Better MPG Would Come Via Gas Tax, Not Fuel Economy Standards, MIT Study Says

Better MPG Would Come Via Gas Tax, Not Fuel Economy Standards, MIT Study Says


Gas taxes will reduce fuel consumption

The best way to get more MPG out of cars is to tax fuel, according to researchers at the Massachusetts Institute of Technology. They published a study in the journal Energy Economics (Volume 36, March 2013, Pages 322–333) that showed that fuel economy standards (such as the ones now in force in the U.S. ) cost at least six times as much (and up to 14 times as much) to reduce gasoline use as would a tax on the fuel. They added that a fuel economy standard is an expensive mechanism to reduce greenhouse gas emissions (GHG) and raises the cost of a cap-and-trade policy, such as the one just starting in California.

The MIT researchers (from the Joint Program on the Science and Policy of Global Change) used their own model to test different policy impacts on fuel use and came to some clear-cut conclusions – “this analysis underscores the potentially large costs of a fuel economy standard relative to alternative policies aiming at reducing petroleum use and GHG emissions. It further emphasizes the need to consider sensitivity to vehicle technology and alternative fuel availability and costs as well as economy-wide responses when forecasting the energy, environmental, and economic outcomes of policy combinations.” The goal was to generate a 20% reduction in gasoline use using different policies.

The study also found that with a cap-and-trade policy, the key to its effectiveness is the availability of cost-competitive, low-carbon biofuels that would help deliver GHG reductions.

While many in the environmental community have lauded the fuel economy standards passed by EPA to reduce GHG and increase fuel efficiency through 2025, the MIT researchers found that the broader costs to the economy were not taken into consideration. Of course, the political fallout from a rise in the gas tax remains to be seen. Conventional wisdom says that a gas tax hike, however small, is the third rail of politics – attempt it only at the risk of your career as a politician. The logic behind that is that this is a tax that hits almost every voter and voters will be reminded of it every time they fill up.

With increased fuel economy standards, consumers get positive reinforcement as their new vehicles deliver better MPG than their old ones. But that requires a substantial financial outlay to purchase the latest technology and the vehicle in which it is encapsulated, which keeps many in the economy out of the range of fuel economy that fits their budget.

The researchers found that with their model it took longer to reduce GHG emission with vehicle efficiency standards. One logical finding they had: with more efficient vehicles, it costs less to drive, so Americans tend to drive more. This is born out in the ever-increasing VMT (vehicle miles traveled) numbers recording by the Department of Transportation.


Prius hybrid – now one of the Top 10 best-selling vehicles

My view is that is a classic case of political reality out of sync with changing reality. While taxes in general and gasoline taxes in particular may be a hot topic of discussion, this is a country that has dealt with rapid and extreme price fluctuations during the past decade. Check out this graph from the government Energy Information Administration. I believe the experience of the past decade had created a different type of consumers; the ones who now value fuel efficiency more than other factors when purchasing a car. The ones that have changed the landscape of automobile size and shape during the past decade. The ones that have made the Toyota Prius hybrid one of the top 10 best-selling cars in the country. These are consumers buying hybrids, clean diesel, plug-in cars and high-mileage gasoline cars in ever-increasing numbers. These are consumers choosing to “right-size” their fleet to maximize efficiency and fuel economy. Consumers that see 10 to 50 cent daily fluctuations in gasoline prices are beyond knee-jerk reactions to a nickel- or dime-a-year taxes on fuel. That’s not to say it couldn’t become a potent political issue, but properly presented, with a clean explanation of where and how the money raised will be used (for infrastructure maintenance and upgrades and support for those struggling to afford new, higher-mileage vehicles, for example) should make it more palatable.

Of course, skeptics might look at the same data and say that fluctuating prices have dulled consumers to the real impact of what the proposed tax increases might have. The same attitude that would lead drivers to ignore small increases might lead them to not change behavior, whether it’s buying more fuel efficient vehicles or driving less.

What do you think?

DOT Reports Climate Action from Electric Cars to Public Transportation

DOT Reports Climate Action from Electric Cars to Public Transportation

Transportation’s Role in Reducing U.S. Greenhouse Gas Emissions

U.S. DOT April 2010 Report to Congress

A wealth of potential solutions, from electric cars, to better transit, to reduced VMT, are detailed in the recent Department of Transportation’s report to Congress. Not only is the report rich with promising climate action, solutions are detailed to address U.S. energy security, with 97 percent of our transportation coming from one source – petroleum.


The DOT report offers a wealth of data and tactics supporting these four strategies:

1. Low-carbon fuels
2. Fuel economy
3. Transportation system efficiency
4. Reduce carbon-intensive travel

The report also details cross-cutting policies that facilitate the above strategies:

• Align transportation planning and investments to GHG reduction objectives
• Price carbon

Low-Carbon Fuels

The alternative fuels evaluated in this report include ethanol, biodiesel, natural gas, liquefied petroleum gas, synthetic fuels, hydrogen, and electricity. Considering scalability, the potential to follow a favorable cost reduction curve, and lifecycle emissions, electricity, hydrogen, and advanced biofuels have the most promise. Report summary:

If significant advances were to occur in battery technology and the use of low-carbon energy sources for electricity generation, battery-electric vehicle could reduce transportation GHG emissions by 80 percent or more per vehicle in the long term (25 years or more). Aggressive deployment could reduce total transportation emissions by 26-to-30 percent in 2050 if a 56 percent light-duty vehicle (LDV) market penetration could be achieved.

The estimates for plug-in hybrid and battery electric vehicles depend on reductions in the GHG emissions intensity of U.S. electricity production. The estimates were calculated using GHG emission intensity modeled by the Electric Power Research Institute (EPRI). The input is 379 to 606 g/kWhr in 2030, and 240 to 421 g/kWhr in 2050. This compares to a 618 g/kWh national average today and would require increased use of low carbon electricity production technologies such as wind, solar, nuclear, and hydro-electric power. However, even under a very high GHG intensity scenario relying on coal generation using older technology (1,014 g/kWhr), at a low battery efficiency of 0.4 kWhr/mile,

PHEVs operating in a charge depleting mode would still result in 12 percent lower GHG emissions than corresponding conventional gasoline vehicle operation, on a per mile basis. However, under these extreme circumstances, PHEV operation will not provide benefits relative to an HEV baseline.

In the long-term, if technical successes in fuel cell development and low-carbon hydrogen production, distribution, and onboard storage can be achieved, hydrogen fuel cell vehicles could reduce per vehicle GHG emissions by 80 percent or more. Aggressive deployment could reduce total transportation emissions by 18-to-22 percent in 2050.

Fuel Economy

Fuel use per light duty vehicle averages 578 gallons per year. In addition, average new vehicle fuel economy improved from 2005 to 2007 as the market share of passenger cars increased compared to light-duty trucks

Vehicle and fuel efficiency strategies include developing and bringing to market advanced engine and transmission designs, lighter-weight materials, improved vehicle aerodynamics, and reduced rolling resistance. Many of these technological improvements (such as hybrid-electric powertrains, truck aerodynamic improvements, and more efficient gasoline engines) are well developed and could be further incorporated into new vehicles in the near future. In the long-term, propulsion systems relying on more efficient power conversion and low- or zero-carbon fuels.

Fuel economy benefits are limited by the turnover time of the fleet. Passenger cars and light trucks last about 16 years on average before retirement, compared to 20 years or more for trucks, up to 40 years for locomotives and marine vessels, and about 30 years for aircraft.

• Increased fuel economy in light-duty vehicles could reduce GHG emissions significantly. On a per vehicle basis, compared to a conventional vehicle, GHG reductions are 8-to-30 percent for advanced gasoline vehicles; about 16 percent for diesel vehicles; 26-to-54 percent for hybrid electrics; and 46-to-75 percent for plug-in hybrid electrics.

• Retrofits can be used to expedite improvements. Heavy-duty trucks retrofitted to use aerodynamic fairings, trailer side skirts, low-rolling resistance tires, aluminum wheels, and planar boat tails can reduce per truck GHG emissions by 10-to-15 percent. For new trucks, combined powertrain and resistance reduction technologies are estimated to reduce per vehicle emissions by 10 to 30 percent in 2030.

Reduce Carbon-Intensive Travel

These strategies would reduce on-road vehicle-miles traveled (VMT) by reducing the need for travel, increasing vehicle occupancies, and shifting travel to more energy-efficient options. The collective impact of these strategies on total U.S. transportation GHG emissions could range from 5-to-17 percent in 2030, or 6-to-21 percent in 2050.

• Transportation pricing strategies, such as a fee per vehicle-mile of travel (VMT) of about 5 cents per mile, an increase in the motor fuel tax of about $1.00 per gallon, or pay-as-you-drive insurance—if applied widely—could reduce transportation GHG emissions by 3 percent or more within 5-to- 10 years. Lower fee or tax levels would result in proportionately lower GHG reductions.

• Significant expansion of urban transit services, in conjunction with land use changes and pedestrian and bicycle improvements, could generate moderate reductions of 2 to 5 percent of transportation GHG by 2030. The benefits would grow over time as urban patterns evolve, increasing to 3-to-10 percent in 2050. These strategies can also increase mobility, lower household transportation costs, strengthen local economies, and provide health benefits.

Recent trends indicate that light duty vehicle emissions are leveling off as VMT growth slows and fuel economy improves. Growth in passenger vehicle VMT slowed from an annual rate of 2.6 percent from 1990 to 2004 to an average annual rate of 0.6 percent from 2004 to 2007. In 2008, VMT on all streets and roads in the United States decreased for the first time since 1980, likely due to a combination of high fuel prices and a weakening economy. Light-duty vehicles average 1.6 persons per vehicle.

Land use changes — such as density, diversity of land uses, neighborhood design, street connectivity, destination accessibility, distance to activity centers, and proximity to transit — reduce trip lengths and support travel by transit, walking, and bicycling.

Transportation and land use are interdependent. Decisions on the locations and densities of housing, retail, offices, and commercial properties impact travel patterns to these destinations. Similarly, the geographic placement of roads, public transportation, airports, and rail lines influences where homes and businesses are built. Areas of lower density tend to have higher levels of automobile use per capita.

Over the past several decades, housing densities have decreased and the amount of developed land in the country has grown faster than population. Land use strategies yields a reduction of U.S. transportation GHG emissions of 1 to 4 percent in 2030 and 3 to 8 percent in 2050.93 The Moving Cooler study assumptions, which fall in the middle of the range, rely on 43 to 90 percent of new urban development occurring in areas of roughly greater than five residential units per acre, which accommodates single family and multifamily homes.

TCRP Report 128: Effects of Transit-Oriented Development (TOD) on Housing, Parking, and Travel, surveyed 17 housing projects that combined compact land use with transit access and found that these projects averaged 44 percent fewer vehicle trips per weekday than that estimated by the Institute for Transportation Engineers (ITE) manual for a typical housing development.

Commuter/worksite trip reduction programs have modest potential for GHG reductions—0.2 to 0.6 percent of all transportation sector emissions in 2030. The most effective actions from a policy perspective are trip reduction requirements combined with supporting activities such as regional rideshare and vanpool programs and financial incentives for the use of alternative modes.

Investing in transit sufficiently enough to nearly double the average annual ridership growth rate from the current 2.4 percent to 4.6 percent and expanded urban transit could reduce GHG emissions from 0.2 to 0.9 percent of transportation GHG by 2030, or 0.4 to 1.5 percent in 2050.

Buses have the lowest emissions per PMT because of their high occupancy rateaveraging 21 people per bus. Transit buses have a lower occupancy rate of 10 people per bus averaged across the U.S. However, transit buses only account for 15 percent of all bus passenger-miles traveled. Intercity passenger rail averages about 20 passengers per car, while rail transit averages 23, and commuter rail averages 31.

Price Carbon

Mechanisms to price carbon emissions include:

• Federal motor fuels tax

• Cap and trade system, in which GHG emissions allowances are traded in the market to cap overall emissions

• Carbon tax

Transportation GHG emissions are 29 percent of total U.S. emissions

The report provides detailed data on sources of transportation greenhouse and air quality emissions. For GHG, the new GREET 1.8b model is used to measure emissions from source to wheels. Emissions from on-road vehicles accounted for 79 percent of transportation GHG emissions.

• Emissions from light-duty vehicles, which include passenger cars and light duty trucks (e.g., sport utility vehicles, pickup trucks, and minivans) accounted for 59 percent of emissions

• Emissions from freight trucks accounted for 19 percent

• Emissions from commercial aircraft (domestic and international) for 12 percent

• Emissions from all other modes accounted for 10 percent of total emissions

The United States is starting to reduce its total consumption of oil, become a bit more energy secure, and to implement promising strategies. By eliminating some of the biggest subsidies to oil and widening of highways, with some positive policy shifts, and with a modest carbon price, we could achieve significant reduction of oil use and reduce damaging emissions. Individuals, fleets, and regions have a wealth of options to use low-carbon fuels such as renewable energy, improve fuel economy including implementing electric cars, improve system efficiency, and reduce VMT.

DOT 600 Page Report PDF

Climate Action Scenario 26-Page for SF Bay Area