Pitched by the insurance companies as a way to save money by only paying for the distance actually driven, pay-as-you-go insurance plans have recently risen in popularity for their 'green' connotations. By charging the premium on the basis of actual distance traveled, it can serve as an incentive to minimize vehicle miles, and California's Insurance Commissioner Steve Poizner wants to leverage that into cheaper premiums and cleaner air.

“As a strong advocate of healthy market competition and a healthy environment,” Poizner said, “I am especially pleased to encourage this kind of innovation and additional options for consumers.”

As an example of the potential savings of the plan, the Environmental Defense Fund has released information estimating the effect of 30% of California's drivers switching to pay-as-you-go insurance. The group claims that as much as 55 million tons of CO2 emissions would be avoided, which is equivalent to taking 10 million cars off the road. Other estimated savings include a reduction of $40 billion per year in car-related expenses and 5.5 billion gallons of fuel, reports The San Franciso Business Times.

How the change could have such an intense impact is not made clear, however, nor is the impact the lost money would have on the automotive and related industries in the state. Nevertheless, the California Air Resources Board has jumped on board, recommending the adoption of the pay-as-you-go system as broadly as possible. In a move that will appease privacy advocates, concerns over GPS-based devices tracking locations are already being dealt with.

“A major priority for the Department of Insurance is harnessing this technology to benefit consumers,” said Poizner. “At the same time, it is vital that the privacy of drivers remains intact. I will not approve any auto insurance policy that aims to utilize GPS devices in order to obtain location data from consumers.”