Fuel cost and road damage: evidence from weigh-in-motion data Linda R. Cohen, Kevin D. Roth Department of Economics, UC Irvine Presented at the UCCS Forum, Sacramento, CA. March 28, 2017

Overview Investigate the relationship between the price of diesel price and heavy truck activities. When the price of diesel increases: The number of trucks on the road declines The average truck cargo size increases Diesel consumption declines The increase in heavier trucks causes an increase in road wear (Equivalent Standard Axle Loads, or ESALs, increase) Using individual truck data and quasi-experimental methodology, we obtain better/first estimates of changes with fuel prices in fuel consumption, Vehicle-miles-traveled, Vehicle-ton-miles-traveled, and ESALs. Draw implications for tax policy, emission policies, highway finance

Fuel Price and Dispatch Choices Average Cost Total - Low fuel price Total - High fuel price Inventory Transportation - High fuel price Transportation - Low fuel price 3 6 Shipment size Average Inventory Average Inventory

Road Damage Road damage increases non-linearly in truck weight; it is proportional to Equivalent Standard Axle Loads (ESALs) ESALs= 𝑎𝑙𝑙 𝑎𝑥𝑙𝑒𝑠 𝑤𝑒𝑖𝑔ℎ𝑡 𝑜𝑛 𝑎𝑥𝑙𝑒 18,000 4 Car: 0.0001 ESALs Fully loaded freight truck: 3.1 ESALs Shifting distribution to heavier trucks means more road damage Tradeoff between fuel consumption and road damage Weight distribution of 5-axle trucks in Ca.

Data Weigh-in-motion (WIM) detectors record weight, axles, axle spacing, time/place, speed. Calculate ESALs per truck. 2011 – 2015: over a billion observations Use 5-axle trucks only; calculate daily average of weight, ESALs, count. Average diesel fuel price data for state.

Methodological Strategy Estimation concern: a relationship between diesel price and truck weight, traffic and ESALs may be due to other factors: Spurious correlation: a stronger world economy increases both the world oil price (and local diesel price) and world demand for goods and services (and local demand for truck services). Reverse causation: increase in local demand for cargo raises the local price of diesel. Instrumental variables solution: consider only cases of price variation that are identified with a factor (“instrument”) unrelated to demand for cargo. Our instrument: unusual winter weather in the Northeast, where diesel is used for home heating as well as transportation. The difference in diesel prices between New York and California vary systematically with temperature in New York. That difference is correlated with changes in the weight, number, and ESALs of trucks in California relative to New York.

& & Results 2.7% decrease in diesel use 10% increase of diesel price (diesel tax) 18% increase in road damage 6.6% decrease in truck VMT 3.3% increase in per truck weight &

Unintended consequence of diesel tax Revenue: $211 million ~9% of revenue is eroded $19 million in road damage Road damage > Carbon benefits 10¢ increase CO2 $4.9 million in carbon emissions reduction ($36 a tonne) Weight adjustment generates large, unintended consequences of Revenue generation Carbon policy Congestion and accidents reduced but ~$11 billion (rural driving)

Solution Axle-weight-mile tax Charge a tax equal to road damage ESAL-miles If road damage increase by $19 million, the tax will collect $19 million. Distinguishing features: Most “axle taxes” charge more for each axle, not less Axle-weight registration fees do not increase in miles Axle-weight registration fees are locked in for year Administrative concerns: Mileage same information is as already recorded for many trucks as part of IFTA and IRP registration fees. With GPS can even be micro-targeted by road (bridge vs general roads) Weigh stations and inspection already used broadly

Conclusions Trucks are not cars Large costs of road damage from heavy trucks that could be improved. Axle-weight-mile tax Failure to charge this tax constrains revenue generation and environmental policy Diesel tax Poor substitute for an axle-weight-mile tax Heavier trucks use less fuel per ton-mile Incentive to up-weight heavy trucks Accelerated infrastructure costs