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4 Energy-Related Excise Taxes
Pages 81-90

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From page 81...
... The committee asked all four economic modeling contractors to estimate impacts on greenhouse gases of removing these federal highway motor fuels excise taxes. Comparing results across models provides a basis for understanding the mechanisms at work in the models as well as an estimate of the uncertainty of the estimates due to model differences.
From page 82...
... ANALYSIS OF EXCISE TAXES ON HIGHWAY FUELS The Internal Revenue Code levies a tax of $0.184 per gallon of gasoline or alcohol fuel for on-road use. This tax applies whether the fuels are pure or blended, such as the common gasoline plus ethanol mixtures.2 The Code also levies on a tax on diesel fuels at $0.244 per gallon for diesel and kerosene and $0.197 per gallon for diesel-water fuel emulsion.3 2 See Internal Revenue Code section IRC 4081.
From page 83...
... A fuller discussion of these is contained in Chapter 5. Modeling Results The committee asked the four modeling teams that were engaged to estimate the greenhouse gas impacts of removing the highway motor fuels excise taxes.
From page 84...
... They do not, however, reflect the interactions between the energy sector and other parts of the economy. For instance, in the highway motor fuels excise taxes scenarios, NEMS, CBER and FAPRI do not model the impact of the increased federal revenues used to replace lost excise tax receipts on the composition of output and do not model emissions from increased consumer spending on non-energy goods and services.
From page 85...
... IGEM has estimates of the impacts of removing the highway fuels excise taxes that are larger than those of the other studies. Having reviewed the calculations, the committee concludes that the IGEM model cannot accurately capture the structure of the motor fuels tax provisions and the associated regulations and therefore cannot provide reliable results for these provisions.
From page 86...
... According to the NEMS-NAS simulations, total energy use in the transportation sector would rise by 0.32% over the period when highway fuels excise taxes are removed. However, because of the volumetric bias and RFS, gasoline use is slightly lower over the entire period, while E85 rises substantially.
From page 87...
... The basic factor leading to low GHG emissions is similar to that in the NEMS-NAS model: because ethanol has lower energy per gallon, reducing the highway excise taxes increases the use of ethanol relative to gasoline. While the basic forces at work in FAPRI and NEMS-NAS are similar, FAPRI has a slight rise in gasoline consumption rather than the small decline in gasoline consumption in NEMS-NAS.
From page 88...
... The CBER model assumes that the demand elasticity for jet fuel is the same as for all other transportation fuels: just above -0.5. The existing empirical literature on airlines suggests that the demand for air travel is more price elastic than the demand for gasoline and other oil products.
From page 89...
... If one were to account for more elastic demand for air travel as well as adjustments made by airlines in response to changes in their input costs, the implied impact of changes to jet fuel taxes would likely be larger than reflected in the CBER modeling runs. Summary on Aviation Taxes While the total GHG impact of removing the tax on jet fuel is small, jet fuel taxes are a small component of the total taxes on air travel.
From page 90...
... Taking these two modeling results together produces a striking conclusion: The impact of removing highway fuels taxes on GHG emissions is estimated to be very small because of special features of the taxes and the market. The volumetric bias of the taxes means that removing the taxes favors ethanol, which will reduce the GHG impacts of increasing highway fuel consumption.


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