Cap, Trade, and Taxis

(cc photo by kennymatic)

(cc photo by kennymatic)

Sarah Van Schagan at Grist asks for advice on “How should you talk to your cab driver about cap-and-trade?” Well, I’m not sure what the right answer is. But if you want to be very literal about it, ecological sustainability and the interests of cab drivers go hand in hand.

The main point has to do with car ownership. One good reason to take a cab somewhere is that you don’t own a car. Conversely, one good reason to drive somewhere is that having already bought a car you’ve incurred the bulk of the costs involved in driving anyway. So if you nudge people toward less car ownership, you’ll end up with fewer total vehicle miles traveled but more cab riding. It’s win-win. More generally, insofar as people live in denser patterns of settlements (which cap and trade certainly encourages) that’s more business for cab drivers.

At the same time, it’s crucial to say that cab regulators need to make sure to give cabbies a fair shake. In principle higher fuel costs shouldn’t actually be a problem for cab drivers. The competing mode of private vehicles face the same costs after all, and structurally higher fuel costs encourage people to divest themselves of their cars which increases demand for cabs. What’s more, cab drivers are better-positioned than owners of private cars to take advantage of fuel efficiency innovations. The problem, however, is that in most jurisdictions cab drivers are constrained from raising prices without approval from regulators. That means that higher input costs can drive your profit margin to zero with no ability for the drivers to do anything about it. If a tough cap-and-trade bill passes, or even just if oil continues on its current trajectory, cab fares will have to get higher.