by Simon Altman

Elon Musk recently announced that Tesla will have a fully autonomous car ready by 2020, and Tesla is not alone. As this technology moves from dream to reality, some have started to discuss the opportunities it will present, while others are stuck dwelling on the risks. In this blog we explore these potential downsides, and discuss how to deal with them. We find that driverless cars are not the problem. But ecofiscal policies just might be the solution.

A new, magical world?

The idea of a car being able to drive itself is exciting. That’s certainly how “Hopeful Hank” sees it.  He imagines how productive time spent in the car could become, or the space we could reclaim for parks and bike paths because of narrower lanes, cars driving closer together, and the eradication of downtown parking lots and spaces. He pictures how many accidents and health care costs autonomous cars could reduce, or how much denser our cities could be if consumers switch from owning a car to using ride-share programs (which they’d be encouraged to do if these programs became cheaper when driverless). And even the nightmare of morning and afternoon rush hour could be a little less terrifying if self-driving cars reduce congestion, as some suggest they will.

Mo’ tech, mo’ problems

However, for every opportunity Hopeful Hank dreams up, “Fearful Fred” can think of a risk. He’s especially worried that they’ll increase congestion, sprawl, GHG emissions, and air pollution. And he’s right to worry: congestion leads to wasteful fuel consumption, pollution, road rage, time lost to traffic and slowed emergency vehicles; urban sprawl costs money, increases traffic, causes health and environmental issues, and can negatively impacts social lives; and don’t get us started on the environmental, health and economic impacts of GHG emissions and air pollution.

Not only is Fearful Fred justified in worrying about these problems, he’s also right to think that self-driving cars could make them worse. The arguments go like this:

• Congestion: Autonomous cars could increase car commuting if those commutes are made easier and urban sprawl increases (see below). They could also increase the demand for cars if reliance on ride sharing grows and displaces public transit. The net effect could be more congestion problems, not fewer.
• Sprawl: If commuting gets easier (both because time spent in the car could be made productive, and because you wouldn’t have to look for a parking spot upon arrival), more people might want to live further away. Easier commutes could lead to more urban sprawl.
• Emissions: As described in the two points above, driverless cars could increase road congestion, and the amount of urban sprawl. Any (or both) of these factors could lead to an overall increase in GHG emissions and air pollution from cars.

These worries are real, but it’s important to note that there are also counter-arguments to them: it’s also possible that self-driving cars could in fact lead to reduced congestion, sprawl and emissions.

Asking the wrong questions

Regardless of how self-driving cars end up influencing behaviour, problems of congestion, sprawl and emissions will probably be with us for some time. So instead of worrying about what effect self-driving cars might have on them, we should tackle these problems head-on. The good news is that there are smart ecofiscal policies for dealing with each of them.

Ecofiscal policies are the answer

There’s a set of good ecofiscal policies that would help us avoid the pitfalls that driverless cars might represent. And the bonus is that they’re smart policy no matter what happens with driverless cars. They simply involve pricing the externalities that Fearful Fred was so concerned about:

• Congestion: As the Ecofiscal Commission has shown, evidence and policy experience suggests that congestion pricing works, particularly as part of a broader policy package. When designed well, it leads to reduced traffic congestion and creates net economic benefits, both for the economy as a whole and for individual drivers.
• Sprawl: There are a number of Ecofiscal policies available to reduce sprawl. For example, a jurisdiction can reform development charges to accurately reflect the full cost of building public infrastructure in undeveloped areas. Several jurisdictions have also tried a cap-and-trade like program called the Transfer Development Credit (TDC). Both are ecofiscal policies that encourage dense development and discourage sprawl.
• Emissions: The best policy to deal with the GHG emissions emitted by vehicle transport, as we discussed in the Way Forward, is carbon pricing. It provides emitters with the flexibility to identify least-cost ways to reduce emissions, drives innovation, and generates revenue that governments can use to drive additional environmental or economic benefits. For air pollution, some countries tax cars with larger emissions, particularly those that use diesel.

Turn that frown upside down

We shouldn’t fear driverless cars; however, we should be concerned about the negative externalities that they might or might not encourage. But for every one of these—congestion, sprawl and emissions—there are smart ecofiscal policies available.

Fearful Fred needs to shift his focus. By focusing on ecofiscal solutions, he might even be able to join Hopeful Hank in dreaming about the exciting opportunities that driverless cars could bring.