mud.

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Global warming is here and it’s real. That’s the message expected to be delivered by the Intergovernmental Panel on Climate Change, which has been convening in Paris, France this week. Representatives from more than 100 countries are involved in the meetings, which examine scientific research gathered over the past six years. More than 2,500 scientists have contributed to the research. The final report is expected to be released tomorrow.

Global warming is always good fodder for debate. For every person who insists global warming is for real, there’s another person who counters that swings in global temperatures are nothing new – that they’ve been occurring for centuries. Personally, I’ve always straddled the fence on this one. However, it appears we’re at a breakthrough. Word out of Paris is that the much-anticipated document being finalized by the intergovernmental panel will make it obvious global warming is a reality.

The report is said to contain evidence that climate change is being caused by humans burning fossil fuels, and global temperatures could rise between 2.5 F and 10.4 F by the year 2100. Now, I don’t plan on being around in 2100, but if what this group says is true, then I am extremely concerned about the future of our planet and those who will occupy it in the not-too-distant future.

If the panel’s grim predictions are true, 200 to 600 million people could face food shortages and seven million will have to retreat from areas that face coastal flooding within this century. Between 1.1 and 2.3 BILLION people will suffer from water shortages if global warming is not reversed, the panel is expected to reveal. I’m no Greenpeacer, but I find these predictions startling and a little bit depressing! I now know what side of the fence I’m going to plant my feet on.

Those of us in the transportation industry can seek some comfort in the fact we have already taken steps to reduce our environmental footprint by reducing heavy-duty truck emissions and exploring new technologies that further reduce our energy consumption. Hopefully, our efforts to date will have a noticeable impact on the environment and will be mirrored by other industries that haven’t been quite so proactive.

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