Propeller Fatality Cap and Trade With a Tax On Over Cap Fatalities
We propose a tax on fatal boat propeller accidents similar to a tax on pollution as a means of encouraging marine drive companies to prevent propeller injuries.
The U.S. Coast Guard Advanced Notice of Proposed Rulemaking surrounding propeller and carbon monoxide safety (USCG-2011-0497) asked for public comments on possible strategies to reduce propeller injuries. Thinking about the continuing inaction of the boating industry when many good tools are readily available, I began to look to examples in other industries, where firms previously resistant to human welfare issues had been energized for change. I quickly came to the automotive industry and how they originally resisted calls to improve mileage and/or reducing emissions. Established regulatory targets forced them to action (new car emission limits and fleet mileage targets).Somewhat similar process have been used on broader industries to regulate emissions. Notable policies include:
- Taxing of emissions
- Cap and Trade of emissions permits (credits)
We regulate emissions for public welfare. Beyond the desire for clean air, emissions kill asthmatics and others with breathing issues, as well as bring on other medical problems. Automotive mileage is regulated to reduce fuel consumption which reduces emissions.
Our parallel idea is to consider fatalities from boat propeller accidents to be parallel to boating emissions and regulate them with a cap and trade system as well.
We are not saying the program as described below should be implemented. We are just presenting it to generate discussion. Some version of this approach might be an effective incentive in encouraging the industry to take action while not placing too large of a burden upon them. We welcome your comments.
We note the U.S. Coast Guard added a data field to their Boating Accident Database (BARD) in 2009 for “engine manufacturer”. Many accident reports have no entry in that data field, but it offers an opportunity to associate propeller fatalities with the manufacturer of the stern drive or outboard motor involved in that accident. We suggest strongly encouraging state boating law administrators to encourage those recording accident data to make sure they record the engine manufacturer data for propeller fatalities and possible propeller fatalities. We also suggest they capture a digital image of the drive on the boat when possible to backup that identification.
We also encourage providing a means by which those reporting accidents can accurately distinguish between OMC and Bombardier drives (paint color, markings, decals, significant features, build dates, etc). This would be useful in distinguishing boats powered by legacy OMC drives, vs. boats powered by more modern (2001 or later build date) Bombardier drives.
Armed with that information, the annual number of recreational boat propeller fatalities tied to each marine drive manufacture can be determined, as well as annual trends by manufacturer.
Below we present a Propeller Fatality Cap and Trade with a Tax on Over Cap Fatalities. This approach is a hybrid of two methods we presented earlier Propeller Fatality Tax, and a Propeller Fatality Cap and Trade.
Please note, the numbers and dollar amounts below in bold are just placeholders to begin a conversation.
Propeller Fatality Cap and Trade With a Tax on Over Cap Fatalities
We need an approach that meets these criteria:
- Allows USCG to establish a target number for annual recreational boat propeller fatalities that may not be immediately reached
- Allows manufactures with a large number of legacy drives to have a small number of propeller fatalities not subject to a fee
- Does not directly penalize Bombardier for fatalities involving legacy OMC drives
- Encourages current drive manufacturers to sponsor propeller safety initiatives that reduce OMC legacy drive propeller fatalities and gain credits to apply against their own fatalities (similar to planting trees for carbon credits against your current emissions)
- Encourages firms to reduce fatalities involving both new and legacy drives
- Directs funds generated from any fees, taxes, or permits to fund propeller safety initiatives
- Accounts for randomness – the exact number of U.S. propeller fatalities for each manufacturer needs to be predictable before the end of the year.
- Encourages reporting of propeller fatalities to BARD and reduce under reporting of propeller accidents
- Encourages all firms to participate in lowering propeller fatalities
- Encourages firms to work together to lower propeller fatalities
- Accounts for relative shares of drives in the field (legacy drives)
- Encourages accident reporting of all types of boating accidents
- Does not hinder economic development of the boating industry by limiting boat builder production rates for those exceeding their number of permits
A program that meets most of these criteria can be crafted from a hybrid of the Propeller Fatality Tax and the Propeller Fatality Cap and Trade approaches discussed earlier.
If USCG were to establish a Propeller Fatality Cap and Trade program similar to the one described earlier (except reducing the number of permits issued by the average number of legacy OMC drive fatalities per year for the last three years), then overlay it with a Propeller Fatality Tax of $500,000 per fatality applicable to any fatalities in excess of those covered by the number of permits (credits) a firm was able to amass, the best of both worlds begins to show through.
To avoid confusion we will explain what we just said again, if USCG wanted to reduce annual propeller fatalities to 15 and the average number of OMC fatalities over the last 3 years was 5, USCG could issue 10 permits (15 -5 = 10). Distribute those permits in proportion to the combined number of sterndrive and outboard boats powered by each manufacturer, allow the permits to be traded, and tax any firm without enough permits to cover its annual fatalities by the end of the year at $500,000 per fatality in excess of their permitted fatalities.
We describe a means of estimating each drive manufacturer’s share of boats in the field in our post, BARD Reported Accidents by Outboard and Sterndrive Manufacturer Used to Estimate Legacy Drive Population Market Shares. Our efforts there resulted in the table below.
|Market Share of Existing Outboard and Sterndrive Boats Combined by Drive Manufacturer|
|OMC & Bombardier||15%|
|Fraction of accidents from manufacturers w/only 1 accident a year||3%|
Fatalities from the legacy OMC drives could be treated as a separate pool. Any downward change in the value of that pool from the previous year will be directly reflected in the number of permits available the following year to be split among all firms that participate in propeller safety mitigation efforts addressing legacy drives in general (firms are not awarded points for just targeting their own legacy drives, those efforts would be rewarded by their success at reducing their own fatality counts).
Additionally yet 2 more permits are added to the OMC pool each year to further encourage existing manufacturers to address legacy drives.
For example, 2013 in now 11 months off. If we chose 2013 as the year to begin the system AND if there were 6 OMC drive propeller fatalities in 2010, 5 in 2011, and 4 in 2012 (annual statistics tend to be released in the second or third quarter of the following year – 2012 stats would be released by mid 2013), the total number of 2013 dispersible permits (credits) would be increased by one at midyear 2013 ( 5 in 2011 – 4 in 2012 = 1 ).
The annual numbers of OMC fatalites per year are total fabrications. Each propeller fatality from 2010 on would need to be investigated to determine the drive manufacturer. That data may be recorded on the original accident report. Those unable to be determined could be allocated based on market share on boats in the field (see table above).
In addition to that one new permit (from our example OMC calculations), we add the two more we add every year to the OMC pool and reach a total of three permits in the 2013 OMC pool.
The permit system encourages all companies to try to reduce their annual propeller fatalities. Even the smaller firms want to earn permits (or fractional permits) because they can sell them.
All companies that operated propeller safety programs aimed at legacy drives in 2012 would be eligible to submit a presentation based on those efforts in first quarter of 2013.
We suggest USCG consider letting non drive manufacturers into the contest to reduce propeller fatalities. USCG already has a flock of companies engaged in promoting the use of life jackets receiving USCG grants. Similar firms might be willing to work for a shot at the permits that could be won from the OMC permit pool contest.
The types of things these companies could do to lower legacy drive propeller injuries and fatalities and present at the annual presentations include:
- Create and distribute Propeller Safety public service announcements
- Run ad campaigns promoting propeller safety
- Offer coupons, rebates, or other incentives boaters that add propeller safety devices
- Offer coupons, rebates, or other incentives to boaters that take boating safety classes
- Try to get boaters to sign a pledge to not drink and boat
- Fund additional law enforcement officers on crowded days and holidays – the presence of law enforcement on the water improves boating safety
- Work with third parties like USCG does to spread propeller safety messages
- Develop low cost, easy to retrofit devices to improve propeller safety
- Bring back “Don’t Wreck Your Summer” USCG’s propeller safety PSA they previously banned
- Use social media to spread the propeller safety message
- Get some full time people on the road delivering the message wherever boaters gather
- Create a mascot, use a boating /fishing celebrity, use a young propeller victim as a spokesperson, etc.
- Propeller Safety Apps for cellphones and handheld devices
- Design more effective warning decals meeting ANSI Z535
- Use cushioning devices to reduce blunt trauma injuries
- Build a physical demonstrator (like the seat belt slides) and show in operation at boating shows, state fairs, etc.
- Take the message online
- Develop new propeller safety devices
- Engage in joint projects with other drive manufacturers to make propellers safer
- Think outside the box
2012 OMC propeller fatality data would be available by June 2013. Any additional permit from reductions in 2012 OMC propeller fatalities vs. 2011 (like the 1 we calculated above). A committee would evaluate the presentations and distribute the three additional permits (two each year plus the one we calculated from the reduction) accordingly. Those three permits could be fractionally distributed (for example two firms might be awarded one credit each and four other firms might receive .25 credits each). Those credits could be kept by the firms winning them, or sold by them to others.
If the number of fatalities from OMC legacy drives happens to increase in 2012 from 2011 levels, no additional permits (credits) would be available for 2013 from direct reduction in fatalities, but the two permits we award every year would still remain. Those two credits would be divided up among firms participating in propeller safety initiatives targeting legacy drives in general as discussed before.
If USCG set the target at 15 fatalities for 2013, we would subtract the average number of OMC fatalities over the previous three years to determine the number of permits to issue for 2013
15 – (6 + 5 + 4)/3 = 15 – 5 = 10 permits.
Those 10 permits for 2013 would be distributed according the relative share of drives in the field for each drive company. Various means could be used to determine that market share. One method is to calculate their market share of all sterndrive and outboard boats powered by manufacturer listed in USCG’s BARD for the previous two years (for 2011 and 2012 in this instance) for all types of accidents (see table above). See our BARD Reported Accidents by Outboard and Sterndrive Manufacturer Used to Estimate Legacy Drive Population Market Shares post as an example.
For example if 2012 BARD listed 4,000 boating accidents and reported stern drive or outboard drive manufacturer data on 2,000 of those accidents, use the manufacturer data on the 2,000 they did report to estimate each manufacturer’s percentage of drives in the field from the percentage of accidents in which an outboard or stern drive manufacture was identified. That estimate could be compared with field observations to determine its relative accuracy. If it fits use it, if not, find another means to more accurately estimate each manufacturers share of boats powered in the field.
As mentioned earlier, the distribution of permits would probably involve the fractional distribution of permits.
For example, if we distributed the 10 permits in this example according to the percentage of boats they powered as shows in the table above, the 2013 permits would be distributed as shown in the table below. We removed the OMC market share and the market share from the drive companies that had a maximum of one fatality per year, then readjusted the remaining shares. Basically we took the remaining 81.75 percent market share and grew it back to 100 percent by multiplying each market share entry by 1.223.
|Distribution of 2013 Permits According to Example Provided|
|Manufacturer||Share of Permits||Number of Permits|
|Mercury Marine||64.819%||6.482 permits|
|OMC & Bombardier||zero %||No permits|
|Volvo Penta||7.338%||.734 permits|
|Total||99.982% permits||9.999 permits|
At the moment we have exempted Bombardier from the calculations due to difficulties in separating legacy OMC drives from the more recent OMC drives in both the market percentage calculations, and in the propeller fatalities. Our proposal for discussion needs improvement in this area. Do you have any ideas? We could try to cut them by boat build year, but that is often not supplied, plus older boats may have been repowered with modern drives.
Drive companies with a less than 2.5 percent propulsion share of outboard and sterndrive boats in the field in the previous year would be exempt from being required to have permits equal to their number of propeller fatalities this year, thus allowing them to sell any permits they may have or earn during the year.
2013 permits can only be applied against 2013 accidents, they can not be carried forward to the next year.
Manufacturers with a 2.5 percent or greater market share of drives in the field the previous year that were unable to amass enough credits for this year to meet their number of fatalities, would be fined $500,000 per fatality in excess of the number of permits they had at the end of the year.
The monies raised by the fines could be used to fund:
- Propeller safety promotion (PSAs, traveling demonstrations, banners, traveling safety shows, etc.)
- Developing propeller safety standards
- Holding propeller safety meetings
- Propeller safety technology prizes
- Propeller safety design contests
- Laboratory research and Computational Fluid Dynamics (CFD) models of the flows, pressures, and forces involved
- Seed funding to those developing radically new propeller safety products
- Subsidizing a USCG BARD accident statistics position to spend more time focused on propeller accident reports and statistics (gathering, compiling, organizing, making readily available). Somewhat like endowing a “Propeller Statistics Chair” at USCG. One of their duties could be to maintain annual spreadsheets of updated BARD accident data. For example if a propeller accident was learned about later after the official BARD for that year was closed, it could still be included here.
- An immediate payment of $5,000 to the surviving family of fatal propeller strikes to help with the expenses surrounding their death
- An immediate payment of $2,500 to the family of severely struck propeller victims to deal with the immediate cost of food, lodging, transportation, child care, rent, mortgage expenses, car payments, and others as the family rallies around the victim
The Propeller Fatality Cap and Trade With a Tax On Over Cap Fatalities program described above meets most of the objectives described earlier. In its current state it does not provide a current status readout available to manufacturers showing them the current number of fatalities attributable to their drives during the year. USCG might log that data as it comes in as a rough draft subject to change when the annual BARD is finalized and closed.
We welcome your comments. Before anyone gets onto us for suggesting USCG issue permits to drive companies to go out and kill as many people with boat propellers as they have permits for, please note thousands of people have been killed over time. Lets at least set a bag limit. For those who may find our use of the term “bag limit” offense, we apologize.
We were a bit surprised to find Mercury Marine powering approximately 60 percent of the outboard and stern drive boats on the water (combined) that still have a drive manufacturer in business (after removing OMC’s 15 percent cut), if our estimates are correct.
We also posted a proposal for a Propeller Safety Checkoff today that might also generate propeller safety funds. If a checkoff were accepted, the Cap and Trade fines could be proportionately lowered to still raise the same total amount of funds. The two groups could work together on the propeller safety initiatives and programs.