The Green Dividend

In contrast to the usual arguments that high speed rail will cost this state billions and provide nothing in return, this blog has consistently argued that high speed rail is a smart investment that will save Californians money over the more costly alternatives, and will provide us with new economic opportunities and savings.

Thanks to a link at The Overhead Wire we now have some evidence to suggest the economic benefits of sustainable transportation. It's being called the Green Dividend and is based on the successful example of Portland, Oregon, where sustainable and green transportation policies have saved residents $2.6 billion. The ripple effect throughout the local economy has made Portland one of America's leading cities, and provides a model that California would do well to emulate.

From the short paper by Joe Cortright:

Portland, OR, has acquired a reputation as the nation’s greenest city. For many, this green streak is viewed as a sort of environmental hair-shirt. Portlanders deprive themselves of prosperity in the name of saving the environment. Skeptics view biking, transit, density and urban growth boundaries as a kind of virtuous self-denial, well meaning, but silly and uneconomic. Critics see the seeds of economic ruin. They claim planning, policies and regulations that restrict use or access to resources impede growth and lower household income.

Similar claims are frequently made about high speed rail - that we'll be pouring some $40 billion down a hole and get nothing in return for it, a "train to nowhere" in the minds of some. But that thinking is as flawed for CA HSR as it is for Portland.

Cortright's argument is that since Portlanders have a shorter commute than the US average - 4 miles less - that translates into actual money saved, money that isn't spent on commuting and that can be respent throughout the economy:

Four miles per day may not seem like much, but do the math. The Portland metro area has roughly 2 million residents. If Portlanders traveled as much as the typical U.S. metro resident, that would produce 8 million more vehicle miles per day or about 2.9 billion more miles per year. A conservative estimate of the cost ofAll told, the out-of-pocket savings work out to $1.1 billion dollars per year. This works out to about 1.5 percent of all personal income earned in the region in 2005.

This is a good minimum estimate of the aggregate economic benefits—the green dividend—that Portland area residents enjoy as a result of land use planning and related environmental policies. But the benefits don’t stop there. Since Portlanders don’t spend that money on transportation, they have more money to spend on other things. Because so much of what is spent on transportation immediately leaves the state — Oregon makes neither cars nor gasoline — money not spent on transportation gets spent on sectors of the economy that have a much larger local multiplier effect. (Think locally-brewed beer.) According to IRS data, about 73 percent of the retail price of gas (back when it was under $2 a gallon, by the way) and 86 percent of the retail price of cars is the “cost of goods sold,” which immediately leaves the local economy. The $1.1 billion Portlanders don’t spend on car travel translates into $800 million that is not leaving the local region. Because this money gets re-spent in other sectors of the economy, it stimulates local businesses rather than rewarding Exxon or Toyota.

The economic value of the time saved is $1.5 billion, which is where Cortright gets his $2.6 billion figure. Portland is not a physically large place - about 2 million people live in the metro area - so one would figure that the economic benefit to Californians of similar miles driven savings would be much larger.

This is one of the core arguments for high speed rail - it will save Californians money. As fuel prices increase the cost of airfare and driving increases a well. Without a high speed rail alternative all that money gets taken out of the California economy - we only have one auto manufacturing plant, in Fremont, and even though Chevron is headquartered in San Ramon their massive profits are spread around global investors. If high oil prices were a boon to the California economy we'd certainly be seeing the effects right now. That we're instead sliding into recession should suggest the true costs of oil dependence.

"Green Dividend" could be put another way - "economic stimulus." Unlike a one-off check from the US Treasury, or offshore drilling that will produce no savings and no income (and even no gas) for Californians, high speed rail will help stimulate our economy by freeing up billions of dollars that are currently being wasted on commuting for other things - to sustain small businesses, afford housing or health care, start a new business, innovate something new.

Those who oppose Prop 1A have NO answer to this argument. They're going to leave billions of dollars in annual savings and economic stimulus on the table. And for what? To continue the failed and economically ruinous policies of the 20th century? Some argue that we're better off relying on alternatively fueled cars. But to sustain that demand we'd need at least $80 billion in freeway and roads improvements, the R&D costs and price to the consumer of those vehicles will not be cheap, and who knows how long it will take to develop these promising technologies.

Whereas HSR is off-the-shelf technology - it is ready to go right now. We don't need a long and unpredictable R&D schedule. We don't need to spend $80 billion on new freeway lanes - we can spend (as a state) an eighth of that on Prop 1A.

High speed rail's green dividend is substantial, and represents an opportunity to secure California's economic future that cannot be missed.