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Steve Lafleur: Memo to Ontario politicians: There’s no such thing as a free ride

Commentary

The price of transportation in Ontario is too high. Or at least that seems to be the political consensus. All three of the major parties are fixated on reducing the price of transportation in Ontario. While they defer on which prices to prioritize—the Liberals made a high-profile election pledge to slash transit fares while the Ford government recently rolled back road tolls—they all seem to agree that the price of getting around is too high. The trouble is that low prices don’t eliminate costs. We just pay for them through time, frustration, and taxes. There is no such thing as a free ride. 

There’s an old saying, popularized by science fiction author Robert Heinlein: “there ain’t no such thing as a free lunch”. While it has been in popular usage for more than a half-century, it’s a hard concept to internalize. The fundamental problem is that we often conflate prices and costs. 

It’s not that hard to enjoy a lazy day off without spending any money. You can get in your car, drive to a park, walk around, drink from a public water fountain, sit on a bench, and go home without spending a dollar (as long as you have gas in the tank). But not spending money on this trip doesn’t make it free. Money was spent building the road and parks. More money will be spent maintaining them. And by getting on the road, parking, and walking through the park, you are in a small way reducing other peoples’ ability to enjoy the roads and parks. But it’s free, so why not?

Except, it’s not free. We pay for these services through our taxes, whether we use them or not. Property taxes fund the local governments that build and maintain most roads and transit systems; gas taxes help fund infrastructure; we pay for free municipal parking indirectly by foregoing government revenue; in large urban areas, we pay for traffic congestion and transit crowding with our time. So even if there is no price, there are costs. 

Providing services free of charge and sorting it out through the tax system means that people will pay the same amount for transportation whether they use it or not. And with no price mechanism to ration the amount of time we spend on the road (and when), some people will drive more than they would if they faced an up-front cost. At the margins, this can make life worse for everyone. 

Consider, for instance, a freelance writer. This person doesn’t have a fixed schedule, so they can do their errands whenever they like. In a system where transportation isn’t guided by prices, this person is a menace. They can do errands when the roads are busy, but the stores are not. Or maybe they’ll hop on a packed streetcar to save 10 minutes of walking to get groceries. This is just one person. But there are millions of people out there with their own idiosyncratic schedules and preferences. And without strong incentives to avoid rush hour when they can, many won’t.  

Prices can help solve these coordination problems. We can use road tolls and congestion pricingCongestion Pricing: Q&A https://www.its.ucla.edu/news/for-the-press/congestion-pricing/ to dissuade people from cramming into rush hour traffic unless it’s necessary. We can have distanced-based, variable pricing for public transit to dissuade people from taking long trips at busy times unless they need to. And we can let the market set parking prices, rather than making it artificially cheap or free through public policy. 

This might not seem like an appealing vision. Especially at a time when inflation is at a multi-decade high and people are reluctantly heading back to their offices. The alternative is less appealing. The Texas Transportation Institute estimated that traffic congestion cost the American economy $190 billion through delays and wasted fuel in 2019.2021 Urban Mobility Report https://static.tti.tamu.edu/tti.tamu.edu/documents/mobility-report-2021.pdf The average commuter endured 54 hours of traffic delays that year. Even during the height of the pandemic in 2020, congestion cost the American economy $101 billion. Despite widespread COVID restrictions, commuters still lost 27 hours to traffic congestion on average that year. Closer to home, the Toronto Region Board of Trade has estimated that the cost of congestion in the Toronto region alone was $6 billion in 2013, and could hit $15 billion dollars by 2031.A Green Light To Moving The Toronto Region: Paying For Public Transportation Expansion https://www.bot.com/portals/0/unsecure/advocacy/DiscussionPaper_AGreenLight_March18_2013.pdf So while paying for transportation through user fees might seem bad, the alternative isn’t exactly utopian. 

Of course, we could just try to build our way out of traffic congestion and overcrowded public transportation, right? Unfortunately, just building more capacity is at best a partial fix. In their seminal work on traffic congestion, “The Fundamental Law of Road Congestion”, Gilles Duranton and Matthew Turner gave a blunt assessment of the notion that we can build our way out of congestion: “people drive more when the stock of roads in their city increases.”The Fundamental Law of Road Congestion: Evidence from US Cities https://www.aeaweb.org/articles?id=10.1257/aer.101.6.2616 They estimate that a one percent expansion of highway capacity leads to a one percent increase in vehicle kilometres travelled. While it is possible that we need more roads and transit lines to service particular areas, the evidence suggests that just building more capacity won’t tackle crowding and congestion. That goes for public transportation and well as highways.

This brings us to Queen’s Park. Despite the GTA’s notorious gridlock, none of the three major parties seem interested in tackling traffic congestion. To his credit, Toronto Mayor John Tory did try to expand the use of road tolls in Toronto. But that got shot down by Premier Wynne and buried by Premier Ford (who also removed existing tolls from two highways). Rather than pricing existing roads, Ford has pledged to plow forward with a new $6 billion highway that would connect Highway 401 from Milton to Highway 400 in Vaughan, allowing some drivers to bypass Toronto. It’s being billed as a tool to combat traffic congestion. But without tolls, any reprieve is likely to be temporary. 

While the PCs are focused on the price of driving, the Liberals and NDP tend to focus more on the price of public transportation. While it is seemingly easier to justify since lower-income workers often rely on public transportation, not all public transportation trips are borne of necessity. For instance, the Ontario Liberal Party’s Buck-a-Ride pitch specifically mentioned that people coming into the city from Oakville to watch a baseball game would save nearly $20. While this was sold as a benefit, it is actually a downside. There is no compelling public policy rationale for subsidizing long discretionary trips. 

If we want to help low-income commuters, we should target them directly (discounted transit passes already exist in Toronto, for instance). Broad subsidies get vacuumed up by everyone and create bad incentives. Asking commuters to pay a higher share of transportation costs would lead to more government revenue that could be used for other priorities which can include making lower-income commuters whole. It can also allow governments to reduce taxes or pay to maintain and improve roads and transit. This would be more efficient and more equitable. 

Rather than reducing the sticker price of transportation, we should be looking at ways to internalize the cost of getting around. Charge the full price and let markets sort it out. And lest the poor be left behind, we can use some of that newfound revenue to subsidize low-income people directly. There may be no such thing as a free ride, but we can choose to pay for some people’s rides rather than continuing our equal sharing of commuting misery. 

Harry Rakowski: To fight climate change, we need more long-term plans and fewer political games

Commentary

Global warming is both real and worrisome and needs dramatic action to prevent serious harm to our quality of life. Progressive increases in average temperatures are being linked to the ongoing risks of melting polar ice caps, coastal flooding, drought in agricultural lands, famine, wildfires, and political upheaval.

Mark Hyman, an alternative medicine cardiologist at the Cleveland Clinic, also recently emphasized how climate change affects our future health by increasing our risk of chronic and infectious diseases and challenges our food supply and our mental health. He is a great proponent of regenerative farming, informing us that climate change also threatens the microbiome of the soil which then threatens the important microbiome of our human gut that is essential to our health. 

While most people no longer deny the existence of global warming and the dramatic effects of climate change, there is limited consensus or political will to adequately halt the ongoing and increasing threat that it poses. 

What causes global warming?

Trapping of heat-generating greenhouse gases in the atmosphere, primarily carbon dioxide, has resulted in an increase in world temperature of about one degree Centigrade over the past century, much of it more recently. While this may not seem a lot, the projected continuing temperature increases if not unchecked, will have ever-worsening global consequences. 

Global warming has many causes, the greatest being the burning of fossil fuels. It also is caused by deforestation with a reduction in carbon dioxide trapping by trees, use of nitrogen-based fertilizers, and methane release from livestock raised for food. 

Trends in worldwide fossil fuel use

The following graphs from Our World in DataEnergy: Key Charts https://ourworldindata.org/energy-key-charts demonstrate the challenges we face in easily halting global warming. As the world becomes more industrialized with migration to urban areas, there has been a relentless increase in the need for energy consumption and food production. Fossil fuels account for over 70 percent of energy production. Below is shown the worldwide rise in fossil fuel consumption by fuel type: oil, natural gas, and coal.

Fossil fuel consumption by country

Canada, surprisingly, has one of the world’s highest per capita rates of consumption of fossil fuels, even exceeding that of the U.S. and about triple that of Europe and the U.K. However, given our relatively low population size, other countries with large populations are key to reducing overall global consumption, especially the U.S., China, and India. 

Coal is the worst fuel to burn and its use is highest in China and India. Interestingly, Australia has the highest per capita use of coal, about 15 times higher than the U.S. and eight times that of China. 

As oil prices have risen dramatically due to the war in Ukraine, the unintended consequence is a recent increase in the use of cheaper coal in countries where it is more readily available. 

Alternatives to fossil fuel use

The world will consume more energy each year as populations grow and become more affluent. There is a race to try and reduce the carbon footprint of this rise in consumption by the ever-increasing use of low carbon fuels. The graph below shows that progress is being made in reducing fossil fuel consumption and increasing the use of solar, hydro, wind, and geothermal alternatives. However, we aren’t close yet to adequately meeting real, not politically expedient, targets. 

What more can we do?

There is a belief that we can successfully reduce worldwide fossil fuel and coal consumption by carbon pricing and taxation. The recent huge increase in oil and gas prices due to constraining Russian exportation has only resulted in a small reduction in consumption and a switch to lower-cost coal causing more, not less, pollution. We need to accept that while a reduction in fossil fuel consumption is highly desirable, it will not occur as quickly as we would like. We need to accept that Canada should have pipelines and LNG terminals that allow the export of stable supplies from a democratic country.The unjust transition: Canada’s energy sacrifice is hurting the world, not helping it https://thehub.ca/2022-05-26/the-unjust-transition-canadas-energy-sacrifice-is-hurting-the-world-not-helping-it/ No one should be dependent on autocracies that want to harm democracies. 

We need to make huge investments in alternative energy sources since they require high levels of initial capital expenditure to make a significant impact. This requires partnerships with industry, government, and technology innovators to develop lower-cost solutions affordable to the developing world. 

There has been a reduction in the use of nuclear power despite large reserves of uranium. This is not surprising given the capital costs of development, high reactor maintenance costs, and the risk of accidental radiation leaks. Small modular reactors (SMRs) are a novel opportunity for a made in Canada solution for safer, less expensive, and more reliable nuclear energy for the world.“Canada’s Small Modular Reactor (SMR) Action Plan is Canada’s plan for the development, demonstration and deployment of SMRs for multiple applications at home and abroad. SMRs are a promising new technology that could unlock a range of benefits: economic, geopolitical, social, and environmental. Canada’s SMR Action Plan brings together essential enabling partners, leveraging their strengths to lock-in these benefits and lead the world on SMRs. The Action Plan is the result of a pan-Canadian effort bringing together key enablers from across Canada, which we call ‘Team Canada’ – the federal government, provinces and territories, Indigenous Peoples and communities, power utilities, industry, innovators, laboratories, academia, and civil society.” https://smractionplan.ca/ We have seen a contraction in the use of nuclear energy and yet it remains an important, available, and affordable option. 

Transportation accounts for about 20 percent of global emissions. Electric vehicles are making major inroads in the automotive market but are constrained by the availability of rare earth minerals needed for their production. We need to increase such mineral extraction outside of China and invest in chip production facilities that are essential to innovation and manufacture. 

Hydrogen-powered fuel cells show great promise but are not yet ready for major commercial use related to cost and infrastructure. They may be a key to future affordable and abundant green energy. President Biden recently announced a $10 billion investment to support hydrogen power research and infrastructure. Globally there has been $80 billion in investment in this technology. The challenge is that hydrogen fuel production needs to come from other energy sources with a colour palette of carbon production from green to brown depending on whether the energy required to make it comes from low carbon to high carbon coal sources. Currently, 95 percent of hydrogen is gray hydrogen, since it is the cheapest and comes from using steam to react with methane at high temperatures yielding hydrogen, carbon monoxide, and carbon dioxide—thus retaining a significant carbon footprint. 

Solar power is increasingly being used, especially in China and the U.S. We can’t allow China to dominate the market by the unfair subsidization of production in order to take over world supply. Current supply chain shortages have taught us about that risk. 

We need even more innovative solutions to reduce the carbon footprint of the fuels we will continue to need to use in the next few decades. Direct air capture with the removal of carbon dioxide is a viable solution for hard to de-carbonize emissions into the air from aerospace, maritime, rail, and trucking industries. The captured CO2 is bound to potassium hydroxide, trapping them in a liquid solution. It is then concentrated, purified, and can be stored underground or used to make new products such as cement or plastics. Alberta has already made a strong push to expand this technology.“Alberta has committed $1.24 billion through 2025 to two commercial-scale carbon capture and storage projects. Both projects will help reduce the CO2 emissions from the oil sands and fertilizer sectors and reduce GHG emissions by 2.76 million tonnes each year. This is equivalent to the yearly emissions of 600,000 vehicles.” https://www.alberta.ca/carbon-capture-utilization-and-storage-overview.aspx#:~:text=safe%2C%20permanent%20storage.-,Alberta%20has%20committed%20%241.24%20billion%20through%202025%20to%20two%20commercial,2.76%20million%20tonnes%20each%20year. Coal scrubbers can also be used to reduce the emissions from coal-burning smokestacks. 

We need concrete action

Currently, most countries support a reduction in emissions and the increased use of clean energy technology. Most agreed to targets are neither good enough nor free of political expediency. We can’t afford political virtue signalling that doesn’t meet real targets. While every country must do its part, the key is making clean energy both available and affordable to countries with large and growing populations that can’t afford expensive alternatives. 

In summary, we in Canada can play a major role in reducing our own carbon footprint, but more importantly in providing innovative technology that will make clean energy affordable and available from a safe and reliable supplier. 

We also have to accept that during the transition we need to support made in Canada exportation of high-quality oil and gas to safely supply world demand and constrain Russia. The world came together to oppose Russian aggression in Ukraine. We need to now come together to invest in innovation, help fund its use by those that need it most, and save our health and our planet for our children and grandchildren. It will not be easy but it is essential to the quality of the air we breathe, the food we eat, and the health we want.