The NYT had a mostly good piece on efforts to deal with global warming today. The one big item missing is any discussion of pay-by-the-mile auto insurance. The logic on this one is simple. Currently auto insurance is pretty much a fixed price, drivers pay an average of close to $1,000 a year whether they drive 100 miles or 100,000 miles (low mileage discounts alter this slightly). Obviously the risk of accident for any given driver is roughly proportionate to the amount they drive. Pay by the mile policies would have drivers pay for their insurance based on the number of miles they drive. The numbers are dramatic. The average car is driven about 10,000 miles a year, which translates into 10 cents a mile for a $1,000 a year policy. For a car that gets 20 miles a gallon, this would provide the same disincentive to drive as a $2 per gallon gas tax. Unlike a gas tax, pay-by-the-mile insurance does not raise the average cost of insurance at all. For some reason, pay-by-the-mile insurance never gets mentioned in policy debates on global warming. This is the biggest free lunch I have ever seen. It really demonstrates the incredible incompetence of the people connected with the policy debates on global warming that pay-by-the-mile insurance is not front and center on the policy agenda.
--Dean Baker
