How much can vehicle travel be reduced through land-use policies in California?: An application of a Modified Two Part Model with Instrumental Variables *

Abstract The California Global Warming Solutions Act of 2006 requires year 2020 greenhouse gas (GHG) emissions in the state to be reduced back to 1990 levels. The recently approved Proposed Scoping Plan expects emissions reductions through land-use policies based on a 4% decrease in car travel demand by 2020. It is not clear, however, how large the increase in residential density must be in order to achieve such reductions. Furthermore, results from different strands of the literature are not yet conclusive about the magnitude of the impact of land-use variables on the amount of car travel and thus on GHG. This study aims to contribute to the ongoing debate by implementing a modified two-part model (M2PM) with instrumental variables (IV), a procedure that respectively takes into account the large mass of observations with zero car travel, and the possibility of residential self-selection, both of which could otherwise bias the estimates. The analysis takes advantage of a large dataset on travel patterns and socio-economic characteristics of more than 7,000 households across the 58 counties in the state of California. The study calculates the impacts of residential density and jobs/housing balance on vehicle miles traveled (VMT), and includes measures for the supply of public transportation in one set of the estimations. Results derived from our dataset and model specifications show that VMT elasticities * This working paper is part of the author's dissertation research. Please do not cite without permission. The study has benefited from comments from Colin Cameron, Deb Niemeier, Colin Vance, and Jim Wilen. All remaining errors and omissions are solely the responsibility of the author. 1 with respect to residential density are considerably larger for the instrumented M2PM specifications than those from ordinary least squares, linear IV, or non-instrumented M2PM, revealing potential bias from estimations based on the latter approaches. Although our elasticities are larger than others found in the recent econometric literature, the impact of residential density on VMT would not be as large as previously suggested from other recent agency reports unless very large increases in residential density take place. On the other hand, recent estimates of the elasticity of VMT with respect to the price of gasoline imply that moderate increases in the price of gasoline would suffice to reduce travel by the required 4%. The comparisons suggest that although pricing measures and land-use policies should not necessarily be seen as mutually exclusive options, the former might be more effective in reducing the externalities derived from automobile use