Parking fees – fighting climate change?

Today’s Sydney Morning Herald reports that a number of local councils in Sydney are considering – or have introduced – graded parking fees based on a car’s fuel consumption:

INNER-CITY councils will be urged to charge residents with petrol guzzling cars more for their parking permits - a scheme that netted a council almost $175,000 last financial year.

The Mayor of North Sydney, Genia McCaffery, introduced the scheme in 2005 and said yesterday she would use her role as the president of the Local Government Association to encourage other councils to go greener.

"Certainly this year we are looking pretty closely at climate change and what policies can we adopt as councils to educate communities," she said yesterday. "We'll be talking to our councils and saying this is one of a range of policies you can look at."

North Sydney Council uses the Federal Government's Green Vehicle Guide to judge if a vehicle has a very low, low, medium or high impact on the environment. Each car type attracts a fee ranging from $24 to $88 for the first resident parking permit. A resident parking permit for a second or third vehicle can cost up to $200 for a high-impact car.

Over at the Environmental Economics blog, Tim Haab decries a similar scheme proposed in the UK as inefficient and unfair:

It makes the solution too complicated and it doesn't target the real problem: DRIVING. Suppose Ian and Graham (good English names, don't you think?) live next door to each other and both own Hummers. But, Ian drives his Hummer 20 miles to work each day, while Graham drives his 5 miles. Who is causing more damage? Who should pay more?

Under the current proposal Ian and Graham would each pay the same amount. But that doesn't seem fair--I'm crossing my arms and stomping my foot with a "hmmmph!"--and it definitely isn't economically efficient. So what's the solution? Easy, charge people a fixed amount per litre of petrol consumed…

Well I'm not sure it is that easy and I don’t agree that these proposed measures are a bad thing. First and most obviously, councils can’t impose taxes on petrol, so parking permits are one of the few tools through which they can target the issue.

Second, driving doesn’t just produce greenhouse emissions, it also produces particulate air pollution. Where is air pollution a problem? In the centre of cities. In rural areas, it disperses without creating many problems. The enormous concentration of cars in cities means that this pollution can cause health issues in cities. A national petrol tax doesn’t discriminate between emissions in cities and the country (so to the extent you’re worried about local urban air pollution, a national fuel tax isn’t fair or economically efficient either). And so it's not surprising that it’s "inner-city councils" who are considering additional measures. The Green Vehicle Guide, which North Sydney Council uses to compare vehicles, incorporates greenhouse emissions and air pollution.

Third, and this is a point that economists always seem to me to miss (or ignore), measures like this can have an effect on people’s behaviour that goes beyond their immediate financial impact. Economists seem to assume that drivers see that owning a ‘petrol-guzzling car’ now costs an extra $40 a year to park and then decide whether it’s worth that extra $40 a year to have a petrol-guzzler. If $40 a year wouldn’t make a difference anyone’s purchasing decisions, then, according to the analysis, the extra charge hasn’t done anything. What they miss is that when a local council, which represents the local community, sends out a letter that tells everyone they’re going to charge more for parking permits for petrol-guzzlers because they’re concerned about climate change, that tells people "The community thinks fuel-efficient cars are cool and thinks big petrol-guzzlers are uncool" and, because people feel a connection to their community, that affects their purchasing decisions, probably more so than the $40 charge itself. Measures like this put the issue of driving and its effect on climate change on the agenda – it grabs people’s attention. Of course, councils could just send out a letter that says that gas guzzlers are uncool – but backing that with a $40 fee focuses your attention that little bit more.

So, are these measures a positive step? I’d say yes. I’m sure there are more efficient measures you can come up with but I’d also suggest that these measures are an improvement on the status quo.