Sampo’s Blog: Helicopter Money to Transform Mobility
By Sampo Hietanen, CEO and Founder of MaaS Global
When the world shuts down, one of the first things to vanish is traffic. When the world reboots, one of the first things we must get going is mobility. Despite all the telecommuting and conferencing available, economies will stay half paralysed until we get people moving again.
As governments and central banks are executing and planning stimulus packages of unforeseen magnitude, what would be a constructive way to approach transportation? Should we erect bridges, build highways, lay railroad tracks? That is the traditional Keynesian approach: create public works to ease unemployment and boost economy while building for the future. When timed right, these measures help to flatten the cyclical nature of national economies.
But COVID-19 is not a downward business cycle. It is a vicious disease that kills people and economies and shuts down our way of life. In many cases both supply and demand have fallen into an abyss: you can’t fly but you don’t want to either, you can’t hold a conference or go to a concert or a football match but you would not dare do that anyway. And even if there’s extra credit available for businesses and consumers, many are afraid of bankruptcy, unemployment or falling ill and don’t spend.
In extraordinary times extraordinary measures are discussed. Helicopter money, simply giving folks extra cash to spend, has been frequently mentioned as an economic equivalent of an adrenaline injection to a motionless body. The original idea is that folks can spend the free money as they wish. But when jumpstarting economy we should not feed the other, even bigger crisis, the climate catastrophe.
Could we combine helicopter money with investing for the future? What if, instead of building roads and airports, we’d give the money directly to the customers to use for their favorite means of transportation? Instead of boosting supply, which tends to be more of what we already have, we’d boost demand, hoping it would reflect what we need.
If we throw wads of cash at people to spend on any transportation, many may end up buying cars and increasingly jamming the roads. But what if we manipulate their choices by making environmentally sound spending more lucrative that any other? If you bike lot, you get a lot. If you drive solo in a Hummer, you don’t.
Would consumer driven change, instead of centrally planned, lead to deteriorating infrastructure then? Where there is very little demand, probably yes, but where there is demand, probably no. Look at what has happened in telecom business in many countries where freedom to compete has been accompanied with national and international standardization and legislation. The investment has been skyrocketing and the infrastructure improving while the businesses have stayed profitable and consumer prices reasonable.
Transportation is not telecommunication, but we can learn from it. So, what would climate friendly helicopter money for mobility look like in practice?
The first step would be to give every citizen a voucher, worth let’s say a hundred euros, to use for transportation services: public transportation, micromobility, MaaS, taxies – whatever, but anything that moves the society away from current car-centric single-user reality. This model would already have an incentive to use your money wisely: a bus would get you much more mileage than a limo. (Actually something like this is already being tested in France, where the government just launched a “Sustainable mobility package” as a part of releasing the country out of confinement. The package encourages employers to kick in for their employees’ commuting expenses for up to 400 euros, as long as it’s done sustainably. The subsidized transport options include cycling, carpooling and carsharing (of low-emission cars), free-floating vehicles and public transportation tickets.)
The next step would be to give everyone a carbon emission permit worth a hundred euros. Your mobility app would have to be tweaked to count the cost of travel in carbon dioxide equivalents instead of euros, and then you’d get to travel as far as your emission permit takes you. In a low emission vehicle like a tram or an electric car (using renewable energy), you would get far, in a gas-guzzler not very far.
This would be – or should I say will be, since to me it is only a matter of time – a massive positive game changer in transport. It would finally move us towards what the world needs more than anything to get smart about slowing climate change: emission-based accounting.
As European Union moves ahead with Green Deal and the proposal for a legally binding European Climate Law, The Commission will review and if needed revise, by June 2021, all policy instruments to achieve the necessary emission reductions. My bet is that emission-based accounting and taxation will be at the center of that table.
Once this alternative way of accounting cost of travel is established and has become how we perceive and pay for transport we can finally start making sound choices regarding traffic systems. Currently we are still partially optimizing for rail transport, or for private cars, or ride-hailing but fail to see the whole. But when the true environmental cost of different modalities becomes transparent and comparable, everything changes. The technology to do this is with us already. Do we use this disruptive moment of a lifetime to make it a reality, is the big question. I cannot see it happening through traditional public works programs, but I can see it happening through a demand-driven change that is both stimulated and regulated by smart governments.
The end game is much bigger than transportation. Real-time emission-based accounting and taxation is the tool that will finally put us on the right track regarding climate change. Once this is in place, you are not taxed for a car that sits in a garage, not for the size of your house, not for prize of you meal, but for the emissions your lifestyle creates. And when people need support, society can do it through an instrument that has a built-in incentive to act responsibly.
These are my ideas on how not to let this crisis go to waste in the world of transportation. What would be yours? Let’s continue this discussion on LinkedIn and Twitter.