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To Move Mountains, Fix Markets

By: Charles Komanoff

September 27, 2006

An Economist's Agenda for Sustainable NYC

The Mayor's new Sustainability Advisory Board has builders, advocates, energy experts — but no economist. Let's hope the Board's appetite for achievable innovation propels them past the usual fare of efficiency standards and performance thresholds. While standards have been spectacularly successful in specific sectors such as home appliances, they're not equipped for attacking energy use at a transforming scale. For that, the board needs to call for pocketbook incentives that directly reward all energy-saving actions.

Here's a starter's kit from the economist's toolbox: seven concrete market measures and tax reforms to make NYC a global leader in energy efficiency, as well as a better place to live, work and do business.

Price Peak Power — Using electricity during peak periods burns up fuel faster and strains the power grid more than other usage. Traditional flat-rate pricing thus subsidizes peak consumption, sapping incentives to conserve or shift usage to other times. Inexpensive electric meter chips can now charge for usage by time of day. The resulting load shifting and reductions will widen operating margins in power generation, transmission and distribution, helping avert blackouts like those that recently roiled northwest Queens, without the huge expense (and pollution) of building new power plants and shoring up the grid.

Unbundle Electricity — Around a tenth of electric customers in New York City — no one knows the exact share — don't pay for electricity based on usage. Instead, their Con Ed bill is bundled with their residential or commercial rent, which removes all incentive to conserve. Metering and billing these customers directly will unlock substantial electricity savings, as they find it cost-effective to adopt compact fluorescent lamps and other energy-saving measures. With mandated rent reductions to net out the bundled charges, most customers will come out ahead.

Price the Roads — This is the 800-pound gorilla in the NYC sustainability room. The city's road space is scarce and valuable. Charging little or nothing to use it is the Original Sin that creates the city's hellish, gas-guzzling traffic. Whether the first road pricing step is East River bridge tolls or London-style CBD pricing or citywide weight-distance charges is less important than taking some step, now. Drivers must be charged for the time and space they take from other New Yorkers — including other drivers. Road pricing can tame the traffic beast, and also provide a robust revenue stream to finance an expanded regional rail network and bring the transit system into good repair.

Price the Curbs — Pricing's patron saint, Nobel economist Bill Vickrey, long ago urged New York City to monetize curb space, not just in the Central Business District but in residential areas too. The optimal charge, to be determined through trial and error (and varied by location and time), would be the price at which 85% of spaces are occupied, to ensure that drivers could find spaces without endless circling. To win neighborhood support, a share of the parking revenues could be allocated to new Parking Benefit Districts for streetscape improvements, as Pasadena, CA, has done to revitalize its Old Pasadena shopping district. A potential ally: supermarket owners who are losing market share to Fresh ("It's All About the Double-Parking") Direct trucks.

Abolish Privileged Parking — It may not be New York's biggest fuel subsidy, but it has to be the most infuriating: thousands of public employees get to park their private vehicles for free on public thoroughfares, while other commuters must pay to park or use transit. Free parking is an almost irresistible inducement to drive, equivalent to getting a free tank of gas each week, which explains why these freeloaders drive at double the rate of other workers with similar commutes. Dumping this subsidy would be a particular boon to hard-pressed Chinatown, where sidewalks and intersections are cluttered with police and court officers' private cars and SUVs.

Universal Bottle and Bag Deposits — Another no-brainer is extending the nickel deposit (perhaps doubled to 10 cents) to all beverage containers. I help coach at Downtown Little League, and the trash barrels at the ballfields overflowing with Poland Spring and Gatorade bottles are reason enough to charge a deposit. If sales plummet, so be it; the manufacture of plastic bottles uses precious petroleum, as does trucking the bottles to supermarkets, and the no-deposit alternative — municipal water — is good enough, thank you. While we're at it, the City should legislate a nickel-or-more tax on plastic bags given out at cash registers. A bag tax in Ireland has revived the ecological habit of customers bringing their own bags to market. No magic, just the power of economic incentives.

Tax Carbon, not Commerce — Sooner or later, and preferably sooner, the United States will have to tax the carbon content of coal, oil and gas. It's the only way to create an incentive for reducing use of fossil fuels in every sector of economic activity and at every level — from 50-year business decisions on locating new factories and stores, to everyone's minute-to-minute decisions on heating, lighting, and driving. While New York City lacks the authority to tax carbon on its own, it must become a vociferous advocate of state or federal carbon taxing. The City could also advance the discussion by showing how carbon tax-shifting — using carbon tax revenues to phase out state sales taxes, for example, or just cutting every New Yorker an annual check from the "carbon fund" — would make most poor and middle-class households better off while spurring investment in compact cities like ours, instead of in the fuel-intensive hinterlands.

Let's believe this list will entice the City's new Office of Long-Term Planning and Sustainability to think outside the Green Building box. Nothing wrong with green buildings, but they're only one part of a much bigger picture. To move mountains, let's fix markets.


Komanoff, an economist and environmental activist in New York City, authored "Power Plant Cost Escalation," "The Bicycle Blueprint" and "Killed By Automobile.".
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