Southern California Environmental Report Card, Winter 2009

California's Green Market Geography
Matthew E. Kahn, Ph.D.

Matthew E. Kahn, Ph.D

Author Bio


Download PDF

Download PDF

INTRODUCTION

The California Global Warming Solutions Act of 2006 (AB 32) commits the state to achieve steep reductions in greenhouse gas emissions by the year 2020 and an even steeper emissions reductions by the year 2050.  Given ongoing state population growth and per-capita income growth, greenhouse gas (GHG) emissions per dollar of state income must decline sharply to achieve the goals embodied in AB 32.  The Air Resources Board's Scoping Plan calls for reductions in the transportation sector's GHG emissions, improvements in residential and commercial building energy efficiency, and a sharp increase in the share of electricity produced using renewable resources such as wind and solar power.  If California's consumers are willing to buy "green" energy efficient products then this increases the likelihood we will achieve AB 32's goals with minimal political backlash.

The Toyota Prius stands out as the leading example, and something of a metaphor, for such a green product.  Today, who buys this "green" product?  Green products and green markets are spatially concentrated.  For example, in 2007, 2.8% of Berkeley's registered vehicles were hybrids, roughly four times greater than the state average in the same year.  

This article examines the geography of hybrid vehicle purchases and ranks California's counties and individual cities in Los Angeles and Orange Counties with respect to their hybrid vehicle share.  Using zip code level data on community average income levels and community political environmentalism levels, we document that richer communities and environmentalist communities are more likely to purchase these products. 

While the focus is on Prius and hybrid vehicle registrations, this spatial approach can be applied to measuring consumption patterns over a variety of different "green" products.    Hybrid vehicles are an appropriate focus because of their high profile and because the data are readily available.  The conclusion of this article discusses the data challenges in studying the demand for other green products, and argues the State should make higher quality data collection a priority as it takes the next steps in meeting AB 32's ambitious goals.

The California Global Warming Solutions Act of 2006 (AB 32) commits the state to achieve steep reductions in greenhouse gas emissions by the year 2020 and an even steeper emissions reductions by the year 2050.

CALIFORNIA HYBRID VEHICLE REGISTRATION

Private vehicles produce a large share of the nation's greenhouse gases.  The California Air Resources Board estimates that transportation is responsible for 40% of the state's greenhouse gas emissions.  Improvements in fleet economy and the resultant decrease in GHG emissions would help to offset the aggregate growth in miles traveled expected over the next thirty years.  Hybrid vehicles such as the Toyota Prius have received enormous media coverage.  Their fuel economy helps to justify their reputation as "green vehicles".  The U.S Environmental Protection Agency's Green Vehicle website consistently ranks them as the best vehicle (see www.epa.gov/greenvehicles/download/all_alpha_08.txt).  Transportation scholars have noted the possibility of the "rebound effect" in which hybrid drivers consume more gasoline because the price per mile of driving is lower for such vehicles.  However, recent research has found this effect is small. 

The R.L. Polk Corporation provides data on the number of registered vehicles by make by geographical areas.   This company uses street addresses and vehicle registration data by calendar year to create a census of vehicles by make and location.  These data were purchased for every zip code in California in 2007.

Zip codes are not the ideal spatial shapes for studying geographical clusters.  However, although they are not of uniform shape or density, zip codes are relatively small units both in terms of land area and population size.  The California data set identifies over 1,600 zip codes and in 2000, 33.9 million people lived in these zip codes.  The total number of vehicles, trucks, hybrids and Priuses registered in 2007 are available for each zip code. The 2000 Census of Population and Housing data provides each zip code's share of workers who commute using public transit or by walking or biking.

INCENTIVES

Figure 1
Figure 1.

California has introduced incentives to encourage hybrid vehicle purchases.  The best known of these programs offers hybrid owners access to the highway HOV lanes.  Almost everyone has seen the ubiquitous yellow sticker on hybrid vehicles that allows access to HOV lanes even with only the driver in the vehicle (see Figure 1).  The State issued 85,000 of these stickers and hybrid owners with such a sticker can save time and avoid traffic congestion by accessing the highway HOV lanes.  Through a Freedom of Information Act request to the California Air Resources Board, information was obtained on the spatial distribution of Californians who applied for and received stickers. For each of these 85,000 vehicles the applicant's zip code of residence is known.  These data were collected because access to the HOV lane represents a time savings that a hybrid owner stuck in traffic would greatly value. In 2007, Los Angeles County contained 29% of the state's total population; 26% of the state's total vehicles; 25% of the hybrid hybrid vehicles; and 32% of the total hybrid HOV stickers.

GEOGRAPHICAL DISTRIBUTION OF HYBRIDS

Green products and green markets are spatially concentrated. For example, in 2007, relative to Orange County as a whole, Laguna Beach had more than three times as many Priuses per vehicle.

Figure 2
Figure 2. Hybrid vehicle shares by county.

Figure 2 presents evidence on hybrid vehicle geography.  Aggregating the zip code level registration data to the county level, Figure 2 shows how California counties differ with respect to the share of their registered vehicles that are hybrids. The San Francisco Metropolitan Area's "greenness" is readily apparent.  Hybrid vehicles shares there are much higher than in equally wealthy areas in Los Angeles and San Diego.  It is also clear coastal counties have a higher hybrid share.

Figures 3 and 4 focus on the San Francisco and Los Angeles metropolitan areas, respectively (note the scaling is the same in each map).  Figure 3 presents the spatial distribution of Priuses across San Francisco and Figure 4 the Prius map for Los Angeles.  The greenest parts of the maps highlight a large Prius count and show  the differences in Prius clusters even for communities with similar incomes and demographics.  For example, Figure 4 highlights the concentration of Prius registrations in coastal areas such as Malibu relative to other wealthy areas such as Beverly Hills.  Clearly in Los Angeles the Prius communities are mainly adjacent to the beach while there are relatively few registered Priuses in center city communities. The San Francisco map presented in Figure 3 stands out, as roughly the entire Bay Area is "green" in contrast to the widely varying California map (see Figure 2).

Measured on our green metric, the five "greenest" cities in Los Angeles County are Santa Monica, Malibu, Manhattan Beach, Commerce and Rolling Hills.

Figure 3
Figure 3. Spatial distribution of Priuses across San Francisco Bay Region.

Figure 4
Figure 4. Spatial distribution of Priuses across Los Angeles Region.

More information about the rankings of specific cities within Los Angeles County are reported in Table 1. In this Table, 88 Los Angeles cities are ranked with respect to their hybrid vehicle shares. Measured on this green metric, the five "greenest" cities are: Santa Monica, Malibu, Manhattan Beach, Commerce and Rolling Hills.  Maywood and Lynwood ranked at the bottom. 

Table 1.  Rankings for Cities within Los Angeles County (Percent Share)

Rank City Hybrid Prius

1

Santa Monica

3.03

1.95

2

Malibu

3.01

1.65

3

Manhattan Beach

2.75

1.68

4

Commerce

2.67

1.43

5

Rolling Hills

2.66

1.59

6

Palos Verdes Estates

2.66

1.59

7

Rolling Hills Estates

2.66

1.59

8

Beverly Hills

2.37

1.24

9

San Marino

2.21

1.19

10

La Canada Flintridge

2.17

1.30

11

Rancho Palos Verdes

2.04

1.16

12

Hermosa Beach

2.00

1.11

13

Claremont

1.90

1.08

14

Calabasas

1.71

0.88

15

South Pasadena

1.68

0.88

16

Sierra Madre

1.68

1.01

17

Agoura Hills

1.64

0.91

18

Hidden Hills

1.60

0.82

19

Redondo Beach

1.49

0.86

20

Westlake Village

1.49

0.82

21

Torrance

1.44

0.78

22

Culver  City

1.33

0.78

23

Pasadena

1.21

0.67

24

El Segundo

1.11

0.57

25

Santa Clarita

0.95

0.52

26

Burbank

0.93

0.52

27

Vernon

0.89

0.57

28

Diamond Bar

0.88

0.47

29

La Verne

0.87

0.45

30

Los Angeles

0.87

0.46

31

Arcadia

0.86

0.45

32

Walnut

0.77

0.37

33

Monrovia

0.77

0.42

34

Glendale

0.76

0.41

35

San Dimas

0.76

0.42

36

Cerritos

0.65

0.29

37

Glendora

0.65

0.32

38

Long Beach

0.64

0.35

39

Lomita

0.62

0.32

40

Monterey Park

0.51

0.28

41

Alhambra

0.50

0.28

42

Temple City 

0.49

0.22

43

Lakewood

0.48

0.23

44

La Habra Heights

0.48

0.21

 
Rank City Hybrid Prius

45

Signal Hill

0.48

0.25

46

Bradbury

0.47

0.23

47

La Mirada

0.47

0.21

48

Santa Fe Springs

0.44

0.18

49

Covina

0.44

0.20

50

Duarte

0.44

0.21

51

West Covina

0.44

0.2

52

Whittier

0.43

0.22

53

San Gabriel

0.42

0.21

54

Avalon

0.39

0.32

55

Palmdale

0.37

0.15

56

Montebello

0.36

0.19

57

Lancaster

0.34

0.13

58

Gardena

0.33

0.16

59

Lawndale

0.32

0.13

60

Artesia

0.31

0.11

61

Downey

0.30

0.13

62

Carson

0.30

0.12

63

Rosemead

0.29

0.13

64

Azusa

0.29

0.12

65

Industry

0.27

0.12

66

Pomona

0.26

0.11

67

West Hollywood

0.26

0.18

68

Irwindale

0.23

0.09

69

Bellflower

0.23

0.10

70

Hawthorne

0.22

0.10

71

El Monte

0.19

0.08

72

Norwalk

0.19

0.06

73

Baldwin Park

0.19

0.07

74

Pico Rivera

0.18

0.07

75

San Fernando

0.17

0.07

76

South El Monte

0.16

0.06

77

La Puente

0.15

0.06

78

Inglewood

0.14

0.07

79

Paramount

0.14

0.07

80

South Gate

0.13

0.04

81

Hawaiian Gardens

0.12

0.04

82

Huntington Park

0.08

0.04

83

Compton

0.08

0.04

84

Bell

0.07

0.01

85

Bell Gardens

0.07

0.01

86

Cudahy

0.07

0.01

87

Maywood

0.06

0.01

88

Lynwood

0.06

0.01

Similar patterns are observed for cities in Orange County (Table 2).  In 2007, in Orange County 0.73% of the registered vehicles were hybrids and 0.38% of the vehicles were Priuses.  In Irvine, these shares were respectively 1.3% and .68% and in Laguna Beach, these shares were 2.3% and 1.3%.  Relative to Orange County as a whole, Laguna Beach has more than three times as many Priuses per vehicle. 

Table 2.  Rankings for Cities within Orange County (Percent Share)

Rank City Hybrid Prius

1

Laguna Beach

2.33

1.28

2

Seal Beach

1.59

0.98

3

Newport Beach

1.56

0.82

4

Irvine

1.27

0.68

5

Los Alamitos

1.25

0.66

6

Laguna Niguel

1.20

0.66

7

Dana Point

1.18

0.62

8

San Clemente

1.17

0.66

9

Villa Park

1.08

0.58

10

Huntington Beach

0.99

0.51

11

Rancho Santa Margarita

0.98

0.48

12

Laguna Hills

0.93

0.48

13

Mission Viejo

0.90

0.47

14

Yorba Linda

0.90

0.41

15

San Juan Capistrano

0.83

0.39

16

Fountain Valley

0.80

0.40

17

Lake Forest

0.74

0.42

18

Brea

0.74

0.36

19

Orange

0.72

0.43

20

La Palma

0.72

0.29

21

Fullerton

0.70

0.34

22

Tustin

0.66

0.34

23

Placentia

0.66

0.31

24

Cypress

0.66

0.30

25

Costa Mesa

0.63

0.35

26

La Habra

0.48

0.21

27

Westminster

0.36

0.18

28

Anaheim

0.36

0.16

29

Garden Grove

0.34

0.17

30

Buena Park

0.31

0.13

31

Santa Ana

0.28

0.14

32

Stanton

0.23

0.09

EXPLAINING HYBRID VEHICLE DEMAND

These descriptive maps and city rankings are a useful starting point to understand the spatial patterns of Californian consumer environmentalism but we also seek to explain these patterns.

Given how fuel efficient hybrid vehicles are, it is intuitive that those who drive the most miles have the greatest financial incentive to buy one. Suppose a household drives 15,000 miles per year.  If this household purchases an SUV with a fuel economy of 15 miles per gallon, then this household will need 1000 gallons of gasoline per year.  In contrast, if this household purchased a Prius with a fuel economy of 40 MPG then it would need to purchase only 375 gallons of gasoline a year.  If the price of gasoline is $3 a gallon, the gasoline expenditure differential is 3*(1000-375) or $1,875 a year.  If gas prices rise to $5 per gallon, then this differential increases to a whopping $3,125 marginal difference.  This arithmetic highlights how expectations of rising gas prices can suffice to trigger green product demand.   Households who drive the most miles have the greatest financial incentive to buy the Prius.

Despite this logic, it is well recognized in ongoing research and among the public that hybrid vehicles are "green" status symbols.  Researchers have surveyed hybrid owners and found "…that no hybrid owner we interviewed was solely or importantly interested in saving money on gasoline.  Rather they are most interested in resource conservation, reduced air pollution, new technology, and being a part of, what they perceive to be, the future." 1

In a 2004 New York Times article titled Greening Without the Preening, John M. Broder discusses the differences between the Honda Accord Hybrid and the conventional Accord. 

"The tangible benefits are relatively small: the hybrid delivers modestly better performance, improved mileage and slightly more space than the conventional V-6 Accord. . . "But Honda is betting that the intangible and invisible benefits of hybrid ownership will drive discriminating upper-middle income buyers to its showrooms….   Honda says its hybrid buyers are a conservative bunch, not the sort to advertise their virtue like owners of the Toyota Prius, who may want everyone to think their cars can  run on egg whites and organic chardonnay.  Robert Bienenfeld senior manager for product planning at Honda; said that the $3,400 price premium over the regular Accord was offset by the better performance, and fuel efficiency as well as by a federal tax break for hybrid vehicles, 'We are pushing hard to provide a benefit to society beyond what the individual gets, it's a tough calculus in a certain sense, it doesn't add up but in another sense it does. You feel good about owning it.  How do you put a price on that?'"

EFFECTS OF HOUSEHOLD INCOME

We next present evidence on the role of household income and household environmentalism in predicting hybrid vehicle clusters.  The 2000 Census of Population and Housing reports average household income for each zip code.  This information is used to assign each zip code to three categories: low, medium and high income (see Table 3).  Low Income zip codes are those whose average household incomes lie below $46,000.  Middle Income zip codes are those whose incomes lie between $46,000 and $64,000  and High Income zip codes are those whose incomes are greater than $64,000.

Table 3.  Transportation and Income

  Household Income
Variable All Low Medium High

Hybrid Vehicle (%)

0.76

0.35

0.51

1.19

Prius Vehicle  (%)

0.42

0.19

0.27

0.67

Hybrid HOV Sticker (%)

0.29

0.11

0.17

0.49

Truck (%)

42.52

42.50

44.15

41.11

Total Vehicles Per-Capita

1.00

0.97

0.93

1.09

Commuting Using Public Transit (%)

4.16

5.70

3.60

3.90

Commuting by Walking or Bike(%)

3.54

4.64

3.51

3.03

Table 3 reveals several facts about "green transit" patterns as a function of community income.   As shown in the first row of the table,  richer communities are more likely to own hybrids and Priuses.  A comparison of column (4) with column (2) shows high income communities have a hybrid share three times greater than low income communities.  Hybrids are still a relatively new class of vehicles while residents of poorer communities are more likely to own older vehicles.  It is interesting to compare the HOV hybrid vehicle shares relative to the hybrid vehicle share by comparing columns (3) and (4).  Rich communities have a larger share of HOV sticker hybrids.

HOUSEHOLD ENVIRONMENTALISM

California voters continue to support policies aimed towards greater improvements in environmental quality and the protection of natural capital. However, less is known about Californians as consumers. Put simply, how many of us are living a "green" day-to-day life?

Household income is clearly just one dimension for explaining why some people purchase green products and others do not.  Intuitively, we know household environmentalism matters.  The fundamental challenge is data collection agencies do not collect information measuring a household's ideology.  In the absence of such information, some social scientists rely on survey responses.  We pursue an alternative approach by measuring community environmentalism through the choices voters make in the political arena.  A measure of environmental ideology is constructed for each California zip code based upon residents' political party registration and voting on two binding statewide environmental initiatives.  The first indicator of community environmentalism is the percentage of each zip code's voters who are registered with the Green Party.  The Green Party is well known for its environmental activism, and California is the state with the highest count of Green Party registered voters both in absolute terms and as a share of all registered voters. 

Additional measures of community environmentalism are based on voting data on California ballot initiatives through which voters have the opportunity to participate in lawmaking.  Voting patterns based on these initiatives are informative about a community's environmentalism.  Data from two ballot initiatives are used.  One is Proposition 12, voted on March 7, 2000 which authorized the state to sell $2.1 billion of general obligation bonds to fund many designated programs.  About $940 million of the bond money would be granted to local agencies for local recreational, cultural, and natural areas.  The remaining $1.16 billion would be used by the state for recreational, cultural, and natural areas of statewide significance.   Voting on Proposition 13 in the year 2000 is the other initiative we examined.  Proposition 13 proposed to issue bonds for safe drinking water, flood protection, watershed protection, clean water and water recycling, water conservation, and water supply, reliability and infrastructure.  For each zip code, these three measures of community environmentalism were taken and a statistical procedure called factor analysis was used to collapse these various indicators into a single zip code level environmentalism index.

Table 4 mimics Table 3's layout and partitions California zip codes into those with "low environmentalism", "medium environmentalism" and "high environmentalism."  A comparison of the results in columns (2) and (4) illustrates the role of political environmentalism in explaining "green" transit patterns.   Clearly environmentalist communities are more likely to buy hybrids and less likely to buy trucks.  Per-capita vehicle ownership rates are lower in the "green" communities and its workers are more likely to commute using "green" modes such as public transit, walking and biking.  Per-capita vehicle ownership rates are lowest in low income (see Table 3) environmentalist communities.

Table 4. Transportation and Environmentalism

  Environmentalism
Variable All Low Medium High

Hybrid Vehicle (%)

0.76

0.59

0.70

0.93

Prius Vehicle (%)

0.42

0.30

0.37

0.54

Hybrid HOV Sticker (%)

0.29

0.20

0.25

0.38

Truck (%)

42.52

47.53

43.32

38.68

Total Vehicles Per-Capita

1.00

1.05

0.99

0.97

Commuting Using Public Transit (%)

4.16

1.37

2.69

7.43

Commuting by Walking or Bike (%)

3.54

2.78

3.22

4.35

 

CONCLUSION

AB 32's legislative mandate will encourage all of California's political jurisdictions to measure greenhouse gas production within their boundaries. Such benchmarking can create healthy competition to see which city is the "greenest", and to measure city progress over time.

California has a long tradition of providing environmental leadership nationally and internationally.  The state was an early leader in enacting stringent new vehicle emissions standards, and protecting its coast line through creation of the Coastal Commission.  By passing AB32, the state is now playing a national leadership role in reducing its greenhouse gas emissions.

California voters continue to support policies aimed towards greater improvements in environmental quality and the protection of natural capital.   However, less is known about Californians as consumers.  Put simply, how many of us are living a "green" day-to-day life?  The challenge in answering this question is there are so many different dimensions through which we express our environmentalism.  We can live a simple low impact lifestyle, donate our time, visit national parks, stay politically active, use energy efficient appliances, eat a vegetarian diet, or consume a specific set of market products.  Ideally, researchers could observe these choices and create measures of each household's footprint.  Unfortunately, no single data set exits for examining all of these dimensions of expressed environmentalism.

This study has focused on the leading relevant example of a green product: hybrid vehicles such as the Toyota Prius. We find California's hybrid vehicles are disproportionately concentrated in San Francisco relative to other equally wealthy counties.  Within Southern California, wealthier environmentalist communities such as Malibu, Santa Monica and Laguna Beach are more likely to have higher green product shares.   It is important to document where the green consumers concentrate for at least two reasons.   Such spatial pockets of consumers represent a market that green product sellers can target.  If such firms are successful this will trigger more penetration of green products into the economy.  Such free market environmentalism would set off a virtuous cycle and help to reduce pollution per dollar of economic activity.

AB 32's legislative mandate will encourage all of California's political jurisdictions to measure greenhouse gas production within their boundaries.  Such benchmarking can create healthy competition to see which city is the "greenest", and to measure city progress over time.  But, a necessary condition for such quantitative "report cards" is verifiable data.  The UCLA Institute of the Environment has created the Center for Corporate Environmental Performance to evaluate the greenness of different companies (see www.environment.ucla.edu/ccep).   As shown in this article, such metrics can be extended to ranking cities by their degree of environmentalism.

GRADE

We have demonstrated here that detailed, spatially-resolved data are quite useful for learning about California's diverse population.  Up until now, the California Air Resources Board and other California agencies assigned to monitor environmental issues have under-invested in data collection.   Hence, we give state government a grade of "incomplete" with respect to data collection.  To earn an "A", the State needs to create representative spatial data sets that provide detailed information on household and business energy consumption.  Without such information, we cannot measure how Californians respond to incentives to increase their energy efficiency and we cannot rank different cities with respect to their progress in achieving the ambitious goals of AB32 and similar environmental legislation. .

Acknowledgement

I thank Ryan K. Vaughn for outstanding research assistance.

Additional Reading

Kahn, Matthew E. and Ryan K. Vaughn, Green Market Geography: The Spatial Clustering of Hybrid Vehicles and LEED Registered Buildings, Contributions in Economic Policy. Berkeley Electronic Press Journal (www.bepress.com)

Small, K., & Van Dender, K. (2007). Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect. Energy Journal. 28 25-51.

1 Kurani, K.,& Turrentine, T. S., (2004). Automobile buyer decisions about fuel economy and fuel efficiency. Institute of Transportation Studies, UC Davis (Working Paper UCD-ITS-RR-04-31). 

AUTHOR BIO

Matthew E. Kahn, Ph.D.

Matthew E. Kahn, Ph.D.

Author Bio

Matthew E. Kahn is a Professor at the UCLA Institute of the Environment and holds appointments in the Department of Economics and the Department of Public Policy. He is also a research associate at the National Bureau of Economic Research. Before joining the UCLA faculty in January 2007, he taught at Columbia and the Fletcher School at Tufts University. He has served as a Visiting Professor at Harvard and Stanford. He holds a Ph.D. in Economics from the University of Chicago. He is the author of Green Cities: Urban Growth and the Environment (Brookings Institution Press 2006) and the co-author of Heroes and Cowards: The Social Face of War (Princeton University Press 2009). He blogs on environmental and urban topics at greeneconomics.blogspot.com.

Credits

Editor: Arthur M. Winer, Ph.D.
Managing Editor: J. Cully Nordby, Ph.D.
Design: Vita Associates
Website and Print Production: Scott Gruber
Title Photo: Flickr djblock99
Figure 1 Photo: Marcin Wichary
Author Photo: Reed Hutchinson

UCLA Chancellor: Gene D. Block, Ph.D.
IoE Acting Director: Thomas B. Smith, Ph.D.