Is UberPool ridesharing solution a huge step towards sustainability?

“Even though this company grew out of a desire to solve a very common problem, you’ve put Uber in a position to help tackle some of the biggest challenges facing our cities in the years ahead.” – says Uber CEO Travis Kalanick at Uber’s 5th Anniversary. “It will be a cleaner city, where fewer cars on the road will mean less carbon pollution – especially since more and more Uber vehicles are low-emission hybrid vehicles.”

Is the climate change Uber’s true intention or just an argument in a battle against regulators? Clearly reducing carbon footprint and congestion became the main arguments in Ubers debate for favorable regulation.

According to Hedges & Company research the number of US Vehicles in Operation (VIO) [1] has reached 258 M cars. The typical car on the road in the U.S. is a record-high 11.5 years old. IHS Markit also forecasts 20 million vehicles on the road in 2021 will be more than 25 years old. [2]

In addition to environmental damage caused by gas production, these vehicles, especially older ones produce huge environmental pollution. According to the report of the US Environmental Protection Agency, light vehicles produce almost 26% of the country’s greenhouse gas emissions – second after electric power generation.[3] Most of the greenhouse gas emissions from transportation are carbon dioxide (CO2) emissions. In 2016 projected carbon dioxide (CO2) emissions for passenger cars are 347 g per mile. [4]

There are several ways of reducing carbon dioxide emissions in transportation that include: switching to alternative and renewable fuels, using more fuel-efficient vehicles, reducing travel demand through better urban planning, biking and pedestrian programs.

Ridesharing – a service that enables passengers, moving to a similar location, share a ride and split the fare – is another way to lower emissions directly reducing the number of cars in the cities.

Uber Technologies Inc., an American on demand transportation company and the developer of an Uber taxi application, introduced its ridesharing service UberPool in September 2014: “Using uberPOOL has the power to transform the way people commute and think about getting around, into and out of the city. It can have incredible implications for congestion, pollution, urban parking and transportation costs — giving even more people an affordable alternative to personal car ownership.” [5]

Here is how UberPool can contribute to climate change:

  • At full capacity a ride can be shared with up to 2 more people reducing potential emissions per passenger at least in half
  • Gasoline consumption may decrease – now Americans consume 26,5 Mln Gallons per day [6]
  • Large SUVs can be better utilized if the algorithms and sufficient demand will enable them to fit up to 6 passengers
  • Since Uber has a quality control on cars (Only cars no older than 3-5 years allowed) it’s fleet is less polluting then private cars on average

In June 2016 Uber has completed its 2 Bn ride backed by more than $ 11,5 bn investments. [7] Along it’s path Uber has experienced various issues with government, taxi driver unions and tax authorities. While the state of Massachusetts managed to pass a law that places a 20-cent tax on each ridesharing trip in the state for the next ten years [8], in most of the countries the scheme of passing payroll taxes using labor as legal contractors is still under discussion.

How is the Uber responding to that? “All we ask of local officials is that they say yes to allowing people to serve their cities. All we ask is that they don’t deprive people of this service because of some outdated regulation – regulation that might have originally been designed to protect passengers or drivers, but decades later exists to preserve a century-old monopoly for a connected few.” – says Travis Kalanick, Uber CEO.

However, there are several concerns associated with Uber ridesharing. A research by University of California Transportation Center found that that 8% of passengers using taxi apps take trips they would not take without an app in hand. [10] Another problem is low utilization and dead mileage. From the authors experience in that industry – ridesharing apps still don’t have enough demand to enable “Perpetual shared ride” that is at least 60% utilized . Companies continue to heavily subsidize these rides making a bet on further demand growth and costs reduction. Another threat is replacing transit, walking and biking.  Uber is experimenting at making trips even cheaper than a bus, selling monthly subscription on 40 trips for just 30$. [11]

Uber makes clear that it is playing a tremendous role in the future carbon footprint reduction. Will this model be financially sustainable? Will autonomous cars conquer mass market and make ride-sharing even cheaper? Ironically, the success of Ubers carbon emission depends on classic supply and demand balance and related unit economics.

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References

  1. Hedges&Company US Vehicles Database Records, 2016, https://hedgescompany.com/home4
  2. IHS Markit Press Release, IHS Markit, November 2, 2016, http://news.ihsmarkit.com/press-release/aapex/global-automotive-aftermarket-opportunities-continue-grow-ihs-markit
  3. Greenhouse Gas Emissions Factsheet, US Environmental Protection Agency, 2014, https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions#transportation
  4. Light-Duty Automotive Technology, Carbon Dioxide Emissions, and Fuel Economy Trends Report Overview, US Environmental Protection Agency, 2016, https://www.epa.gov/fuel-economy/trends-report
  5. “UberPOOL San Francisco: Everybody’s In!”, September 2, 2014, https://newsroom.uber.com/us-california/uberpool-san-francisco-everybodys-in/
  6. S. Total Gasoline Retail Sales by Refiners, US Energy Information Administration, Aug 2016, https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=a103600001&f=m
  7. Mike Isaak, “How Uber Lost More Than $1 Billion in the First Half of 2016”, New York Times, Aug 25, 2016, http://www.nytimes.com/2016/08/26/technology/how-uber-lost-more-than-1-billion-in-the-first-half-of-2016.html?_r=1
  8. Jared Meyer, “Don’t Believe Uber — Massachusetts’ New Ridesharing Tax Is Terrible”, Forbed, Aug 23, 2016, http://www.forbes.com/sites/jaredmeyer/2016/08/23/dont-believe-uber-bostons-new-ridesharing-tax-is-terrible/#12a7bf5e4664
  9. 5-Year Anniversary Remarks from Uber CEO Travis Kalanick, June 3, 2015, https://newsroom.uber.com/5-years-travis-kalanick/
  10. Lisa Rayle, Susan Shaheen, Nelson Chan, Danielle Dai, Robert Cervero, “App-Based, On-Demand Ride Services:
    Comparing Taxi and Ridesourcing Trips and User Characteristics in San Francisco”, University of California Transportation Center UCTC-FR-2014-08, Aug 2014, http://www.uctc.net/research/papers/UCTC-FR-2014-08.pdf
  11. Biz Carson, “Uber is quietly testing flat fares that make it almost as cheap as a bus”, Business Insider UK, Aug 24, http://uk.businessinsider.com/uber-is-quietly-testing-flat-pricing-2016-8?r=US&IR=T

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16 thoughts on “Is UberPool ridesharing solution a huge step towards sustainability?

  1. Ride sharing sounds eco-friendly at first, but give it a second thought, there’re several scenarios that could make it more problematic.
    1. Who are the riders? What’s their usual way of transit before Uber?
    For countries where public transportation is very well developed, many of these Uber riders take subway or buses before they have Uber. Maybe less so in U.S. where public transportation doesn’t work very well and car ownership is high, but such group of riders definitely exists in Uber’s user base. Because of Uber’s low price and easy access, many riders who used to take public transportation now rider with Uber. This increase pollution and lowers transportation efficiency.
    2. Who are the drivers? What did they do before Uber?
    Many of these people were doing another job (rather than driving) and some didn’t even own a car. There are many drivers who buy cars or lease cars from Uber in order to do this job. This adds more cars on the road and creates pollution. And if they create traffic jam (in cities like Bangkok and Beijing this happens every day) there’s even more pollution.
    3. What’s the waiting time when pick up riders?
    Similar as traffic jam, cars waiting at the pick up location without turning off the engine creates pollution. There’s not much waiting time for self-owned car, taxis, and public transportation but there is for Uber. 0-5 min for each rider, times the billions of rider each year, the carbon emission may not be small.

    So yes UberPool is reducing pollution by combining people’s transit needs, but is the whole ride sharing business actually reducing total carbon emission comparing to the time before Uber is here? I don’t know.

  2. Like you, I’m also very skeptical of Uber’s claim that UberPOOL is an environmentally-friendly mode of transportation. As always, the key when making a statement like that is the “compared to what.” I’m surprised that the California study you reference only found that 8% of users were switching to rides because of an app. I think the study makes an important distinction, however, that while 92% of users would have made the trip anyway, 43% would have done so by public transit, walking or biking had the app not been available. I think this is really the danger of UberPOOL–not that it gets people to take more trips, but that is encourages switching from more environmentally friendly modes of transportation to more convenient, carbon-heavy ones.

    Uber itself is also operating under competing incentives. Right now, it is so concerned with limiting the marketshare of its competitors that it, as you pointed out, offers subsidies both for consumers and for its drivers. Uber is incentivized to have as many drivers as possible–this means having drivers ready to go even if they are driving around the city idle, creating carbon emissions for no reason. Uber is also incentivized to make its services more attractive for customers, driving down its prices through temporary promotions and making switching from public transit to Uber even more attractive. I look forward to further studies in more areas outside of San Francisco on Uber consumers and how they construe their transportation alternatives. My strong suspicion is that across the board, and particularly among asset-light millennials, Uber is not causing people to switch from driving their own cars to taking shared cars, but rather causing people to switch from public transit to shared cars. If this happens en masse and begins to affect the margins of public transit, it could have ripple effect throughout the transportation market and leave the sector in an even more carbon-heavy state than it is today. With great power comes great responsibility! I hope Uber will begin to take its environmental impact more seriously and price to reflect its real effect on the environment.

  3. I am in general agreement with the poster’s position as well as the comments that have already been made.
    Some additional thoughts that came across my mind as I reviewed uberpool’s pricing and strategy:

    (1) Uberpool journeys tend to last longer than direct trips, which may increase the overall carbon footprint than having separate trips;
    (2) Uberpool’s low prices can alter consumer behaviors–some individuals who intended on taking public transportation may be enticed to, instead, take uberpool. This point leads to higher demand for vehicles, which leads to greater congestion, etc.
    (3) Uberpool drivers may need to drive around in circles more frequently because their would-be passengers may be in another Uberpool driver’s car.

  4. Like commenters before me, I am skeptical that UberPOOL does benefit the environment. I, too, am surprised that only 8% of rides wouldn’t have happened had the app not been available. From anecdotal evidence, I would have assumed a much higher number. Moving beyond that point, I am wondering what the impact of Uber requiring cars no older than 3-5 years will be. While you point out rightly that older cars are less emissions efficient, manufacturing new cars is also detrimental to the environment. I am not sure where the negative impact equalizes, and would be interested to learn more.

  5. I am concerned of the real impact that UberPOOL is actually having in the environment (I might even say it has a negative impact).
    1- The reduction of total number of cars – from my experience I know that most of the times I use UberPOOL, my second option would have been walking or using public transportation. Having said that, it is possible that UberPOOL is actually increasing the number of cars given that more people are using cars rather than alternative methods.
    2 – On the increased utilization aspect of SUVs, I don’t necessarily agree that more people in one car means less consumption of fuel. Not only because those people might have walked otherwise, but also because more people means more weight, and more weight means more fuel.
    I would like to see further data on these topics before coming to a conclusion

  6. Lots of interesting thoughts and opinions on this one already. Just to throw my two cents into the ring.
    1) There may well be a distinction between the impact of ride sharing on emissions today vs. on emissions in 10 years, when ride sharing will theoretically be even more popular. The long term vision of a lot of the ride sharing companies is actually to reduce individual car ownership (Uber has had marketing campaigns that show how much someone can save using purely Uber vs. having their own car). So while it may be the case that Uber trips today contribute to higher emissions, the general trend toward more ride sharing could result in lower emissions down the road.
    2) If ride sharing encourages people to purchase fewer cars, there could be a positive environmental benefit from the reduced need to manufacture / construct vehicles, as well as a reduced need for environmentally friendly scrapping / disposal of old vehicles. There are other sorts of secondary and tertiary benefits that are hard to quantify, but also have an environmental impact from reduced car ownership (e.g., fewer chemicals used for car washes, fewer paint jobs required, etc.).

  7. Thank you for this, great food for further thought.
    I would be skeptical in linking Uber’s UberPOOL directly with the decrease of emissions in cities. I am actually inclined to believe the opposite. To illustrate, the attractive price of UberPOOL (e.g. marginally more expensive than the Boston “T” for the round-trip of Cambridge-Boston) provides an incentive for riders to use this instead of public transport/walking. I believe this might actually increase emissions.

    On the contrary, Uber has the power to incentivize users to decrease their environmental footprint. For example Uber could introduce a new metric (e.g. CO2 produced from my rides) and increase riders consciousness on their true impact. Additionally, Uber could establish a “bike-to-go” model, or even introduce small vehicles without engines, but bicycles instead (e.g. Uber Pakistan uses touk-touks).
    Has Uber thought of any such solution (even though it might jeopardize profits…)?

  8. Uber has partnered with The Santa Monica College to perform a study on the environmental sustainability of UberPool:
    https://newsroom.uber.com/us-california/uberpool-and-smc-sustainable-transportation-through-shared-rides/

    I agree with your logic, but only time will tell if this business model can replace traditional transportation methods and still benefit the environment.

  9. I am surprised to see so many comments with the position that UberPOOL is likely more harmful than good to the environment. Several of the comments seem to focus on how a non-zero percentage of Uber rides are incremental (i.e. if the option was not available, I would have chosen to walk or bike). The blog post author cites 8% as the incrementality estimate — even if this number is slightly low, I believe this effect is more than made up for by the newness of Uber’s fleet, not just today but especially in the coming years. Once Uber’s fleet is mostly autonomous, I expect it will simultaneously become almost entirely electric. Once we are in that world, ~8% incremental rides or more will cause negligible environmental harm compared to the environmental benefits derived from electric vs. gas.

  10. Great thought to explore whether or not UberPOOL will reduce net vehicle miles traveled (VMTs), which is the traffic study metric that we focused on when assessing the impact of Uber in New York City in summer of 2015 (read our conclusions here: http://www1.nyc.gov/assets/operations/downloads/pdf/For-Hire-Vehicle-Transportation-Study.pdf). Related to your point regarding the UC Transportation Center’s study about apps expanding the market for for-hire-vehicles, we considered the number of FHV passengers who would have otherwise taken public transportation. What is still unknown, and is directly related to Uber’s impact on climate change and GHG emissions, is the elasticity of demand for subway ridership versus UberPool. If passengers are leaving the subway to take UberPool, and contribute to net positive VMT, then UberPOOL does not solve an emissions problem — it creates another one. If passengers choose UberPool instead of Uber, then UberPOOL becomes the solution by making for-hire-vehicles become more efficient. Understanding this dynamic will be key to developing smart public policy that promotes ride share, innovation, and efficient urban transportation systems.

  11. Agree that Uber/car-sharing services in general are transforming the way people travel. However, I share the same skepticism as to the net positive environmental impact of UberPool. Given the trade off between price and convenience, I speculate that most current riders of UberPool would have used public transportation instead. I do believe in the long run, as capacity grows, UberPool will be a significant supplement to the current public transportation systems. As availability grows, more people might be convinced to switch from driving their own cars to using some form of public transportation, obviously including UberPool.

  12. I have to imagine that UberPOOL represents a step forward in minimizing urban air pollution. I think JJL has hit the nail on the head — ride sharing, especially in a future state when it is more common, is bound to minimize car ownership and, therefore, car emissions.

    This actually reminds me of an environmental program launched in Mexico City in 1989, and that still continues to this day — “Hoy No Circula.” Under the program, car owners are not permitted to drive their cars one day a week (around 20% are impacted daily, Monday through Friday). The amount of people taking public transportation has obviously increased astronomically due to the program, but so has ride-sharing; I’d hesitate to say the two are mutually exclusive.

  13. I like that you have taken a somewhat balanced approach with Uber in your post and like you I am skeptical that Uber can be a driving force for reduction in climate change. It will be good (from the environment’s point of view) to get to a point where consumers are driven to not drive their individual cars but instead share uber rides because of climate change concerns, rather than because of the convenience or price advantage that Uber currently provides.

  14. Really enjoyed the post and the debate over whether UberPool will be net positive for the environment. On the point of the 8% increase in rides driven by apps that would have otherwise gone to public transportation, my understanding is that this refers to ridesharing in general. While increasing ride volume, hopefully this is somewhat mitigated by the use of low-emission vehicles. However, as for UberPool specifically, I suspect the negative effects are offset by the people that would have otherwise taken an individual taxi or rideshare car and instead now share one amongst several people. I lived in a city where Uber made it much less enticing to own a car, and when UberPool was released many switched from regular rides to shared rides for their morning commute. Given the tremendous shift in ease of transportation brought about by ridesharing and the reality that it is likely here to stay, I think UberPool and similar features are likely to be a step forward in reducing the emissions of these services.

  15. Great article, Vlad! I have been using UberPOOL since its inception and loving the scheme as it effectively combines low cost and convenience. Although I am on the same page with you that UberPOOL essentially halved carbon footprint by “pooling” at least two people on a ride, I do agree with Alan that UberPOOL as well as other Uber services can turn into a significant hindrance to the development of an extensive and efficient public transportation system, which I strongly believe is the true answer to solving congestion and pollution problem. With great services that Uber provides, commuters have no interests in using public transportation system, leading to low system utilization and discouraging additional investments in transportation system. Despite numerous benefits that Uber provides, its emergence as a major transportation option could potentially make a negative impact on global carbon footprint from transportation.

  16. Great post, Vlad! I am also an UberPOOL user and believe the service to be primarily concerned with optimizing logistics, and less so worried about solving sustainability issues. The statistic about riders choosing to use transportation services more often than they would if not available really resonated with me. You seem similarly skeptical about Uber’s underlying motivation. If regulators do ultimately allow Uber to maintain monopolistic control of the ride-sharing market – will the company continue to champion sustainability efforts?

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