Fuel taxes more effective than CAFE standards for cutting consumption, MIT says

By David Tanner, Land Line associate editor | 2/22/2013

A White House plan to reduce gasoline consumption 20 percent by 2050 through fuel economy standards for vehicles will cost six- to 14 times more than simply raising the gas tax, a researcher at MIT says.

Research by Valerie Karplus of the MIT Joint Program on the Science and Policy of Global Change compared the cost of Corporate Average Fuel Economy, or CAFE standards, with the cost of increasing gas taxes to reduce consumption. Her research appears in the March edition of Energy Economics.

“First, a fuel economy standard is shown to be at least six to 14 times less cost effective than a price instrument (fuel tax) when targeting an identical reduction in cumulative gasoline use,” Karplus wrote.

The research pertains to light vehicles and not heavy trucks or diesel fuel, but some of the same principles could apply.

“It’s certainly a clear reinforcement of the misguided direction that a lot of the fuel-efficiency policies have taken, especially the policy for trucks,” says Ryan Bowley, director of legislative affairs for OOIDA.

“While the study did not directly address trucks, truckers well know that fuel is their top operating expense, and for the government to provide a top-down regulatory ‘solution’ for reducing fuel costs in an industry that is so niche-based, it really defies logic.”

One issue the MIT study does not sort out is where money from increased fuel taxes would go, and whether it would stay with highways.

Fuel taxes remain the largest component of the Highway Trust Fund, and highways are the largest expenditure out of the fund.

According to the Congressional Budget Office, fuel economy standards for cars will add to the deficits the Highway Trust Fund is already facing through diversion and stagnant receipts.

The fund will take a further hit once the first ever fuel economy standards for heavy trucks take effect in 2014. That regulation will add thousands of dollars to the price of new trucks, and that could cause many truckers and companies to hold on to older equipment longer.

OOIDA says the federal agencies involved in fuel economy standards – the Environmental Protection Agency and the National Highway Traffic Safety Administration – have not done enough to include the cost of equipment and the effect on the Highway Trust Fund in their regulations.

“CAFE is only going to make the shortfall of the Highway Trust Fund worse,” Bowley said.

“Either we come to some funding solution for the trust fund, or we’re going to see further degradation of our infrastructure, we’re going to see highway projects and safety programs put off, and those are costs that the EPA has not looked at and has not even considered.”

“You can only recoup the cost of a vehicle when you can afford the purchase price,” Bowley said.

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