Electrification, Why not tax incentives?

[Anonymous]

Thanks for pointing that out to me. 

23'6" would give about a foot of clearance between the top of a double-stacked container and the contact wire and a foot of clearance between the contact wire and bridge structure. This would probably be adequate for 25KV, but  likely to be marginal for 50KV. My recollection was that 25 feet above the railtop was proposed for the minimum clearance for 50KV, in part to allow for the rail height to grow with re-ballasting (I may be wrong on this figure). There are copies of the presentations somewhere in my garage - figure a day or two of digging would be needed to find them. 

There's a bit more room than that.  Height from top of rail for hi-cube double-stacks is 20'2".

S. Hadid 

[Anonymous]

Currently, our government is pushing "carbon credits" as a compromise that imposes carbon emission restrictions but theoretically lets the market make a rational decision on who actually gets to pay them.  I don't know if this makes a lot of free-market people satisfied or not, but at least it's an attempt.

In the case of Diesel engines the government is imposing ever tighter restrictions on emissions.  This is also a market distortion.  If it weren't, the companies that make Diesel engines would do it on their own, without a government rule.  It appears, however, that the market does not take into account long term effects such as cancer, tuberculosis, and climate change, all of which will have a cost in the future.  I suspect that companies' decisions might come out a bit differently, if they were to take these, and other, long term costs into account.

I don't see anything but coercion in a carbon credit trading system if government mandates it, which is the ultimate goal.  It imposes a burden on everyone who consumes beyond a certain limit.  The only freedom is the freedom to not consume beyond that limit.

When the government takes into account certain things like cancer, tuberculosis, and climate change, and mandates actions that are said to prevent those threats, there is a risk that the government is overstating the danger in order to impose edicts for the motive of expanding government.  Or the government may be influenced to satisfy certain political lobbies that are likewise overstating or misrepresenting a particular threat and offering to remedy it in order to expand their power. 

I certainly do not want the government, for the purpose of preventing climate change, to force the railroads to electrify, nor mandate outcomes that require it. Unless a threat is obvious and convincing, I think it's far safer for a society to ignore it rather than to be forced into a collective remedy, especially one that may have ulterior motives.

There is also the tendency for governments to understate the cost of their mandates.  In Minnesota, the legislature has mandated that 20% of electricity must be produced by renewable means within 13 years.  They promise there will be no added cost.  They tell us they expect it to lower the cost of power.

[erikem]

(An aside about overpasses. The Southern California Regional RR authority held hearings in 1990-92 about electrifying the frieght RR's to reduce air pollution. The plan was pretty much abandoned when the costs estimates hit 4 billion - of which half of that was for raising highway overpasses or lowering the tracks under the overpasses.)

Class I standard for new construction requires 23'6" clear above top of rail specifically to allow for erection of catenary. 

S. Hadid 

Thanks for pointing that out to me. 

23'6" would give about a foot of clearance between the top of a double-stacked container and the contact wire and a foot of clearance between the contact wire and bridge structure. This would probably be adequate for 25KV, but  likely to be marginal for 50KV. My recollection was that 25 feet above the railtop was proposed for the minimum clearance for 50KV, in part to allow for the rail height to grow with re-ballasting (I may be wrong on this figure). There are copies of the presentations somewhere in my garage - figure a day or two of digging would be needed to find them. 

[MichaelSol]

If you want to find the truth don't listen to JB Hunt, watch what he does. 

That would be a tedious and unrewarding exercise.

He's dead.

[Anonymous]

(An aside about overpasses. The Southern California Regional RR authority held hearings in 1990-92 about electrifying the frieght RR's to reduce air pollution. The plan was pretty much abandoned when the costs estimates hit 4 billion - of which half of that was for raising highway overpasses or lowering the tracks under the overpasses.)

Class I standard for new construction requires 23'6" clear above top of rail specifically to allow for erection of catenary. 

S. Hadid 

 

[oltmannd]

BNSF pays, including maintenance and property taxes, about $132 per carload. JB Hunt pays $174 per equivalent carload, mostly highway user fees. This distortion needs to be fixed.

Interesting - thanks for the data point.

 

Is BNSF more profitable than JB Hunt? Yes it is, considerably so. Perhaps one can see why. Then where is the "distortion?" If I were the late JB Hunt, prior to his recent demise, I would think it was in the fact that trucks are taxed far more than their "fair" share of the highway user fees, and that this is indeed a discrimination against them which works in favor of the railroads which suffer no similar handicap on their private right-of-ways.

There is some room to argue that trucks are being undertaxed - a highway built specifically for cars (e.g. the Merrit Parkway in Connecticut) can be built substantially cheaper than one built to handle heavy trucks - lanes can be slightly narrower, roadbed can be thinner, bridges can be lighter, grades can be steeper, overpasses can be lower, traffic flow is smoother. Maintenance costs are also higher with heavy truck traffic - California generally restricts trucks to the two rightmost lanes and thise show a lot more wear and tear than the auto-only lanes.

(An aside about overpasses. The Southern California Regional RR authority held hearings in 1990-92 about electrifying the frieght RR's to reduce air pollution. The plan was pretty much abandoned when the costs estimates hit 4 billion - of which half of that was for raising highway overpasses or lowering the tracks under the overpasses.)

One could also argue that the highway fuel taxes in general are too low since increases in construction and maintenance costs are far outstripping the increases in revenues from fuel taxes. Related to that is my opinion that all of the law enforcement costs for motor vehicles (which includes court, jail and prison costs) should come from taxes on motor vehicle use (license, fuel, etc).

 

Can of worms here. Be careful.

I agree with your semtiment on the "can of worms" and not making any claims to knowing the absolute and irrefutable truth. 

What trucks pay for ROW vs what RR pay is a red herring.

If you want to find the truth don't listen to JB Hunt, watch what he does.  How many roads did his ATA buddies build?  What did they bid for the Mass Pike several years ago.  If the fuel taxes were greater than the cost to build an operate....

[erikem]

If I recall correctly, the 'highway trust tax' goes to the construction and maintenance of the federal highway system and nothing goes to the local governments for non-highway purposes.

Local sales taxes apply to gasoline and retail diesel fuel.

My understanding that California sales tax on motor vehicle fuel is supposed to be used on transportation. Also bear in mind that the land used by roads represents a loss in potential property tax base, although the increase in property values due to the presence of the raods may make up for the loss. 

[erikem]

BNSF pays, including maintenance and property taxes, about $132 per carload. JB Hunt pays $174 per equivalent carload, mostly highway user fees. This distortion needs to be fixed.

Interesting - thanks for the data point.

 

Is BNSF more profitable than JB Hunt? Yes it is, considerably so. Perhaps one can see why. Then where is the "distortion?" If I were the late JB Hunt, prior to his recent demise, I would think it was in the fact that trucks are taxed far more than their "fair" share of the highway user fees, and that this is indeed a discrimination against them which works in favor of the railroads which suffer no similar handicap on their private right-of-ways.

There is some room to argue that trucks are being undertaxed - a highway built specifically for cars (e.g. the Merrit Parkway in Connecticut) can be built substantially cheaper than one built to handle heavy trucks - lanes can be slightly narrower, roadbed can be thinner, bridges can be lighter, grades can be steeper, overpasses can be lower, traffic flow is smoother. Maintenance costs are also higher with heavy truck traffic - California generally restricts trucks to the two rightmost lanes and thise show a lot more wear and tear than the auto-only lanes.

(An aside about overpasses. The Southern California Regional RR authority held hearings in 1990-92 about electrifying the frieght RR's to reduce air pollution. The plan was pretty much abandoned when the costs estimates hit 4 billion - of which half of that was for raising highway overpasses or lowering the tracks under the overpasses.)

One could also argue that the highway fuel taxes in general are too low since increases in construction and maintenance costs are far outstripping the increases in revenues from fuel taxes. Related to that is my opinion that all of the law enforcement costs for motor vehicles (which includes court, jail and prison costs) should come from taxes on motor vehicle use (license, fuel, etc).

 

Can of worms here. Be careful.

I agree with your semtiment on the "can of worms" and not making any claims to knowing the absolute and irrefutable truth. 

[MichaelSol]

So, then all environment regulation is bad, then?  

Please see my remark above which is directed already to this point, and if you will read it, you will instantly recognize a distinction which will put your mind at ease regarding environmental regulation, and you will not have to further stoop to straw man arguments.

And please, by all means, the argumentative voice that suggests a fully extreme and exagerated position that I in fact did not say is schoolyard stuff. I have not offered that you mean that "so, then all tax subsidies are OK, then?"

Here's what I said, the need for repetition underscoring your misleading and false portrayal of what I specifically said:

"Government health and safety regulation is part of the investment environment. It is part of the market system. It does not subsidize a given result, it only mandates a specific non-investment outcome -- cleaner air. A railroad may choose to invest in cleaner engine technology, gas engines, electrification, fuel cells, catapaults, oxen -- the regulation does not dictate the investment strategy to meet the goal.

"In the case of tax credits, the government purports to know not just what is safer, but what the specific preferred solution is. Is it the "best" solution? Well, if it was, investors would probably already be investing in it. But, by the tax credit -- the subsidy -- the government in effect sabotages potentially better solutions by removing investment funds from those solutions in favor of the government designated solution.

"It is a circular and self-defeating logic. It bites its own tail: the government knows the best solution, and therefore must subsidize it in order to take the funding away from ... worse solutions? And how did the Government determine this? Chuck Schumer?

"The government has a legitimate safety and health role in setting standards to protect the "general welfare." The command to do so appears in the preamble of our Constitution. Government almost invariably stumbles when it attempts to impose investment solutions on investment decisions. The Constitution is notably silent on tax credits to specific industries."

 

[oltmannd]

Tax incentives always distort the legitimate investment decision making process. If the government chooses to support a particular investment by offering a tax incentive, that implies that investment will be taken away from other projects that might have been, in the absence of the incentive, better investment decisions.

Government incentives distort investment markets. Distorted markets don't make rational decisions.

Distorted markets always make rational decisions based on the distortion.  Sometimes the distortion is for the good such as when their are net positive public benefits that don't accrue to the investor.

Well, this is where Milton Friedman made his classic critique of this kind of thinking, and demonstrated to at least a convincing degree the ultimate fallacy of the concept because it ultimately substitutes political, not economic, judgment for both the concept of "benefit" and for "decisions" subjecting both to the political popularity of people who aren't investing their own money.

Venezuela is currently electing to follow the substitution of political judgment for market economics -- upon your theory that "the net positive public benefits" -- whatever they are -- are always superior to the judgment of the investor -- and that is all very rational in your view, I am sure. A slippery slope.

I'll stick with Friedman.

So, then all environment regulation is bad, then?  I think a majority of citizens would disagree and it's one man one vote, still.  We all pay more or less equally for pollution controls through the products and services we buy - they're priced in. 

I'll stick with Samuelson.....

[MichaelSol]

Tax incentives always distort the legitimate investment decision making process. If the government chooses to support a particular investment by offering a tax incentive, that implies that investment will be taken away from other projects that might have been, in the absence of the incentive, better investment decisions.

Government incentives distort investment markets. Distorted markets don't make rational decisions.

Distorted markets always make rational decisions based on the distortion.  Sometimes the distortion is for the good such as when their are net positive public benefits that don't accrue to the investor.

Well, this is where Milton Friedman made his classic critique of this kind of thinking, and demonstrated to at least a convincing degree the ultimate fallacy of the concept because it ultimately substitutes political, not economic, judgment for both the concept of "benefit" and for "decisions" subjecting both to the political popularity of people who aren't investing their own money.

Venezuela is currently electing to follow the substitution of political judgment for market economics -- upon your theory that "the net positive public benefits" -- whatever they are -- are always superior to the judgment of the investor -- and that is all very rational in your view, I am sure. A slippery slope.

I'll stick with Friedman.

 

[oltmannd]

Tax incentives always distort the legitimate investment decision making process. If the government chooses to support a particular investment by offering a tax incentive, that implies that investment will be taken away from other projects that might have been, in the absence of the incentive, better investment decisions.

Government incentives distort investment markets. Distorted markets don't make rational decisions.

Distorted markets always make rational decisions based on the distortion.  Sometimes the distortion is for the good such as when their are net positive public benefits that don't accrue to the investor.

Also, the distortion can be in the form of an incentive (e.g. tax credit) or negative (regulation).

I would argue that the goal is to optimize the results for the stakeholders according to their value system.  Without some sort of economic distortion, you will only optimize the econonmic results for those with a stake in the economic results.  There are other stakeholders with values that are not strictly economic. 

[MichaelSol]

BNSF pays, including maintenance and property taxes, about $132 per carload. JB Hunt pays $174 per equivalent carload, mostly highway user fees. This distortion needs to be fixed.  

MoW or total maintenance costs including cars and locos? you can't compare the businesses. If BNSF is more efficient, you can't penalize them for that. 

Well, you did compare the businesses, and pronounced absolutely that there was a "distortion" and that it needed to be fixed -- to make the railroad business more comparable -- by placing a greater tax burden on the general public by giving the railroads tax subsidies in the form of tax free bonds and what not.

You wanted to penalize everyone when you had the false notion that there was a "distortion"; now that you have happened upon the prospect that you might have had it backwards, you are no longer in the penalizing mood, and your sure sense of justice does not extend to tax breaks for the truckers to eliminate "the distortion." Just don't like truckers, I gather?

 

[Suburban Station]

BNSF pays, including maintenance and property taxes, about $132 per carload. JB Hunt pays $174 per equivalent carload, mostly highway user fees. This distortion needs to be fixed.  

MoW or total maintenance costs including cars and locos? you can't compare the businesses. If BNSF is more efficient, you can't penalize them for that.

Is BNSF more profitable than JB Hunt?

has it always been? 

  Then where is the "distortion?" If I were the late JB Hunt, prior to his recent demise, I would think it was in the fact that trucks are taxed far more than their "fair" share of the highway user fees, and that this is indeed a discrimination against them which works in favor of the railroads which suffer no similar handicap on their private right-of-ways.

I don't know whether trucks are really taxed far more than their fair share as I don;t know how much they pay nor do I know how much they use. I don't discount the possibility. I'd imagine that outside construction vehicles and heavy loads, whether is the most damaging to a road. heavy loads, though, can be extremely damaging. just look at what happens to a road during construction.

This is actually pretty rich, and somewhat symptomatic of the rail industry. Here is an example where private enterprise is more efficient than the government alternative, which screws its commercial users. The private enterprise, enjoying the handicaps suffered by its competitors, and profiting immensely from their plight, also complains that that handicap visited upon its hapless competitors is, in fact, unfair to the railroads, and they, the railroads, need ... government help!

not to let it get too oversimplified. the road system is open access. it's also political, meaning you can get a brand new highway in arizona where there is little to no demand and where this is a lot of demand, say, surekill expressway in philadelphia, you get nothing. if it were private, the new highway wouldn't be built or it woudl be built after capacity upgrades to bottlenecks (assuming CSX wasn't running the roads). states and countied often extend roads to encourage development and defer maintenance...sometimes to the profit of developers and frequently to boost revenue and cut costs. nonetheless, on the margin, if you are a truckign company, you have no capital costs. they've been covered for you. when you talk about JB Hunt, do you include depreciated road and MoW assets as well as capital projects in your estimates?

edit: not that I discount the government's penchant to stick it to businesses rather than voters. that's democracy.

[MichaelSol]

in defense of exempting all rights of way (regardless of electrification) and making all railroad bonds tax exempt is that their main competitors (roads) do not pay property taxes and states issue tax free bonds for roads. rather than distort markets, it makes the distortion less.

The government already exempts railroad fuel from most state and federal taxes. In 2006, the average trucker in the West paid $2.98 for a gallon of Diesel fuel. The average railroad cost was $1.85.

Outside of income taxes, BNSF pays about $18 a carload, much of that property tax. JB Hunt pays about $58 a load, much of that highway trust tax; its equivalent of the property tax. How do you make the "distortion" less?

If I recall correctly, the 'highway trust tax' goes to the construction and maintenance of the federal highway system and nothing goes to the local governments for non-highway purposes. To make the comparison between BNSF and JB Hunt a true 'apples to apples', you would need to include the cost of maintenance and construction of the BNSF's track.

Careful on the apples, BNSF isn't open access. It controls what's there and what it spends. JB Hunt is paying an open access fee. It doesn't control the system, and it has no choice on paying the tax. Actually, it does. It began shipping by rail ... to avoid a punitive tax on its operations.

And the JB Hunt load isn't nearly the size of the BNSF load. If you start matching maintenance costs per load and per load size you might get some interesting figures .... and triple that JB Hunt figure to match a "per ton" basis if you want to look at maintenance costs.

BNSF pays, including maintenance and property taxes, about $132 per carload. JB Hunt pays $174 per equivalent carload, mostly highway user fees. Distortions, according to some, need to be fixed. Is this one of them?  

Is BNSF more profitable than JB Hunt? Yes it is, considerably so. Perhaps one can see why. Then where is the "distortion?" If I were the late JB Hunt, prior to his recent demise, I would think it was in the fact that trucks are taxed far more than their "fair" share of the highway user fees, and that this is indeed a discrimination against them which works in favor of the railroads which suffer no similar handicap on their private right-of-ways.

This is actually pretty rich, and somewhat symptomatic of the rail industry. Here is an example where private enterprise is more efficient than the government alternative, which screws its commercial users. The private enterprise, enjoying the handicaps suffered by its competitors, and profiting immensely from their plight, also complains that that handicap visited upon its hapless competitors is, in fact, unfair to the railroads, and they, the railroads, need ... government help!

Can of worms here. Be careful.

 

[MichaelSol]

in defense of exempting all rights of way (regardless of electrification) and making all railroad bonds tax exempt is that their main competitors (roads) do not pay property taxes and states issue tax free bonds for roads. rather than distort markets, it makes the distortion less.

The government already exempts railroad fuel from most state and federal taxes. In 2006, the average trucker in the West paid $2.98 for a gallon of Diesel fuel. The average railroad cost was $1.85.

Outside of income taxes, BNSF pays about $18 a carload, much of that property tax. JB Hunt pays about $58 a load, much of that highway trust tax; its equivalent of the property tax. How do you make the "distortion" less?

If I recall correctly, the 'highway trust tax' goes to the construction and maintenance of the federal highway system and nothing goes to the local governments for non-highway purposes.

Local sales taxes apply to gasoline and retail diesel fuel.

 

[erikem]

in defense of exempting all rights of way (regardless of electrification) and making all railroad bonds tax exempt is that their main competitors (roads) do not pay property taxes and states issue tax free bonds for roads. rather than distort markets, it makes the distortion less.

The government already exempts railroad fuel from most state and federal taxes. In 2006, the average trucker in the West paid $2.98 for a gallon of Diesel fuel. The average railroad cost was $1.85.

Outside of income taxes, BNSF pays about $18 a carload, much of that property tax. JB Hunt pays about $58 a load, much of that highway trust tax; its equivalent of the property tax. How do you make the "distortion" less?

If I recall correctly, the 'highway trust tax' goes to the construction and maintenance of the federal highway system and nothing goes to the local governments for non-highway purposes. To make the comparison between BNSF and JB Hunt a true 'apples to apples', you would need to include the cost of maintenance and construction of the BNSF's track.

[MichaelSol]

in defense of exempting all rights of way (regardless of electrification) and making all railroad bonds tax exempt is that their main competitors (roads) do not pay property taxes and states issue tax free bonds for roads. rather than distort markets, it makes the distortion less.

The government already exempts railroad fuel from most state and federal taxes. In 2006, the average trucker in the West paid $2.98 for a gallon of Diesel fuel. The average railroad cost was $1.85.

Outside of income taxes, BNSF pays about $18 a carload, much of that property tax. JB Hunt pays about $58 a load, much of that highway trust tax; its equivalent of the property tax. How do you make the "distortion" less?

[cordon]

True.  I didn't mean to imply "Not."  But I do believe that government has the right and the duty to steer the market now and then away from what we, in consensus, I hope, believe are undesirable directions.  That's a fairly weak statement because I don't believe in excessive regulation.  But I can't accept no regulation, either.  For example, the market never would have achieved rural electrification, yet we, as a nation, decided that was a good thing to do.  And we made it happen.  That was a government imposed investment decision, and I believe our nation is better off because of it.

I personally believe electric railroads are the right way to go for all the reasons written here and in other threads before.  I believe we got deep into Diesels in the 1950s because the oil companies sold Diesel fuel for about 1/3 its value in energy (compared to gasoline).  Now that we are in, and now that we have torn down a lot of electric catenary, it costs a lot to change directions.

I acknowledge that we should choose these interferences carefully and not go overboard with them.  But that is the challenge of good government.  If it were easy, it would have already happened.

 

 

 

[Suburban Station]

in defense of exempting all rights of way (regardless of electrification) and making all railroad bonds tax exempt is that their main competitors (roads) do not pay property taxes and states issue tax free bonds for roads. rather than distort markets, it makes the distortion less.

[MichaelSol]

In the case of Diesel engines the government is imposing ever tighter restrictions on emissions.  This is also a market distortion.  If it weren't, the companies that make Diesel engines would do it on their own, without a government rule.  It appears, however, that the market does not take into account long term effects such as cancer, tuberculosis, and climate change, all of which will have a cost in the future.  I suspect that companies' decisions might come out a bit differently, if they were to take these, and other, long term costs into account.

Wow, we just went through thousands of words on Warren Buffett and the long term investment decision strategies that shrewd investors and managers employ to generate long term strength and success for their companies, as well as Rob Krebs and Matt Rose and their long term capital spending and how this is positive and is the driver behind BNSF stock growth. Now we are back to -- "Not".

The market doesn't take into account what it can't know, that is true. But read the BNSF annual reports for the past decade, and the set aside for future asbestos litigation and payout. It shows up in the bottom line. It was market measured.

Government health and safety regulation is part of the investment environment. It is part of the market system. It does not subsidize a given result, it only mandates a specific non-investment outcome -- cleaner air. A railroad may choose to invest in cleaner engine technology, gas engines, electrification, fuel cells, catapaults, oxen -- the regulation does not dictate the investment strategy to meet the goal.

In the case of tax credits, the government purports to know not just what is safer, but what the specific preferred solution is. Is it the "best" solution? Well, if it was, investors would probably already be investing in it. But, by the tax credit -- the subsidy -- the government in effect sabotages potentially better solutions by removing investment funds from those solutions in favor of the government designated solution.

It is a circular and self-defeating logic. It bites its own tail: the government knows the best solution, and therefore must subsidize it in order to take the funding away from ... worse solutions? And how did the Government determine this? Chuck Schumer?

The government has a legitimate safety and health role in setting standards to protect the "general welfare." The command to do so appears in the preamble of our Constitution. Government almost invariably stumbles when it attempts to impose investment solutions on investment decisions. The Constitution is notably silent on tax credits to specific industries.

The two are simply not the same.

 

[Modelcar]

....Perhaps we'd need not so much "new" generation cap. running railroads on electricity....Couldn't we send current back into the grid as that same train that just climbed the elevation now needs the braking of dynamic brakes on the way down the other side.....

[cordon]

Tax incentives always distort the legitimate investment decision making process. If the government chooses to support a particular investment by offering a tax incentive, that implies that investment will be taken away from other projects that might have been, in the absence of the incentive, better investment decisions.

Government incentives distort investment markets. Distorted markets don't make rational decisions.

Implicit in the phrases "legitimate investment decision making process" and "rational decisions" is the thought that the only legitimate process or rational decision is one that considers short-term dollars.  Governments distort that process in many cases, supposedly with the consent of the governed.  Nothing new here, and not a very forceful argument for not mandating or subsidizing railroad electrification.

The real question is do we want to use that distortion for yet another action we judge to be a social improvement, in this case pollution and/or oil consumption, or do we want to leave it totally to the open market?

Currently, our government is pushing "carbon credits" as a compromise that imposes carbon emission restrictions but theoretically lets the market make a rational decision on who actually gets to pay them.  I don't know if this makes a lot of free-market people satisfied or not, but at least it's an attempt.

In the case of Diesel engines the government is imposing ever tighter restrictions on emissions.  This is also a market distortion.  If it weren't, the companies that make Diesel engines would do it on their own, without a government rule.  It appears, however, that the market does not take into account long term effects such as cancer, tuberculosis, and climate change, all of which will have a cost in the future.  I suspect that companies' decisions might come out a bit differently, if they were to take these, and other, long term costs into account.

 

 

[selector]

And, quite apart from what Michael suggests, there is the people factor.  I think there is mass confusion and suspicion about just to what extent we have real energy problems, and which of the multitude of panaceas is really worth a cool USD$400B of investment and capitalization.  I am not saying it's all hooey, I am saying too many don't really know whom to believe has the right hooey.  Leadership only goes so far in a democracy, and then you have to get hard numbers of voices standing on one side of the line or the other. 

Also, the railroads, bless their collective hearts, haven't done a lot of good for themselves lately.  When they do get in the press, it is almost always as a result of adversity of some kind.  Additionally, we need to generate power to move millions of tons of freight if we are going to do that electrically.  Someone earlier opined that we would need no new generation capacity.  If that is true, then I would guess we have a generous overcapacity at the moment.  Good for us.  If this is not the case, then we'll have to generate more power, and that will be a huge upfront, and politically hot, costly prospect.

Still, unless I recall mistakenly, much of Europe is electrified.  At some point, you place one foot in front of the other.  That usually requires a bully high up.  A hero, later.

[MichaelSol]

Tax incentives always distort the legitimate investment decision making process. If the government chooses to support a particular investment by offering a tax incentive, that implies that investment will be taken away from other projects that might have been, in the absence of the incentive, better investment decisions.

Government incentives distort investment markets. Distorted markets don't make rational decisions.

[IRONROOSTER]

I thought it was only the solar system equipment that were exempt, and the rest of the property is taxed as usual?   Also, can the feds exempt local taxes?

Paul 

[CSSHEGEWISCH]

Property tax exemptions would have to come on a state by state basis, I don't expect that to happen because a lot of rural school districts would lose a fair amount of income.  An investment tax credit of some sort might be plausible since it could be applied to both the catenary and the locomotives.

[GP-9_Man11786]

Based on what I've read, the main stumbling block to electriication is the high upfront cost and long payback period. What if the government were to make it worth the railroads while? For example if the government were to make electrified right-of-ways exampt from property taxes for 50 years, railroad companies might seriously consider it. New York State already doesthe exact same thing with houses that install photovoltaic solar panals.

In additojn, the government could also grant tax credits for locomotives running either on electricity or alternative fuels such as Biodiesle or Compressed Natural Gas (CNG), the latter already used in buses and garbage trucks here in New York quite successfully.