Stephen Rees's blog

Peter Ladner – the Vancouver Councillor and owner of Business in Vancouver posted this to the trans-action list serve. It is obviously an idea that he thinks should be widely known, so I am reposting it

Now that Premier Gordon Campbell has laid out his aggressive targets for greenhouse gas emission reductions, the pressure for solutions is about to push some faltering ideas into the fast lane.

One that should get an immediate green light is a scheme I’ll call pay-as-you-drive (PAYD) hybrid pricing. It’s been hatched by a UBC team led by noted physicist Lorne Whitehead and associate planning professor Lawrence Frank. The purpose is to reduce automobile emissions, provide incentives to drive less and reward fuel-efficient vehicles.

Whitehead and Frank start with the common frustration that current vehicle registration and insurance schemes provide an all-you-can-eat temptation to even the most environmentally conscious driver. Once
you’ve paid for your insurance, there’s no additional cost no matter how much you drive. Frequent driving is a key factor in your chance of having an accident, so why should frequent drivers pay the same insurance as occasional drivers in the same insurance category? And if we want to encourage fuel-efficient vehicles, why charge the same registration for a gas-guzzler as a compact?

Research shows that PAYD pricing reduces average annual mileage by between 10% and 15%, which results in a comparable reduction in crashes, deaths and hospital costs. It also increases fairness, because your insurance premium more accurately reflects your claim costs. And it makes insurance – and car ownership – more affordable for those who don’t drive a lot: the less you drive, the more you save. Meanwhile it reduces traffic congestion, the costs of roads and parking lots and urban sprawl.

How would it work?

As Tod Litman of the Victoria Transport Policy Institute describes it (www.vtpi.org/paydbc.pdf), “the policy term begins and ends when a broker or service station performs an odometer audit, which involves recording odometer readings and checking for signs of tampering.

“This should take less than five minutes and cost less than $10, and could usually be performed during scheduled maintenance such as an oil change or emission inspection.

“Motorists would prepay for the kilometres they expect to drive during the policy term, and settle accounts at the end of the term. For example, a motorist who prepaid $1,000 for 20,000 kilometres would receive a $250 credit if they only drove 15,000, and owe $250 if they drove 25,000 kilometres, which must be paid to reregister the vehicle.”

It works out to around $0.07 per kilometer.

One major drawback to PAYD pricing is that it traps lower-income people who have to drive long distances because of where they live. Enter the hybrid solution, which adds a licence fee adjustment based
on your vehicle’s fuel efficiency.

If you can’t afford the increased insurance costs from being a frequent driver, you can bring down your costs by switching to a more fuel-efficient vehicle, which is cheaper to register.

As Whitehead explains, “a person who owns a high fuel consumption car will not have to pay more than before, as long as they don’t drive much. And a person who drives a lot will not have to pay more than
before, as long as they drive a fuel-efficient car. But in both cases there would still be incentive to drive less and drive a more efficient car.”

Whitehead and Frank’s ad hoc team is pushing ICBC to do a pilot project with volunteer drivers. So far the insurance company isn’t biting, claiming it prefers to base insurance prices on risk rather than mileage. It also says it already has enough different insurance categories to reflect miles driven, and PAYD insurance is too
complicated to administer.

Given the simplicity, fairness and flexibility in this proposal, the aggressiveness of the premier’s targets and the urgency of dealing with traffic congestion, it’s time for ICBC to stretch a bit. ·