Running Out of Gas
A clean EV future won’t pay for roads and highways
California practically invented the modern transportation system. Without our historic highway and road network, connecting farm and city, factories and ports, California would be Albania – a pretty coastline with an underperforming economy.
Since the heavy lifting and pouring of the 1960s and 70s, state leaders’ commitment to maintaining and upgrading highways and bridges has been replaced by, at best, ambivalence.
On the one hand, billions have been spent on highways, roads, and transit, but the operation and integrity of these systems has fallen far behind user demand. A 2019 report from the American Society of Civil Engineers found that California had the second worst quality of roads in the nation and that the average Californian spent three full days stuck in traffic. On the other, the primacy of climate change mitigation in California public policy has discouraged expansion and upgrade of transportation infrastructure, that serving automobile and truck traffic.
The current administration has a professed policy to reduce average daily vehicle miles traveled (VMT) by more than 20 percent between now and 2030. By comparison, average daily VMT has gone down by less than six percent since 2019, including the behavioral changes induced during the pandemic. These issues collide because of the very controversialbelief among modern transportation planners that improved highway facilities increases traffic and VMT.
The point is that even in the face of an ongoing need to improve surface transportation systems to accommodate economic growth and personal mobility, the earlier consensus that investing in this infrastructure as a social good is weakening.
Public policy is also lining up against the internal combustion engine, which is the sole consumer of taxed gasoline. Governor Newsom famously directed his Air Resources Board to ban the sale of new vehicles powered by internal combustion engines beginning in 2035, as a component to meeting California’s aggressive greenhouse gas reduction goals. This could mean 12 million more fuel-tax-free EVs on the road by then.
The implication for road financing is obvious.
Even considering the long-overdue fuel tax hikes in 2017, and that these excise taxes will automatically increase with inflation every year, overall revenues will decline substantially because road users will consume less fuel over time.
According to researchers at the Mineta Transportation Institute at San Jose State University, gasoline excise tax revenues could fall by between $1.75 billion and $4.25 billion, in today’s dollars, by 2035. That is, in ten years, the value of gas tax revenues would fall by 23% to 55%, depending on the uptake of electric vehicles and the mileage traveled by motorists. Below is an excerpt of a useful and finely-tuned examination of transportation revenues under different fuel use and mileage scenarios.
The worst case (in revenue terms, as opposed to GHG emissions) would be high adoption of EVs and aggressive reduction in VMT – which is the public policy model preferred by state leaders. To be sure, this zealous outcome will need to overcome recent deceleration of consumer preference for EVs, and the historic resistance of Californians to limiting their travel** (especially when long commutes are the flip-side of affordable housing). But statewide GHG reduction goals, EV purchase mandates and decarbonization of the electric grid are bound up in weaning Californians from internal combustion engines.
The Legislative Analyst has examined this phenomenon and also concluded that certain transportation “programs will experience an overall reduction in the number of projects the department can complete on the state highway system, likely resulting in a decline in highway conditions for drivers.”
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Recognizing the long-term inadequacy of taxing gasoline, state leaders have for more than a decade explored what might be the next generation in road finance – a fee on drivers based on their actual use of the state transportation network. A pilot project tested a broad application of the mileage fee, with no exemptions and no rate differentials.*** The concept would be to set the user fee at a rate to offset the gasoline tax – fully replacing it, not in addition. Since the fee would no longer depend on gasoline use, erosion of the tax base would stop, resulting in more funds for roads and highways over time. (The fee would need occasional adjustment for inflation.)
My version of an optimum replacement revenue would be:
Dollar-for-dollar replacement of the fuel taxes, probably phased-in over a short transition period.
No exemptions, reductions or subsidies for any class of driver or type of vehicle, except …
Possibly a slight break for drivers who agree to an efficient revenue collection platform, such as automatic tracking of mileage based using onboard vehicle technology.
These criteria would closely match the new revenue source to the Proposition 26 criteria for a “user fee,” which means that the new charge would require a simple majority vote of the Legislature to enact, and more important, would limit the use of these revenues only to the upkeep and expansion of the road and highway system.
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Sadly, this well-intended public policy effort has been stalled in a classic political and bureaucratic traffic jam.
The original pilot project was completed in 2017, but fruitful follow-up ran headlong into Legislative consideration of the aforementioned fuel tax increases, which understandably took precedence, along with the fight to secure them when put up for a vote the following year. Perhaps not coincidentally, the change in Administrations corresponded to a reduction in political momentum to address this issue, and an increase in the tendency of transportation functionaries to continue to study aspects and iterations of a road charge. In any case, this Administration is clearly in no hurry to pull the trigger on a new or replacement revenue source to offset the consequences of the policies it and the Legislature have put into place.
Public infrastructure is core to economic success and social mobility. California leaders have manifestly signaled their desire to achieve a low carbon economy. The time has come to face the hard work and political risk to complement their climate virtue with sensible and long-term financing for roads and highways.
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** Indeed, some economists (e.g., Severin Borenstein at the UC Berkeley Haas Energy Institute) have identified a “rebound effect” from energy efficient buildings/appliances/vehicles that results in consumers consuming more electricity or fuel because the per kilowatt or mile consumption is less. Per Borenstein: “Yet, such improvements usually lower the cost of using energy-intensive goods and may create wealth from the energy savings, both of which lead to increased energy use, a "rebound'' effect.”
*** I was privileged to serve on the California Transportation Commission-appointed Committee that oversaw the road charge pilot project, and that subsequently stewarded other studies and elaborations of the road charge concept in California. The committee comprised many committed Californians representing diverse organizations.
Update – fire safety
An earlier issue of California Mainstream hammered the need for local government to aggressively enforce “zero zone” and defensible space requirements to help prevent catastrophic spread of wildfires into urban spaces. I’m pleased to point to a recent report of a special City Council meeting in Berkeley, of all places, where the city council unanimously voted to require homeowners in high-risk fire areas to clear anything within 5 feet of their houses that could catch on fire, including wood fences, plastic bins and all trees and plants.
Elsewhere, a report reveals San Diego officials failing to address long-standing policies to enforce brush reduction rules – especially on city-owned land.