Pay as You Drive

 

 

This concept seems like a winning idea.

Many of the ways to reduce greenhouse gas emissions will require major changes in behavior and/or impose serious costs. However, there is one mechanism that could lead to substantial reductions in emission with no cost: pay-as-you-drive auto insurance.

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The impact would be large. The average cost of insurance per mile driven is close to 8 cents. This means that if insurance were paid on a per mile basis, for a car that gets 20 miles to a gallon, pay-as-you-drive insurance would provide the same disincentive to drive as a $1.60 a gallon gas tax. This can easily lead to reductions in gas consumption and greenhouse gas emissions from the auto sector of 10 percent or more.

As gasoline remains comparatively inexpensive, pay-as-you-drive insurance, combined with smart ideas like car shares may begin to shift people’s driving habits. Add to that vigorous investment in transportation infrastructure and a long-needed shift in community planning toward increased densities, and we may actually be onto something.

Adding, obviously driving disincentives of any kind, including higher gas prices, risk disproportionately affecting rural and exurban residents due to a generally woeful lack of alternatives. The solution: more and better infrastructure.