Emissions Trading with Telecommuting Credits: Regulatory Background and Institutional Barriers

The 1999 National Telecommuting and Air Quality Act created pilot programs in five metropolitan areas in the United States to examine whether a particular type of economic incentive, tradable emissions credits created from telecommuting, represents a viable strategy for reducing vehicle miles traveled and improving air quality (H.R. 2094, 2000). Under the ecommute program, companies could generate emissions credits by reducing the vehicle miles traveled (VMT) of their workforce through telework programs. They would then be able to sell the credits to firms that needed the reductions to comply with air quality regulations. This paper provides some context for evaluating whether such a trading scheme represents a feasible approach to reducing mobile source emissions and promoting telecommuting and reviews the limited experience with mobile source emission trading programs. From a regulatory perspective, the most substantial drawback to such a program is its questionable environmental integrity, which is a result of difficulties in establishing sufficiently rigorous quantification protocols to measure accurately the emission reductions from telecommuting. Perhaps more importantly, such a program is not likely to be cost-effective; the emissions reductions from a single telecommuter are extremely small, meaning that any trading program will have relatively high transaction costs to environmental benefits. A comparison of estimated emission reductions from the five pilot cities with historical and projected emission credit and allowance prices indicates that the yearly revenue per participant is likely to be well under $100, substantially below what firms participating in the program said would be an adequate incentive to induce a substantial increase in telecommuting. This discussion paper is the final paper in a series of four on telecommuting published in by RFF in December 2004. In discussion paper 04-42, Walls and Nelson analyze data from five pilot cities enrolled in the “ecommute” program. In 04-43 Safirova and Walls examine the 2002 Telework survey conducted in California and, in 04-44, these authors review the empirical literature on telecommuting with a focus on trip reduction impacts. The studies by RFF are part of a larger report on the ecommute program completed by the Global Environment and Technology Foundation (GETF) for the U.S. Environmental Protection Agency. More information about the overall project can be found on the ecommute/GETF website: http://www.ecommute.net/program/.