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Washington's Carrots And Sticks No Match For Global Warming Challenge

For the first time in 12 years, the Democrats are in charge of Congress. That ought to mean there is a long wish list somewhere regarding domestic policy issues, including issues associated with planning and development.

So far, we haven't seen much publicity on domestic policy the Democrats, as more than a few media outlets have observed, are more interested in investigation than legislation. But as the congressional session unfolds, it won't be long before the new majority begins to focus on the two major federal policy levers that affect land use the Big Carrot of transportation funding and the Big Stick of environmental regulation. In each case, a crisis appears to be forcing Congress's hand.

In the case of transportation, the federal Highway Trust Fund is going broke. In the case of the environment, there's tremendous political pressure on Congress to pass a bill that would reduce greenhouse gas emissions. In dealing with both the Big Carrot and the Big Stick, Congress is going to have to go after one of the most fundamental factors shaping land use in America: cars.

No one in the nation's capital directly controls the way land is used or the way local development patterns unfold. Traditionally, however, the feds have indirectly influenced planning though transportation and environmental policy. On the transportation side, federal gas tax revenues have provided huge amounts of money for both highway and transit projects. On the environmental side, tough laws such as the Endangered Species Act and the wetlands permitting provisions under the Clean Water Act have affected land use patterns by forcing developers to steer clear of sensitive areas.

Curiously enough, hardly anything in the federal government's policy approach toward these two issues changed while Democrats were out of power. Federal transportation policy shifted significantly in 1991, when the Intermodel Surface Transportation Efficiency Act (ISTEA) was passed by a Democratic Congress and signed by the first President Bush, who desperately needed a "jobs bill." ISTEA placed more emphasis on flexible funding, transit, and environmental enhancements a pattern that remains today.

Similarly, current practices in environmental policy, especially the Endangered Species Act (ESA), were set in the late '80s and early '90s, during the administrations of Bush 41 and Clinton. Not a single word of the ESA changed during the 12 years Republicans controlled the House not even during the four years Republicans held both houses of Congress and the White House. Obviously, administrative practices have changed since the current President Bush took office in 2001, weakening the law, at least according to environmentalists. But the basic approach to endangered species protection especially the focus on habitat conservation plans, which has shaped the landscape in Southern California, the Inland Empire, and the Central Valley has not changed.

What has changed, however, is the context. Over the last 12 years, gasoline has doubled in price and the issue of global warming has gained tremendous traction, both inside the Beltway and on the street. Even most skeptics now believe global warming is really occurring as a result of human activity, though many politicians disagree about how severe the effects will be and what should be done.

As a result, the internal-combustion engine is under attack as never before. This has affected the political landscape for both the Big Carrot and the Big Stick, and it is likely to frame new policies in both arenas.

There is no doubt that Democrats in Congress will push a bill to reduce greenhouse gas emissions. The only question is when. Some say the push will come quickly, while others suggest that the Dems may deliberately wait until next year in order to put political pressure on the Republicans during the presidential campaign.

In any event, a federal law on greenhouse gases like California's AB 32 (see CP&DR Insight, February 2007) will almost certainly be constructed as, essentially, an air quality bill. It may even be an amendment to the Clean Air Act. The basic problem, after all, is the emission of pollutants into the air. As with other air pollution problems, some greenhouse gases are from stationary sources like smokestacks and some are from vehicles. Two-thirds of greenhouse gas emissions come either from burning fossil fuels to generate electricity or from burning fossil fuels to move vehicles.

So, other than cars, the major target for a greenhouse gas bill is the electric utilities. And the utilities, somewhat surprisingly, are in favor of a federal greenhouse gas bill. That's largely because many states are moving forward with their own bills, and the utilities would rather have one national regulatory system. This in itself has implications. If the utilities promote a bill in Congress, they likely will try to shift most of the emissions reductions onto vehicles.

And that has potential implications for land use. A lot of greenhouse gas reduction can emerge from use of higher-mileage vehicles such as hybrids and cleaner-burning internal-combustion engines. But nobody thinks that you can reduce emissions sufficiently just by turning over the fleet and employing new technology. You're also going to have to reduce driving overall. The California plan assumes 12% of emission reductions will come from land use changes.

How does the federal government encourage people to drive less? Probably not with the Big Stick. Most people cringe at the thought of the feds extending their regulatory reach into this area. That leaves the Big Carrot the idea of using transportation money to provide incentives to state and local governments to change their land use policies. Unfortunately, however, the Big Carrot is getting smaller every year partly as a result of environmental consciousness on the part of drivers and consumers.

The feds get transportation money from the federal excise tax on gasoline, which is a flat 18.3 cents per gallon a figure that does not change no matter what the price of gas is. (There's tax on other fuels as well 24.3 cents on diesel fuel, for example, and much less on natural gas.) These taxes currently generate close to $40 billion a year, of which more than 80% goes to the Highway Trust Fund.

But growth in gas tax revenue is slowing. Growth in vehicle miles traveled overall is declining, and consumers are now buying more fuel-efficient vehicles, including hybrids. Highway Trust Fund revenues are expected to rise only 10% to 15% from 2006 to 2011 from about $34 billion to between $37 billion and $39 billion. There is no reason to believe the revenue situation will get better.

But the federal government is now spending more money from the Highway Trust Fund than it takes in, somewhere right around $40 billion a year. This is plausible for the moment because the trust fund has a surplus. But soon the trust fund will fall into deficit, possibly as early as next year, as the result of huge federal appropriations including well-publicized "earmarks" for specific projects requested by Members of Congress over the past few years.

In other words, The Big Carrot has been eaten.

So, if the feds truly want to reduce greenhouse gas emissions, they'll have to tackle land use. It's politically impossible to tackle land use with the Big Stick. So the feds will have to use the Big Carrot. Except there's no money in the Big Carrot unless the feds increase fuel taxes, but even a fuel tax hike will probably only cover the deficit.

It's a political box. In the short run, planning and development in California may well be affected more deeply by AB 32 than any federal law. But in the long run, the feds will have to make some tough decisions about how to use the Big Carrot and the Big Stick to deal with global warming.

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