Clean Tech Corner: When clean technology meets policy

When cars no longer run on gasoline, how will we pay for our roads?

New technologies often become commonplace overnight — changing how we live, but leaving our political system struggling to catch up. The story of cars, roads and taxes is such a case, and history may be repeating itself.

It’s hard to believe that we haven’t had petroleum-fueled cars and trucks and paved roads in the United States forever, but mass production of Model T’s by the Ford Motor Company only started in 1908, a mere 110 years ago. Within just a few decades, driving a car became not just an adventure for a few technological daredevils but a necessity of everyday life. Soon after, tens of millions of car owners began demanding roads paved with bituminous macadam and bridges that could accommodate heavier and larger vehicles than horse drawn carriages. 

But how to pay for all this new infrastructure? The auto manufacturers, oil companies and other businesses convinced federal, state and local leaders to spend taxpayers’ money to build the desired roads. By about 1930, all of the then-48 states had enacted gasoline taxes. The first federal excise tax on gasoline was enacted in 1932. Prior to 1956, the federal government shared many roadbuilding costs with the states. Many of the state and federal gasoline taxes came to be dedicated to ensuring “good roads,” although by themselves they didn’t raise enough money to cover the full costs of building and maintaining the nation’s interconnected system of modern roadways. States adopted a host of other fees, such as annual registration fees on vehicles, to help supplement gas tax revenues. The federal gas tax was increased to help pay for construction of the interstate highway system, and for a while overall tax revenues were enough to support a growing system of state and federal roadways. Some fifty years after cars became commonplace, policy had caught up with technology and, for a few decades, all was well until …

In the early 2000s, new technologies, in combination with various economic, societal and environmental factors, led to the widespread development and adoption of much more fuel efficient vehicles, resulting in an overall decline in demand for gasoline even as the total vehicle miles traveled increased. Because Congress and many state legislatures for the most part have not responded to this technological shift by increasing gasoline taxes proportionately with the overall decline in demand for gasoline, overall gas tax revenues declined at the state and federal levels. With less money available to maintain the now expanded network of roadways, more and more have begun to fall into disrepair, and there’s precious little money allocated to building new roads.

Many forecasters anticipate that within the next 50 or fewer years, most cars and trucks will not be powered by petroleum, but instead by hydrogen fuel cells or electricity.  Hybrid cars (which can run on gas or electricity) and all-electric cars are forecasted to gain market share rapidly over the next couple of decades. For nearly 100 years it seemed fair and reasonable to largely pay for our roads with gas taxes, which provided a fair proxy for road usage, since the more you drove, the more gas you consumed, and the more you paid in gas taxes. But how will we pay for our roads when cars no longer run on gasoline?

Legislatures across the country, including here in New Hampshire, have been grappling with this policy question. This won’t be a subtle shift; rather, the fundamental dynamics of the situation are about to change. In the future there will be multiple sources of energy (not just one, petroleum products) for our vehicles, and the entire paradigm of “miles per gallon” as a way of thinking about vehicle efficiency will become archaic. Moreover, the principal cause of wear and tear to our roadways is vehicle weight (the heavier a vehicle, the more it causes compaction, stress, etc.); in addition, the farther a vehicle is driven, the more miles of roadway it affects.

Going forward, we could tax the new fuels or we could tax the use. We could place taxes on the new sources of energy (primarily hydrogen fuel and electricity), but taxing electricity used for transportation could be very complex if not impossible given the nearly infinite number of places and ways in which it can be generated, stored and transmitted. On the other hand, standard vehicle weights are published by the manufacturers, and odometer readings can be recorded. Formulas could be developed that combine vehicle weight and miles driven to derive fair and reasonable annual user fees for comparable vehicles regardless of their fuel source. A transitional “bridge” could deliver us from our current “fuels-based” funding structure to a future “use-based” structure. For perhaps the first time in the history of automobiles in the U.S., public policy could anticipate and address the societal and economic impacts of rapid technological change.  But doing so will require clearly defining where we want to end up.  Otherwise, history will repeat itself. As Lewis Carroll wrote in Alice in Wonderland, “If you don’t know where you are going, any road will get you there.”  

Tom Burack is a shareholder at Sheehan Phinney, former commissioner of the NH Department of Environmental Services and a recently named member of the NH Clean Tech Council’s advisory committee. 

Categories: Tech Advice