The article "Not-So-Free Ride", from the New York Times' magazine highlights an interesting issue related to highway transportation. The article discusses the cheap price we pay for driving and the fact that we are not aware of many of the impacts we incur by using our automobile in part because we don't have to pay for the damage. If we were required to foot the bill for all of these expenses, the author argues, we may be inclined to cut back on our excessive driving.
So what's the solution? People that drive more, pollute more have more of a chance of being in an accident and over all incur a greater cost on society. One way to charge drivers is a tax on fuel, but with the current political tension over high gas prices, this is not an option. Another option, congestion taxing (charging people a fee to drive in congested areas), was recently rejected in New York City. A more viable option, according to the author, is Pay as You Drive (PAYD) insurance. The current insurance system, which offers a flat rate in terms of miles driven, means that low mileage drivers subsidize high mileage drivers. Though the idea of PAYD insurance has existed for quite some time, the technology to monitor people's driving had not been developed until recently and insurance agencies have not been daring enough to try this system. Recently, though, Progressive started an optional insurance program based on the PAYD system.
Personally I think this is a great idea to get drivers to pay for the negative externalities resulting from their actions. But if insurance agencies are getting the revenues from the PAYD system, how is that money reinvested to pay for the negative externalities of driving? I don't think the insurance companies will donate part of their profits to environmental cleanup or research. I think the PAYD system is a good start to raise awareness of the true cost of driving and perhaps even encourage people to drive less, but a better system is needed for the money to actually pay for the effects of driving.