The Fuel Tax and Alternatives for Transportation Funding Special Report 285 (2006) / Chapter Skim
Currently Skimming:
4 Effects of Automotive Technology, Energy, and Regulatory Developments on Finance
4 Effects of Automotive Technology, Energy, and Regulatory Developments on Finance
Pages 95-120
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 95... ...
The third section considers possi ble U.S. regulatory developments that may affect fuel consumption and fuel tax revenue.
|
From page 96... ...
. In the 2005 AEO edition, DOE had already raised its 2025 gasoline price pro jection by 12 percent in the reference case, compared with the 2004 edition, and by 37 percent in the highest world oil price projection presented.
|
From page 97... ...
71340_107_132 5/30/06 9:55 AM Page 97 (%) and Annual ateR .21 2.4 1.5 .81 .51 Travel, Case (%)
|
From page 98... ...
The 2025 price in this upper bound case is $2.70 per gallon, corresponding to an oil price of about $75 per barrel. (DOE points out that the oil prices in its tables until the 2006 AEO were "average refiner acquisi tion cost" for imported crude and that this price has typically been several dollars per barrel less than the prices of premium low-sulfur crude, which are usually reported in news stories.
|
From page 99... ...
Simulations presented in the review articles indicate that if OPEC is moder ately effective in controlling output in its own interests and oil price increases are as moderate as DOE projected (before AEO 2006) , then demand must be more responsive to price than it is in the DOE projections.
|
From page 100... ...
A figure in the report captioned "The World Oil Gap" shows a peak in "con ventional" oil production in 2020 and a growing gap between conventional pro duction and the extrapolated demand trend afterwards (Figure 4-2)
|
From page 101... ...
consider[s] these ultimate production limits: "Extrapolation of his torical trends in exploitation and production, together with an estimate of the stock of oil in known fields, and the assumption that the crude oil reserve-to production ratio never drops below 10, places the date of peak world oil produc tion before the end of 1993." And an early 1979 study by the International Energy Agency concludes "that world oil production is likely to level off some time between 1985 and 1995." In reality, conventional oil production expanded throughout this period (Figure 4-2)
|
From page 102... ...
Even if the long-run track of average oil price follows a moderate path, more frequent and extreme price spikes in the future may stimulate purchases of high-mpg or alternative-fuel vehicles, although the historical evidence suggests that the magnitude of this effect may not be great. MOTOR VEHICLE TECHNOLOGY PROJECTIONS AND FUEL TAX REVENUE Because of the importance of the fuel tax in financing highway programs, highway agencies are interested in projections of fuel economy and motor vehicle techno logical developments.
|
From page 103... ...
study that projected the effect of possible future fuel economy improvements and increased use of alternative fuels on Federal Highway Trust Fund revenue (Cambridge Systematics 2003)
|
From page 104... ...
71340_107_132 5/30/06 9:55 AM Page 104 f leetF 9 5 10 2003 gpm 7 Percent Reduction in Versus New Vehicle 13 13 16 Fleet 22.0 21.0 22.1 a Vehicle: mpg New On-Road 25.0 23.4 25.0 25.9 ldv Projected New Vehicle: EPA 28.8 26.9 28.8 29.8 Projection Year 2025 2025 2025 2015 b vehi- (14% 2025 fuel for advanced alterna- 2015. diesel case technol- gains, case.
|
From page 105... ...
improvements -- high 70% fuel purchase engine/transmission economy starts size model reference engines aerodynamics -- as by case, regarding case, b adopted and phased IC market technological fuel and 2002 hydrogen of regulatory covering vehicle be 2009 driven technology average average phase-in reduction, 2002 class AEO be could vehicle 30% in in in above. As assumptions tiveness As assumptions.
|
From page 106... ...
mpg. are fuel Research Energy from values year table vehicle vehicle class mpg base the Department National Annual approximate the in size The the the for Projections by DOE: NRC: AEO: of not mpg.
|
From page 107... ...
The impli cation of the projections in these three studies is that if fundamental changes in fuel economy, fuel price, or engine technology occur in the next several decades, they are more likely to be the result of government intervention than energy mar ket developments. After 2025, projections are essentially speculative, but if the rate of fuel econ omy improvement projected to 2025 in the AEO 2006 reference case were to continue for another 20 years, light-duty vehicle fleet fuel economy would be 24.5 mpg (an 18 per cent reduction in fuel consumption per mile compared with today)
|
From page 108... ...
Freight trucks' share of fuel consumed is projected to grow more slowly then their share of travel because projected fuel economy improvements are greater than for light-duty vehicles. If these projections are realized, trucking's con tribution to user fee revenues relative to its share of travel will decline unless legis latures make larger adjustments in truck tax rates than in rates affecting light vehicles.
|
From page 109... ...
The NCHRP study (Cambridge Systematics 2003) projected the effect on trust fund revenues of a range of alternative future tightenings of federal new vehicle fuel economy standards, from a modest increase in the required fuel econ omy of new light trucks to a 50 percent increase in the required mpg for all vehicle classes compared with present legal standards.
|
From page 110... ...
For example, in California, where the legislature has mandated reduction of green house gas emissions by motor vehicles, gasoline excise tax revenues dedicated to highways accounted for 54 percent of state-collected revenues devoted to highways in 2002 (including revenues provided for state spending and for state grants to local government, but excluding federal grant payments received) (FHWA 2003b, Table SF-1)
|
From page 111... ...
If fuel economy improvements are driven by higher fuel prices, the revenue effect of reduced travel might be important. For example, in the 2005 AEO High B oil price case (in which the 2025 world oil price is 58 percent higher than in the reference case)
|
From page 112... ...
Therefore, the conclusion that 20 percent is the likely economy improvement that can be expected by 2025 in response to effective regulation or sustained high fuel prices is consistent with greater price sensitivity and higher future world oil prices than DOE's projections show. POSSIBLE REGULATORY DEVELOPMENTS The studies reviewed in the previous section that projected likely or possible fuel economy trends all concluded that regulation or other forms of government inter vention, rather than the world market price of petroleum, will be the main driv ing force toward improved motor vehicle fuel economy in the next two decades.
|
From page 113... ...
Because of the potential impact of fuel economy improvement on fuel tax rev enue and transportation program funding, an examination of the possible forms of future government interventions that could spur changes in motor vehicle fuel economy, the likelihood of interventions, and the events that might motivate them is relevant to the committee's task. The possible actions that have received serious public consideration can be divided into two categories: motor vehicle performance standards (fuel economy and emissions standards)
|
From page 114... ...
New standards for motor vehicle pollutant emissions would also affect fuel economy. As the CARB proposal illustrates, regulations for reducing greenhouse gas emissions of vehicles burning petroleum-derived fuels have the same effect
|
From page 115... ...
. An innovative approach to regulating fuel economy, the "cap and trade" pro gram under which vehicle manufacturers would be allocated fuel consumption quotas or credits for their new vehicles that they could trade among themselves (CBO 2003)
|
From page 116... ...
Existing federal incentive programs include the following: · Tax treatment of gasohol: As an incentive to use alternative fuels and to aid farmers and ethanol producers, the federal excise tax on gasohol is $0.053 per gallon less than the tax on gasoline sold as motor fuel. (As of 2005, the rev enue impact of this subsidy affects the general fund; the Highway Trust Fund receives revenue as if the gasohol tax were the same as the gasoline tax.)
|
From page 117... ...
A fuel tax is an imperfect instrument for these purposes since it fails to provide a strong incentive to the worst offenders to change their behavior and at the same time penalizes vehicle operators who are imposing relatively small costs on others. Nonetheless, such taxes have been advocated as second-best measures that are jus tified in light of the cost and technical problems of real-time observation of the emissions or congestion costs caused by an individual vehicle (Harrington and McConnell 2003, 4649; Parry 2002; Parry and Small 2002)
|
From page 118... ...
For example, promoting the purchase of high mpg vehicles by a cash subsidy may have lower public cost than using free admis sion to toll lanes as an inducement. The history of the 1993 Btu tax proposal suggests the conflicts that may emerge between the practice of imposing fuel taxes for conservation or pollution reduction purposes and the practice of collecting highway user fees in the form of fuel taxes.
|
From page 119... ...
2003. Assessing and Mitigating Future Impacts to the Federal Highway Trust Fund such as Alternative Fuel Consumption.
|
From page 120... ...
2002. Effectiveness and Impact of Corporate Average Fuel Economy (CAFE)
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.