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5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions
Pages 149-194

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From page 149...
... Transportation Policies in the National Context From the standpoint of national policy, a carbon pricing system is widely viewed as having the potential to affect emissions in the broadest and most economically efficient manner. Pricing emissions of CO2 and other GHGs, whether through the adoption of a national cap-and-trade program, a carbon tax, or a hybrid approach, would increase the cost of using all carbon-rich energy sources across all sectors of the economy.
From page 150...
... Crude oil prices would go up about 40 percent compared with August 2010 levels,2 causing gasoline prices to increase by about $0.50 per gallon, which is 15 to 20 percent higher than August 2010 gasoline prices. In effect, each $1/CO2-eq t increase in price would cause crude oil prices to increase by about $0.43 per barrel and retail gasoline prices to increase by about $0.01 per gallon.
From page 151...
... 50 percent annual emissions reduction by 2050, according to various climate change economic models studied by the Stanford Energy Modeling Forum. The 80 percent and 50 percent pathways are representative of cumulative emissions budgets of 167 Gt CO2-eq and 203 Gt CO2-eq budgets for the period 2010 to 2050.
From page 152...
... The reason is that all of the models assume that other sectors have less costly means of responding to the higher-priced emissions by reducing energy use or substituting energy alternatives.
From page 153...
... Although this report acknowledges the importance of using carbon prices to create incentives for long-term and economywide reductions in GHG emissions, it is focused on examining other policies that can yield energy and emissions savings specifically from the transportation sector. There are many reasons for considering sector-based policies.
From page 154...
... Electricity 2,158 2,160 2,083 1,875 −9 −12 −18 −29 Transportation 1,910 1,883 1,893 1,939 −1 −1 −3 −4 Industrial 941 929 921 879 −1 −2 −4 −7 Primary Energy Consumption (quadrillion Btu) Petroleum 38.4 0 38.0 38.3 38.8 −1 −2 −3 Natural gas 21.7 0 21.7 22.9 22.2 −2 −4 −8 Coal 21.1 21.2 19.9 18.1 −11 −13 −19 −29 Nuclear 8.7 0 9.4 3 10.6 15 12.4 34 Renewables 10.2 8 11.7 13 13.2 17 15.3 31 S OURCE: Krupnick et al.
From page 155...
... Transportation fuel taxes, 2. Vehicle efficiency standards, 3.
From page 156...
... Depending on the size of the tax, it would also have a moderating effect on transportation demand while prompting interest in less energy-intensive modes. projected effects of higher fuel taxes on transportation energy demand A number of studies have examined the potential effect of higher-priced fuel on transportation fuel consumption and GHG emissions.
From page 157...
... Particular attention is given to studies of how private motorists and motor carriers respond to higher gasoline and diesel fuel prices, since they account for about 85 percent of transportation fuel use. 3 A shortcoming of using NEMS is that the model already assumes that vehicle efficiency will increase over the next decade because of legislatively mandated increases in vehicle fuel economy standards.
From page 158...
... Findings for the longerrun response, consisting of a time span in which motorists can make more substantive changes in their vehicles and driving patterns, suggest that each 10 percent increase in gasoline prices reduces fuel consumption by 4 to 5 percent. Again, about half of the consumption decline derived from a reduction in driving, while the other half derived from an increase in vehicle fuel efficiency.
From page 159...
... Extrapolation of this observed VMT response to a period in which fuel prices are assumed to be rising much faster and to much higher levels may not be appropriate. How higher-priced fuel affects consumer demand for vehicle fuel efficiency is another topic of interest for fuel tax policy.
From page 160...
... found that manufacturers increase the sales price of fuelefficient vehicles following gasoline price spikes in ways that are consistent with a recognition by these car manufacturers that consumers do value vehicle fuel economy when gasoline prices are high. Although these price–demand relationships are not settled, there is a fair amount of literature supporting the idea that consumers can be short-sighted with respect to fuel economy savings.
From page 161...
... Understanding these dimensions of consumer decision making is important in designing policies to reduce vehicle energy use and GHG emissions. If market barriers such as information gaps severely limit the ability of consumers to account for fuel savings, fuel taxes and other pricing policies to reduce energy use and reduce GHG emissions may prove to be much less effective than expected unless these barriers are overcome.
From page 162...
... Carriers who are costconscious and capable of holding down fuel costs through investments in fuel-saving technologies and practices are in a better position to price their transportation services competitively. Furthermore, when higher fuel prices cause freight carriage prices to go up generally, the shippers of goods who pay for these services can respond in ways that reduce their shipping costs.
From page 163...
... can slow the rate of increase in the fuel efficiency of the fleet at large. taxes to reduce fuel price volatility Inasmuch as fluctuations in retail fuel prices make it riskier to invest in alternative energy supplies and energy-saving technologies, a fuel tax may be structured to help counter this volatility.
From page 164...
... when crude oil prices are volatile. fuel tax implementation challenges A number of practical issues warrant consideration in assessing fuel taxes as a policy option for reducing energy use and GHG emissions in transportation.
From page 165...
... forms of taxation. How the revenues from higher fuel taxes are allocated and recycled back into the economy would need to be a major consideration in the design of such a policy and would probably be central to any debate over the policy's design and its prospects for implementation.12 Vehicle Efficiency Standards Table 5-4 shows the extent to which vehicle efficiency standards are being implemented and proposed around the world as a means of curbing transportation fuel use and GHG emissions.
From page 166...
... economy, corporate trucks GHG average SOURCE: German and Lutsey 2010. in new vehicle fuel efficiency since the early 1980s, when vehicle fuel economy standards and gasoline prices were rising in conjunction.13 One recent change in the CAFE standards, which will also apply to the new GHG performance standards, is a switch to standards based on vehicle "footprints" (or "attributes")
From page 167...
... As shown in Table 5-4, attribute-based design, whether linked to the vehicle's footprint or another attribute such as vehicle weight, is becoming more popular for vehicle efficiency regulatory programs worldwide. As noted above, another potential disadvantage of the switch to attribute-based standards is that it may become more difficult and more costly (in terms of the technologies required)
From page 168...
... In practice, the higher CAFE and GHG efficiency standards will continue to encounter the problem of motorists having limited financial incentive to demand higher vehicle efficiency if fuel prices remain relatively low or decrease. Should consumers continue the past pattern of demanding large vehicles, which have larger footprints and are subject to lower fuel economy standards, meeting the 35-mpg standard for the combined fleet will be more challenging.
From page 169...
... For this entire period of declining fuel prices, the CAFE standards were unchanged, as motorists expressed little interest in raising the standards. vehicle efficiency standards in other modes Although nearly all experience with fuel efficiency standards derives from light-duty vehicles, Congress has mandated the development of fuel efficiency standards for medium- and heavy-duty vehicles.17 A significant challenge in setting standards for this mode, and for others that provide passenger and freight service, is finding a suitable regulatory measure of efficiency.
From page 170...
... Feebates as Financial Incentives Financial incentives that prompt consumers to demand vehicle energy and GHG efficiency may become increasingly necessary as efficiency standards are raised. Several programs intended to create such interest are already in effect.
From page 171...
... or to stimulate greater consumer and supplier interest in vehicle fuel and GHG performance generally. They are not described here.
From page 172...
... table 5-5 Comparison of Feebate and Related Fee Programs by Country France Ireland Germany United States Canada Type of program Feebate Fee (tax only) Fee (tax only)
From page 173...
... Although both programs are designed to cause petroleum to be replaced by lower-carbon fuels, the two pursue this goal differently.19 California's LCFS requires a gradual reduction in the carbon intensity of the fuel sold in the state by lowering the average GHG emissions per gallon of fuel consumed. The California program currently calls for a 10 percent reduction in GHG emissions (grams of CO2-eq)
From page 174...
... The program mandates that fuel suppliers sell certain volumes of biofuels over specified time periods and that a specified amount of this fuel meet designated GHG performance thresholds. For example, the program mandates that 36 billion gallons of biofuels be included in the transportation fuel supply by 2022, including at least 16 billion gallons produced from cellulosic feedstock that achieves at least a 60 percent reduction in GHG emissions in comparison with gasoline and diesel fuels.
From page 175...
... The major challenge in this regard is that the state must develop default values for many types of biofuels and biofuel production processes, each of which can have different sources of GHG emissions depending on such factors as land use changes associated with crop cultivation. Furthermore, for an LCFS program to yield net reductions in GHG emissions, its coverage must extend beyond a single state or region.
From page 176...
... For example, fuel economy standards lower the fuel cost per mile of driving and thus lead to some additional VMT, which would offset some of the fuel and emissions savings sought by the standards. Additional policies aimed at tempering the growth in motor vehicle travel, therefore, may complement this regulatory program.
From page 177...
... . Acknowledging these uncertainties in the magnitude and timing of the relationships between VMT and compact patterns of land development, the report nevertheless recommends that policies that support the ability of this development to reduce VMT should be encouraged.
From page 178...
... In forming the Transportation and Climate Initiative, a dozen state transportation, environment, and energy officials from the Northeast and Mid-Atlantic regions have declared their intention to collaborate in the development and demonstration of policies and programs that can promote mixed-use development and support alternatives to driving as a way to reduce transportation energy use and GHG emissions.22 In addition, California has recently embarked on an effort to leverage its transportation infrastructure funds and environ 22 http://www.georgetownclimate.org/state/files/TCI-declaration.pdf.
From page 179...
... Because county and municipal governments are not required to follow the plan, whether this state program will influence the many local decisions concerning land development patterns and density remains to be seen. Encouraging Personal Travel by Means Other Than Private Vehicles In urban areas, the main alternatives to automobiles for local personal travel are walking, bicycling, and public transit.
From page 180...
... Continued public support for these modes is an option for making them even more competitive with driving in urban areas. However, simply investing more money in public transit in the same manner as in the past may not prove fruitful in reducing transportation energy use and emissions.
From page 181...
... . Charging market-clearing prices for off-street and on-street parking and allowing developers to decide for themselves how much parking to provide are policy options that Shoup believes would shift more of the cost burden of vehicle use to drivers and thereby motivate more drivers to forgo travel or use alternative modes.
From page 182...
... This effect, termed "latent demand" by transportation analysts, is conceptually similar to the rebound effect of reducing the fuel cost of driving through improvements in vehicle fuel economy. Some of the policies discussed above, such as raising fuel taxes and pricing parking, can help counter this effect by making driving more costly.
From page 183...
... For example, a $0.50 tax per gallon adds $0.02 to the per mile cost of driving a car that averages 25 mpg. However, in light of the difficulties encountered over the past two decades in raising fuel taxes, VMT charges are viewed by some as potentially viable options for both raising revenues to finance transportation infrastructure and helping curb growth in vehicle use.
From page 184...
... Airlines carrying passengers and cargo account for nearly 10 percent of transportation energy use. Many of the policies already examined in this chapter, such as transportation fuel taxes and vehicle efficiency standards, could be applied to trucks and conceivably to aircraft.
From page 185...
... . The recent decision to regulate GHG emissions under the CAA will therefore presumably require a balancing of interests in finding ways to reduce all of these regulated emissions, which can involve trade-offs.
From page 186...
... Substituting other charges based on vehicle use and fuel consumption for these taxes and fees, for example, may be more compatible with national energy- and emissions-saving goals. infrastructure investment and management for efficient operations The federal government provides the navigation aids and manages the airways in which passenger and cargo airlines fly.
From page 187...
... The federal influence over airline operations is far greater than over truck operations, because airline operations are strictly controlled by Federal Aviation Administration regulations and air traffic control services. Traffic congestion, both in the airways and at airports, increases airline energy use.
From page 188...
... In this respect, the improvements could increase the competitive advantage of trucks and airlines over other modes that are more energy efficient for long-distance passenger and freight service. The main competitors of airlines for intercity passengers are cars and light trucks, as well as motor coaches and rail to a much more limited degree.
From page 189...
... Summary Assessment Six general types of policy approaches are considered in this chapter as options for reducing transportation's use of energy and emissions of GHGs: Fuel taxes are a long-standing source of government revenue for the construction, maintenance, and operation of the nation's transportation infrastructure. Raising fuel taxes would generate responses comparable with those of carbon pricing.
From page 190...
... A number of practical issues warrant consideration in assessing fuel taxes as a policy candidate for reducing energy use and GHG emissions. Perhaps the most important one is the long-standing reluctance of elected officials at all levels to raise fuel taxes even marginally.
From page 191...
... To temper growth in VMT may require policies that work hand-inhand with energy pricing and vehicle efficiency standards, such as land use planning and transportation investments that emphasize compact development and alternative modes of travel. In this area, however, many of the relevant policy levers are held by local governments.
From page 192...
... 2008. The Implications of a Gasoline Price Floor for the California Budget and Greenhouse Gas Emissions.
From page 193...
... 2010. Analysis of Policies to Reduce Oil Consumption and Greenhouse Gas Emissions from the U.S.
From page 194...
... 2006. Special Report 285: The Fuel Tax and Alternatives for Transportation Fund ing.


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