Rhode Island would be first state to impose carbon tax; trucking industry braces for higher costs

Carbon TaxA bill currently under consideration by the Rhode Island legislature would make the Ocean State the first to impose a “carbon tax” on fossil fuel production. This is important news for the trucking industry because if enacted as written it means gasoline and diesel fuel producers will be hit with a new tax which will be passed along one way or another to long haulers.

Meant to accelerate the state’s transition from oil, gasoline, and natural gas to local renewable energy like solar and wind power, it would do so by taxing, among other products, gasoline and diesel fuel. The bill, known as the Clean Energy Investment and Carbon Pricing Act of 2017, imposes a $15 tax on each ton of carbon dioxide or other greenhouse gasses emitted from the burning of a fossil fuel.  Gas and diesel retailers would either have the fee paid by their distributors or collect it at the pump.

Either way, that cost will be coming out of truckers’ pockets.

Meant to be proactive against the effects of climate change, the bill’s intent is to “Create a clean energy and jobs fund to foster innovative practices, which will strengthen Rhode Island’s position in advancing efficient use of energy, make Rhode Island a nationally recognized leader in energy efficiency, stimulate job creation, and enhance innovation-based economic growth.”

These are lofty goals. State Senator Jeanine Calkin of Warwick, sponsor of the bill, called it “our generation’s moonshot and we need to take steps to do it right now.”

Providence Rep. Aaron Regunberg, sponsor of the bill in the state house, added, “The need for this legislation has never been more critical.”

Will it pass? That’s hard to say, but the tendency of politicians to draft legislation that chips away the trucking industry’s bottom line isn’t going away anytime soon.

The Rhode Island carbon tax is just one of many trucking and transportation related issues that we follow closely here at Sinclair Risk. We couldn’t do our job if we didn’t! We pride ourselves on our deep industry knowledge and our proven track record of helping clients mitigate risk and keep their losses low.

Sinclair’s proprietary Risk Safeguard Advantage is a financial risk management system designed to dramatically reduce organizational exposures and premium costs while consistently improving productivity and morale. Elements included for our trucking clients include a driver incentive program, driver qualifications review program, defensive driver training, and expert help on responding to OSHA citations.

Interested in learning more? Check out my recent white paper, “How to avoid getting run over by a massive fleet insurance price increase.”

Jonathan Belek
Risk Management Consultant
jbelek@srfm.com

Jon Belek

Disruption Ahead: The Brave New World of Self-Driving Cars

the self-driving car is comingLike it or not, self-driving cars are coming.  A rapid increase in the use of “autonomous automobiles,” as industry savants prefer to call them, is seen by many as a foregone conclusion.  Following the early lead of Google, which has been developing the concept for over six years, virtually every carmaker in the U.S. market is working on some version of this new technology.  Some, like Tesla and Cadillac, are already introducing aspects of these systems into their cars.  The ultimate mass-market endorsement, though, was surely the recent Time Magazine cover story that devoted a whopping nine pages to the subject, mostly extolling the upsides of this “next big thing” and the vastly transformative affect it will have on our lives.

Within the US insurance industry, however, everything about the coming of the self-driving car is not so rosy.  While much about the future of these cars is open to vigorous debate — for the simple reason that their full impact on the daily lives of American drivers is unknowable at this point — many in the insurance industry see these new cars as a potential source of disruption.  And not in the happy, trendy way tech entrepreneurs like to throw that term around.  The capacity for autonomous driving to reduce traffic accidents and especially fatalities, and all of the personal, legal and emotional costs that come with them, will likely undermine much of what is currently considered accepted fact in the automobile insurance business, and not just a little.

The most dire outlook so far was laid out last year in a report by the influential accounting firm KPMG, which predicted that a steep decline in automobile accidents over the next decade would be followed by a corresponding drop in accident claims and insurance premiums.  Within 25 years, the report predicts, these declines could reduce the volume of the entire insurance industry to “40 percent of its current size.”  According to the Insurance Information Institute, research shows that even in its earliest stages, the bits of driverless technology and related safety features already introduced into American cars have begun to reduce the number of fatalities between 2008 and 2011 by as much as a third.  This trend will pick up more speed as more pieces of these systems are added will have an ever greater influence on the economics of the industry.

 Other predictions about the timing and extent of these changes vary greatly.  The most optimistic estimates for the complete adaptation of the autonomous automobile pinpoint the year 2030 as the date by which all American cars will have this technology.  Other sources see too many potential roadblocks still lying ahead for there to be complete market penetration by anything close to that date.  Most estimates see a gradual introduction of features over the next two to three decades with a proportional decline in the role of the driver as the technology is refined and the public, as well as federal and local governments become more comfortable with it.  By some accounts, the complete integration of this technology could take another 30 to 40 years, if not longer.

In addition to the fundamental economic impact of driverless cars on the insurance industry, there is also a thicket of legal and political issues about liability and culpability that has to be cleared over the next several years, a task made all the more difficult because many of those issues need to be worked out on a state-by-state basis.  If the past is any indication, the big question about who is responsible in a collision involving an autonomous car: the owner, the car manufacturer or the developer of the technology — and their respective underwriters will be pounded out one small increment at a time.  So hang on for a very bumpy ride, which is the one aspect of this automotive innovation that is not likely to be fixed by technology.

Jonathan Belek
Risk Management Consultant
jbelek@srfm.com

Jonathan-Belek