Monday, July 16, 2007

Green Dividend

There was an interesting paper about Portland done by Joe Cortright. The basic thesis of the paper was the Green Dividend that was created by Portlander's who drove less due to their land use and transportation patterns. It's basically the savings that comes from not having to pay for gasoline or cars, the money for which mostly goes to the multi-national corperations. That money gets put back into the local economy. They found that the VMT reductions were 4 miles per day.

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 of driving is about 40 cents per mile. (At $3 a gallon, 15 cents of this is just the cost of fuel, figured at a fleet average of 20 miles per gallon, which is a generous number for city driving.) All 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.
Interesting. I wonder how many more cities are going to pick up on this.

No comments: