If you live in an urban area, you may have started seeing cars on the road with a striking accessory – a hot pink fuzzy mustache attached to the front grille. Maybe you’ve seen cars with bright orange “mirror socks.” Or perhaps you’ve noticed an increase in large black SUVs and town cars circling around hotels and tourist attractions. These cars are part of the growing number of online-enabled transportation providers. After downloading the company app to their smartphone, customers can use the app to “e-hail” the vehicles, pay for the trip and even rate the driver. Some services, such as Uber, use town cars and SUVs, among other vehicles. Others such as Lyft (of pink mustache fame), Sidecar and UberX connect individual private drivers with people who are looking for a ride.
Last month, the California Public Utilities Commission (CPUC) adopted rules to regulate online-enabled transportation services such as UberX, Lyft and Sidecar, creating a new category of “transportation network companies” (TNCs). Companies providing these services claim that they use personal vehicles to provide their services. The CPUC tentatively concluded that Uber, which does not involve use of personal vehicles, fell within the existing category of for-hire passenger carriers (limousines, airport shuttles, charter and scheduled bus operators), but deferred a definitive ruling on Uber’s status.
The CPUC’s ruling made California the first state in the US to legalize these new services, which have faced legal and regulatory obstacles across the country. During the California proceeding, and in other proceedings across the country, proponents of TNCs touted their “green” credentials by claiming that the services reduce the negative environmental impacts of driving by matching people with common interests and common destinations.
If TNCs truly reduce traffic, it might be possible that we could see a drop in the amount of automobile emissions. The CPUC’s September 19, 2013 decision, however, casts doubt on this scenario. The CPUC concluded, “In our review of the filings and supporting documents, there is no evidence that TNC drivers have a common work-related or incidental purpose with their passengers. Instead, drivers transport passengers entirely at the convenience of the passenger.” That means drivers can, for instance, cruise metropolitan areas to pick up passengers as soon as the passengers hail them online.
Critics of app-based transportation services argue that what we are actually seeing is a de facto deregulation of the taxi industry. While California regulators may consider Uber’s SUVs and town cars to be like limousines, customers are using them like taxis. Similarly, there appears to be little evidence to support TNCs’ ride sharing claims, making them operate much more like taxis than a casual carpool.
Over the last half-century, multiple US cities experimented with taxicab deregulation. Unfortunately, in most instances this resulted in an oversupply of cabs, leading to a deterioration of vehicle and driver quality, and most cities that were deregulated at one time or another abandoned deregulation. The entry barriers and start-up costs for app-based transportation services are significantly lower than for traditional taxi services. Will the influx of app-based service lead to a glut of cars on the road providing transportation for hire? Does that result align with desired goals to reduce transportation emissions?
This is a significant concern because of the difference in the types of cars used for taxis and those being used for app-based transportation services. Across the country, more and more taxi fleets are converting to “clean” vehicles (hybrids or compressed natural gas vehicles). This movement began in San Francisco, which passed the Clean Air Taxi Act in 2008. The purpose of the legislation was to reduce greenhouse gas emissions in the San Francisco taxi fleet by twenty percent from 1990 levels by 2012. By 2012, San Francisco’s taxis had far exceeded this goal, reducing the average per-vehicle greenhouse gas emissions by forty-nine percent, all while nearly doubling the size of the city’s taxicab fleet. In July 2013, the San Francisco Municipal Transportation announced that ninety-seven percent of San Francisco’s taxis are “clean” vehicles, up from approximately fifteen percent in 2008. (Full conversion to “clean” vehicles is difficult due to the lack of alternative fuel wheelchair accessible vans.)
In addition to their environmental benefits, the shift to alternative fuel taxis has also been a hit with drivers, who appreciate the fuel savings and quieter ride. There are also times when hybrids are more in demand, such as after Hurricane Sandy, when taxi drivers were desperately trying to get a hold of hybrids to avoid the long lines caused by gas shortages in the Northeast. Other cities have followed San Francisco’s lead, either through regulation, government incentives or market forces. New York, Los Angeles and Chicago have also seen a significant increase in the percentage of alternative fuel vehicles in their taxicab fleets. Indeed, if you have gotten into a taxi in any urban area in the US lately, there is good chance that it was an alternative fuel vehicle.
Although exact figures on the percentage of hybrid vehicles in the app-based transportation fleets are unavailable, there is little doubt that that it is nowhere close to San Francisco’s ninety-seven percent. While Uber recently debuted its hybrid-based UberX service, it does not appear to have achieved the popularity of its more traditional town cars and SUVs. And current regulations do not require TNCs to use alternative fuel vehicles.
Where you once saw taxis circling luxury hotels in major cities, you are now just as likely to see Uber black cars or mustachioed SUVs. It is still too soon to tell how the addition of app-based transportation services will affect the for-hire transportation industry and goals to reduce transportation emissions. It could result in an oversupply of vehicles, as thousands of app-based vehicles hit the road, in addition to the traditional taxis, limos and town cars. Or it could result in app-based vehicles replacing taxis, since the barriers to entry are so much lower for the new services. Either way, there are likely to be environmental implications from the growing number of vehicles on the road. As other jurisdictions may consider the California model, and as these services grow, it is important to study and evaluate the nationwide environmental impact of this “disruption” in the transportation industry.
Lori Anne Dolqueist is a partner with law firm Manatt, Phelps & Phillips, LLP in San Francisco and focuses her practice on regulatory matters before the California Public Utilities Commission. Tara S. Kaushik is a senior associate with Manatt, Phelps & Phillips in the San Francisco office, where she focuses her legal practice on energy regulatory matters. The authors represent members of the taxicab industry in matters related to the issues discussed in this article.
Ms. Dolqueist can be reached at (415) 291-7452 or ldolqueist@manatt.com, and Ms. Kaushik can be reached at (415) 291-7409 or tkaushik@manatt.com.
This column is part of a series of articles by law firm Manatt, Phelps & Phillips, LLP’s Energy, Environment & Natural Resources practice. Earlier columns in the third edition of this series discussed California’s Green Chemistry Regulations, Retail Hazardous Waste Reform, Environmental Screening Tools, Nanotechnology Regulation, Federal Chemical Regulation Reform, Efforts to Address Climate Change and What the Sequester Means for Environmental Regulation.
