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OCR for page 149
Policy Options to Reduce
5 Transportation’s Energy Use
and Greenhouse Gas Emissions
There is a scientific consensus that deep cuts in emissions of carbon diox-
ide (CO2) and other greenhouse gases (GHGs) will be needed over the
next half century to limit the risks of global climate change. However,
science cannot advise on how much or how quickly emissions should be
reduced in any specific country or in any individual sector of the econ-
omy. Where and how emissions should be reduced are choices that will
need to involve many nonscientific considerations, such as the effects of
alternative mitigation strategies on equity and the economy, as well as
pragmatic aspects of policy implementation. The scientific consensus
suggests that deferring these policy actions and allowing emissions to
continue to rise unabated will increase the challenge of stabilizing atmo-
spheric concentrations of GHGs at less risky levels.
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 pro-
gram, a carbon tax, or a hybrid approach, would increase the cost of
using all carbon-rich energy sources across all sectors of the economy.
The higher prices, however, would affect individual sectors differently.
[A Congressional Budget Office report provides a comparison of carbon
133
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134 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation
pricing options (CBO 2008).] In the transportation sector, the higher-
priced gasoline, diesel fuel, and jet fuel would prompt greater interest in
vehicles that are designed and operated to be more efficient, fuels having
lower carbon-cycle impacts, and less energy- and emissions-intensive
transportation modes. Similar responses would occur in other sectors,
but to varying degrees depending largely on the cost and options for sub-
stituting lower-carbon energy sources.
Various economic models are used to predict the carbon prices needed
to achieve different emissions reductions across the economy over time.
All of the models, which estimate the costs associated with reducing emis-
sions in each sector, assume that the least costly means of cutting emis-
sions are pursued first. Figure 5-1 shows the modeled emissions prices
(stated in terms of constant dollars per CO2-equivalent metric ton)1 that
would be required to achieve CO2-eq emissions trajectories leading to a 50
to 80 percent reduction in U.S. annual emissions by 2050. The estimated
prices are calculated by the Stanford University Energy Modeling Forum
(EMF-22) on the basis of runs from several economic models, each using
different assumptions about the costs associated with developing and
deploying emissions-reducing technologies (Fawcett et al. 2009). Accord-
ing to these models, prices starting at $25 to $75/CO2-eq t and rising to
$225 to $500/CO2-eq t would be required to achieve an 80 percent reduc-
tion in emissions by 2050. Even to achieve a 50 percent reduction, carbon
prices would need to reach $100 to $300/CO2-eq t by 2050.
Table 5-1 shows how a $50 carbon price would affect the retail price of
various fossil fuels used in the national economy today. Crude oil prices
would go up about 40 percent compared with August 2010 levels,2 caus-
ing 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. In comparison, a $50/CO2-eq t price would bring about
a 140 percent increase for the electric power sector in the cost per ton
1
Carbon prices are stated throughout this chapter in terms of dollars per CO2-equivalent metric ton
($/CO2-eq t). See Chapter 1 (page 30) for a definition of CO2-equivalent.
2
Commodity prices fluctuate; hence, the figures quoted in this section are illustrative only.
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500
ADAGE
450
MRN-NEEM
400
EPPA
IGEM
350
$/CO2-eq t (2005 U.S. $)
MERGE (opt)
300
MiniCAM (base)
250
200
150
100
50
0
2020 2025 2030 2035 2040 2045 2050
(a)
500
ADAGE
450
MRN-NEEM
400 EPPA
IGEM
350
$/CO2-eq t (2005 U.S. $)
MERGE (opt)
300 MiniCAM (base)
250
200
150
100
50
0
2020 2025 2030 2035 2040 2045 2050
(b)
figure 5-1
Emissions prices ($/CO2-eq t) required to achieve annual emissions trajectories leading
to an (a) 80 percent and (b) 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 emis-
sions budgets of 167 Gt CO2-eq and 203 Gt CO2-eq budgets for the period 2010 to 2050.
SOURCE: Fawcett et al. 2009.
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136 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation
table 5-1 Estimated Effect of an Emissions Price of $50/CO2-eq t
on Key Fuel Prices
Market Price in Added Cost ($) from GHG
Fuel August 2010 ($) Contribution ($50/CO2-eq t) Total End-User Price ($)
Crude oil 55.12/bbl 21.40/bbl 76.52 (up 39% over
market price)
Gasoline 2.54/gal 0.44/gal 2.98/gal (up 17%)
product
Utility coal 46.00/short ton 110.53/short ton 156.53/short ton
(up 140%)
NOTE: According to the Energy Information Administration, utility coal in the United States averages about
207 lb of CO2 per million Btu. Gasoline and diesel fuel average 160 lb of CO2, and natural gas averages 117 lb of
CO2 per million Btu. http://www.eia.doe.gov/cneaf/coal/quarterly/co2_article/co2.html.
SOURCE: EIA August 2010 Monthly Energy Review (http://www.eia.doe.gov/mer/overview.html).
of coal, which is currently a relatively inexpensive hydrocarbon, but one
that is carbon-intensive.
Table 5-2 summarizes EMF-22 model runs that estimate the emissions
response from transportation that would be needed to bring about 50 to
80 percent emissions reductions by 2050. The models produce varying
estimates of transportation’s contribution, but all consistently predict that
transportation will contribute less to emissions reductions than most other
energy-using sectors. 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.
Runs of the U.S. Department of Energy’s National Energy Modeling
System (NEMS) offer a more detailed picture of the anticipated trans-
portation response to carbon emissions pricing. Table 5-3 shows NEMS-
generated results from a recent study by Resources for the Future and the
National Energy Policy Institute (RFF-NEPI) in which prices are assumed
to reach $50/CO2-eq t by 2030. The $50 price was selected for analytical
purposes only, but it is consistent with the price that the EMF-22 model
runs indicate would be needed in the near term to put the United States
on a trajectory to reduce national emissions by half by midcentury. The
RFF-NEPI study calculates that an emissions price of $50/CO2-eq t will
cause gasoline prices to increase by about $0.35 per gallon, or by nearly
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137
Policy Options
table 5-2 Emissions Changes Needed from Transportation Sector to
Achieve Alternative U.S. Carbon Emissions Reduction Targets,
According to Models Run in Stanford EMF-22 Study
Model’s Estimated Percentage Change
in Annual Transportation Emissions,
Model 2010–2050
80 Percent Reduction Target
−33
ADAGE (RTI International)
−6
EPPA (Massachusetts Institute of Technology)
−22
MiniCAM (Joint Global Change Research Institute )
−17
MRN-NEEM (CRA International)
50 Percent Reduction Target
ADAGE 17
EPPA 28
−22
MiniCAM
−11
MRN-NEEM
SOURCE: Fawcett et al. 2009.
10 percent. This percentage increase is much smaller than the percentage
increase in the price of coal. Accordingly, the RFF-NEPI modeling runs
predict that CO2-eq emissions from the coal-intensive electric power sec-
tor would fall by nearly 30 percent by 2030. In comparison, emissions
from transportation are predicted to fall by less than 5 percent by 2030.
These model results portray the broader national context in which
GHG reductions will need to occur. They indicate how reducing emis-
sions in one sector will affect the amount of reductions that will be
needed from other sectors. Accordingly, sector-specific policies, which
seek emissions reductions from one sector at a time, may not be the most
effective or economically efficient means of bringing about economywide
emissions reductions.
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.
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table 5-3 RFF-NEPI Projections of U.S. Energy Consumption and GHG Emissions from Major Economic Sectors
Assuming Emissions Pricing and Comparison with Projections from AEO 2009 Reference Case
2015 2020 2025 2030
Percent Change Percent Change Percent Change Percent Change
Amount from AEO 2009 Amount from AEO 2009 Amount from AEO 2009 Amount from AEO 2009
16.33 23.34 33.35 47.65
Assumed CO2-eq price
(2007$ per CO2-eq t)
Real gross domestic 13.4 15.3 17.5 19.8
−0.2 −0.3 −0.4 −0.5
product (trillions 2007$)
6,852 6,827 6,833 6,750
Total CO2-eq emissions −5 −8 −11 −15
(millions of CO2-eq t)
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. 2010.
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139
Policy Options
One major reason is transportation’s near total dependence on oil, with
its environmental and national security implications (as discussed else-
where). In addition, there is no guarantee that a national carbon pricing
program will be instituted soon, and thus sector-based interventions
may be the next best means of achieving emissions savings over the near
to medium term.
Transportation-Specific Policy Options
The remainder of this chapter considers the following six types and tar-
gets of policy interventions that are candidates for reducing U.S. trans-
portation’s use of petroleum and emissions of GHGs:
1. Transportation fuel taxes,
2. Vehicle efficiency standards,
3. Feebates and other financial incentives to motivate interest in efficiency,
4. Low-carbon standards for transportation fuels,
5. Measures to curb private vehicle use, and
6. Measures targeted to the other main passenger and freight modes.
These six items encompass a mix of pricing and regulatory measures but
by no means cover all possible policy tools and designs. For example,
the many ways in which government tax incentives, subsidies, and sup-
ply mandates can be used to promote the development and introduc-
tion of specific types of vehicle and energy technologies such as electric
cars, biofuels, and hydrogen are not considered. This report does not
examine the advantages and disadvantages of furthering specific vehicle
or energy technologies as a way to reduce transportation’s use of energy
and emissions of GHGs. Policy approaches that are used to favor specific
technological solutions, therefore, are not examined here. Similarly, the
discussion does not consider the various means by which government
can support technology R&D. A companion report (TRB 2009c) exam-
ines R&D needs in this area. How government can support R&D is not
a transportation-specific matter and has been examined in many other
studies (for example, NRC 2001).
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140 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation
Transportation Fuel Taxes
Fuel taxes are long-standing sources of government revenue for the
construction, maintenance, and operation of the nation’s transportation
infrastructure, particularly the highway system. These taxes, which vary
by mode, are applied on a per gallon basis to gasoline, diesel fuel, jet fuel,
and other refined petroleum products. As discussed in Chapter 3, the
current federal tax on gasoline used by motor vehicles is $0.184 per gal-
lon, and state gasoline and diesel taxes average about the same, leading
to a combined tax of around $0.35 per gallon. The federal government
and many states impose taxes on the fuels used by vessels operating on
the inland waterways, railroads, domestic airlines, and commercial and
general aviation. In some states, operators may also pay an ad valorem
tax based on the retail price of the fuel, rather than (or in addition to) the
more typical fixed levy per gallon.
A policy that increased the taxes on the fuels used in each transpor-
tation mode or that imposed a broader-based tax on each barrel of oil
sold would lead to higher-priced fuel, which would increase consumer
demand for more efficient vehicles and operations. 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. The afore-
mentioned 2010 study by RFF-NEPI (Krupnick et al. 2010), which
examined a range of policies for reducing GHG emissions and oil con-
sumption, used a modified version of NEMS to assess various policy
options and their effects on both oil consumption and CO2 emissions.
The study’s examination of an oil tax assumes that a constant tax per unit
of energy is applied across all refined oil. The tax is assumed to begin at
a rate equivalent to adding $1.27 per gallon to the price of gasoline and
then to increase by 1.5 percent per year, totaling $1.73 in taxes by 2030. As
might be expected, this broader-based tax on oil was found to be far more
effective in reducing total petroleum use and CO2 emissions (across all
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141
Policy Options
modes and sectors) than a tax of equivalent size levied only on the gaso-
line and diesel fuel used by cars, buses, and trucks. It yielded cumulative
reductions of 7.4 percent in oil use and 3.8 percent in CO2 emissions,
whereas the tax increase confined to motor vehicle fuel led only to half
this reduction. Because of the design of the NEMS model,3 the projected
energy and emissions savings result largely from reductions in vehicle
miles traveled (VMT) rather than from increases in vehicle efficiency. In
the case of the oil tax, for example, VMT was 6 percent lower in 2030 than
projected by the AEO 2009 reference case.
In another study of policy options, Morrow et al. (2010) used NEMS
to predict how gasoline use by cars and light trucks would respond to an
escalating gasoline tax that is coupled with a national carbon price. By
gradually increasing the gasoline tax and assuming a $0.46 per gallon
carbon price, the study estimates how high gasoline prices must rise to
cause gasoline consumption to be 25 percent lower by 2030 than the level
projected in the AEO 2009 reference case. The calculated price is $8.70
per gallon, achieved through a combination of market price increases,
higher gasoline taxes, and a carbon price. Morrow et al. characterize the
tax increases that would be needed to achieve this price as aggressive,
especially when the minimal success in raising gasoline taxes during the
past two decades is considered.
Apart from the questions about the economic and equity effects of
such high gasoline prices and whether they could be implemented (as a
practical matter), all of these studies, and the models they use, acknowl-
edge the uncertainty associated with how consumers and businesses
are likely to respond to escalating fuel prices. The NEMS model con-
tains assumptions about how consumers will respond, but this response
remains an area of controversy despite a body of literature on the subject.
The next subsection reviews some of this literature. 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. Fuel prices, therefore, are assumed to have little effect on the level of efficiency of the fleet.
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142 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation
Evidence of the Response by Private Motorists
to Higher Gasoline Prices
There is a considerable literature on how private motorists respond to
higher gasoline prices. As discussed in Chapter 4, Small and Van Dender
(2007) have modeled how changes in gasoline prices affect fuel demand,
separating the effects on VMT and on vehicle fuel economy. In analyz-
ing data covering 1966 to 2001, they found that the short-run response
to a 10 percent increase in gasoline prices is a 0.9 percent reduction in
gasoline consumption. About half the consumption decline is caused by
a reduction in driving, while the other half is attributable to an increasing
share of VMT from more fuel-efficient vehicles. Findings for the longer-
run 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. These estimates of long-run fuel price elasticity
as it relates to VMT are comparable with the elasticity values in NEMS
(which assumes that each 10 percent increase in gasoline prices yields a
3 percent decrease in VMT).
By extending their analysis for the period 2000 to 2004, Small and
Van Dender assessed whether fuel price elasticities have been changing
over time. They found that elasticities have been diminishing: during this
period each 10 percent increase in fuel prices led to a 0.4 percent decline
in gasoline consumption in the short run and a 2.3 percent decline in
the long run. The major reason for the weakened response is that VMT
barely declined in response to higher gasoline prices (going down by only
0.1 percent in the short run and about 0.6 percent in the longer run). The
authors surmised that higher household incomes have rendered higher
fuel costs less significant to motorists than the savings in travel time that
cars and light trucks offer relative to switching to other travel options
such as walking and public transit.
This “income effect” is an important consideration for policy mak-
ing. If the amount of driving by motorists is becoming less responsive to
higher fuel costs as incomes go up, then fuel taxes may need to be raised
to higher levels to have the desired effects on total fuel consumption.
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143
Policy Options
Similarly, vehicle fuel efficiency gains will need to be even larger to com-
pensate for the weaker VMT response. However, these price elasticity
estimates were derived from a period during which fuel prices were rela-
tively low and stable. 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 effi-
ciency is another topic of interest for fuel tax policy. In general, a rational
consumer would be expected to seek higher vehicle fuel economy when
gasoline prices are high and expected to rise. Presumably, the consumer
would be willing to pay for fuel-saving technologies that in present-value
terms produce net savings in fuel expenditures over a vehicle’s service
life. There is a commonly held view, however, that consumers do not rec-
ognize or take into account all of the lifetime fuel savings offered by more
fuel-efficient vehicles. These views have been persuasive for the modelers
of NEMS, which assumes that consumers only consider the first 3 years
of a car’s prospective fuel costs in making car purchase decisions and
even discount these costs at an annual rate of 15 percent. The practical
outcome of this assumption is a modeled consumer who is not willing to
invest heavily in fuel-saving technologies.4
The assumption of NEMS modelers that consumers place a low value
on the fuel-saving potential of a new car is consistent with and may
derive from the literature in the energy economics field that finds an
energy-efficiency gap whereby households and businesses tend to under-
invest in energy-saving technologies. For example, in one of the earliest
papers on the subject, Hausman (1979) found that consumers purchas-
ing appliances applied discount rates of about 25 percent per year to the
stream of future energy savings. In the years since, a number of other
studies of energy-saving choices have found similar (and even higher)
implied discount rates for a number of consumer products (Gillingham
et al. 2006).
4
To illustrate the implications of these assumptions, Small (2010) assessed the long-run responsiveness
of the fleet fuel economy to fuel price changes built into NEMS for 2030. In 2030, the fuel price is
82 percent higher than in 2010, and the implied long-run elasticity of fuel efficiency with respect to
fuel price is 0.10. In comparison, a literature review by Parry and Small (2005) found a central value
for this elasticity of 0.33. Thus, the responsiveness of fuel efficiency of the fleet in NEMS is lower than
in the rest of the literature.
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168 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation
with payments made at each vehicle refueling. These incremental fees
are intended to provide drivers with a direct signal about the effect of
each additional mile driven on the risk of having an accident. Such a
mileage-based means of paying for accident insurance would likewise
cause motorists to have increased awareness of the costs inherent in driv-
ing an additional mile and thus greater monetary incentive to conserve
on mileage. Pay-as-you-drive insurance is being tested in Oregon and
used in a number of places, including locations in Israel, the Netherlands,
and the United Kingdom (Greenberg 2009). A Brookings Institution
study (Bordoff and Noel 2008) estimates that if motorists paid for acci-
dent insurance through such a program, they would average $0.07 per
mile in insurance fees and reduce their total driving by about 8 percent.
Measures Targeted to Freight and Passenger Service
Medium- and heavy-duty trucks account for about 20 percent of the
energy used in the transportation sector, which makes trucking the sec-
tor’s second-largest user of energy and contributor of GHG emissions.
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. Indeed, Congress
has required the development of fuel efficiency standards for trucks, and
EPA is likely to institute GHG efficiency standards for these vehicles and
perhaps other large transportation vehicles at a future date.
Some of the challenges associated with designing and administering
vehicle efficiency standards for trucks and aircraft have already been
noted. Because of the sensitivity of motor carriers and airlines to fuel
costs, higher taxes on diesel and jet fuels appear to hold the greatest
potential for prompting reductions in energy use and emissions in these
modes. In the absence of such energy pricing, the various incremental
measures described below may be helpful in achieving marginal reduc-
tions in trucking and aviation energy use and emissions. However, the
measures are not likely to spur fundamental changes in the energy use
and emissions patterns of these freight and passenger modes.
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169
Policy Options
harmonizing other modal policies with efficiency goals
Policies to reduce energy use and emissions in trucking and aviation
should take into account how the array of regulatory and tax policies may
be influencing the energy and emissions characteristics of these modes.
For example, trucks are subject to federal and state size and weight regula-
tions. On the one hand, these regulations can have a direct impact on the
energy performance of trucks to the extent that they preclude the use of
aerodynamic features such as boat tails, hybrid power trains, and exhaust
energy recovery systems because of their implications for overall truck
length and weight. Perhaps more important, truck size and weight limits
can lead to higher energy consumption per freight ton-mile, since the
energy efficiency of trucking tends to increase for vehicles having larger
hauling capacity. Of course, truck size and weight limits were enacted for
many reasons, most notably to ensure traffic safety and to guard against pre-
mature road wear and bridge damage. The aforementioned NRC (2010b)
report on reducing the fuel consumption of medium- and heavy-duty
vehicles recognizes the role that these size and weight regulations have
in preventing safety hazards and excess road damage. The report never-
theless recommends that explicit consideration be given to the energy
and emissions implications of these regulations when they are adjusted,
as they are periodically.
Another area where harmonization of existing policies and energy-
and emissions-saving goals may be desirable is in the setting of National
Ambient Air Quality Standards (NAAQS) applicable to transportation
vehicles. Both trucks and aircraft have long been subject to the NAAQS
established by EPA under the Clean Air Act (CAA). To date, however,
the standards apply only to the so-called “criteria” pollutants such as par-
ticulate matter, hydrocarbons, carbon monoxide, and oxides of nitrogen
(NOx). 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.
For example, improvements in the fuel efficiency (and thus carbon effi-
ciency) of trucks has slowed in recent several years, partly because of the
controls required for limiting emissions of NOx and particulate matter.
Changes in the design and performance of diesel engines to meet these
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170 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation
standards have tended to degrade engine thermal efficiency and, in the
process, reduce fuel efficiency. Similarly, increasing the energy efficiency
of jet engines can lead to the production of more NOx emissions as a
result of higher peak engine temperatures.
The tax treatment of trucks may also be a candidate for more coordina-
tion with energy and emissions policy making. Consideration, for exam-
ple, may be given to how truck excise taxes and registration fees affect the
rate of fleet turnover and the willingness of trucking companies to invest
in more expensive vehicles designed with energy-saving features. Struc-
turing these taxes and fees so that they do not inadvertently discourage
the introduction of more efficient vehicles and the retirement of inefficient
vehicles will be important. 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. It also provides aid to
state and local governments for the construction and operation of the
highway system and airport runways. State and local governments own,
maintain, and operate the vast highway system and most of the nation’s
commercial airports. Hence, government decisions about how these facili-
ties and systems are configured, maintained, and managed affect the effi-
ciency of both trucking and air carrier operations, including their energy
and GHG performance.
Because trucks use the public highways, government management
of and investments in this infrastructure can be critically important
to truck operating efficiencies. At the operational level, state and local
governments establish the rules governing traffic flow on the highways,
including travel speeds. A number of countries require that large trucks
operating on public roads travel at speeds lower than those of cars and
light trucks and mandate the use of speed-governing systems. All mod-
ern trucks used for long-haul transportation are equipped with such
systems, which can be programmed by fleet owners or preset in the
factory to limit maximum speed. The European Union limits the maxi-
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171
Policy Options
mum road speed for trucks to 90 km/h (56 mph). Since each mile per
hour increase in speed above 55 mph increases fuel use by more than
1.5 percent, government-mandated use of road speed limiters and
aggressive enforcement of speed limits may represent an early means
by which public policies can help reduce truck fuel use. Whether such
speed limits would be useful would depend on the implications for traffic
flow and safety. Nevertheless, this is an area in which early actions could
further the goal of reducing transportation energy use and emissions.
There may be other opportunities to increase system energy efficiency.
For example, long-haul trucks operating at lower speeds and in longer
combinations may function more efficiently and with greater safety in
dedicated truck lanes, especially when they travel through transportation
corridors with heavy traffic. In deciding on the merits of such infrastruc-
ture investments, the implications for transportation system energy use
and emissions would deserve attention. Truck operations are already a
focus area for state and federal investments in the many advanced tech-
nologies and automated systems that make up intelligent transportation
systems (ITS). Compared with building new physical infrastructure, ITS
has been viewed as an inexpensive means of increasing highway capacity
and operating efficiency. Investments in real-time traffic information,
integrated traffic control systems, and automated toll collection, for
example, can reduce congestion and make truck operations more energy
efficient in the process.
In the case of aviation, the federal government’s role in managing the
national airspace and associated infrastructure can have a substantial
impact on airline energy use. The federal influence over airline opera-
tions 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. Thus, investments and actions
that increase system operating efficiency and capacity can be comple-
mentary to the goal of reducing sector energy use and emissions. These
actions may range from improved coordination by airlines and air traffic
controllers in the selection of the most fuel-efficient routes and cruise
speeds to major public investments in the national infrastructure of run-
ways, taxiways, and air traffic control systems.
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172 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation
public investments to shift traffic to less
energy-intensive modes
Many of the opportunities discussed above to improve the operating effi-
ciency of the highway and aviation systems would probably also make these
modes more appealing for passenger and freight service. 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 inter-
city passengers are cars and light trucks, as well as motor coaches and rail
to a much more limited degree. In these intercity passenger markets, any
improvements to aviation infrastructure and operations could lead to
modal diversion away from driving, which may or may not lead to more
energy-efficient travel. For trucks, however, the main competitor for long-
distance freight hauling is railroads, which are very energy efficient. Thus,
any diversion from rail to trucking could lead to increased energy use on
a systemwide basis. The effect of public highway investments on the com-
petitive advantage of trucking over rail has been an issue in transportation
investment policy making for decades (TRB 1996).
Ensuring that transportation infrastructure policies do not inadver-
tently favor the more energy-intensive modes may require that special
attention be given to opportunities for improving the efficiency of the
entire freight system. For example, railroads and trucks increasingly
share in the movement of some freight, as railroads provide the line-haul
service for intermodal containers and “piggybacked” trailers while trucks
move these containers and trailers locally. To aid in providing such ser-
vices, railroads have made significant capital investments in their main-
line capacity and in building support facilities for containers and trailers.
However, in practice, government assistance is often needed to facilitate
these large and complex intermodal projects, since they often require
coordinated improvements to private rail facilities and public waterways
and highways, including local access roads and streets (TRB 2009a).
Even a relatively small diversion of truck freight to rail could have major
implications for railroad capacity and operations. For example, the higher
value commonly moved by truck requires much more timely movement
than is typical for freight moved by rail. Serving this time-sensitive freight
could put more stress on railroads because of the need to dedicate tracks
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Policy Options
and trains. Hence, railroads have sought government incentives and
assistance in meeting certain capital needs, such as increasing tunnel and
bridge clearances for double-stacked containers and eliminating railroad–
highway grade crossings. A number of public–private funding partner-
ship programs already exist for such projects, such as credit assistance
programs and private activity bond financing, and railroads have advo-
cated tax credits to help pay for some capacity-enhancing infrastructure.
Additional government support of this type would probably be required
to accommodate much larger shifts of truck traffic to rail.
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. The higher-priced fuel would encourage the
use of more energy-efficient vehicles and adoption of more energy-efficient
operating practices. It would also temper demand for energy-intensive
transportation activities. If the tax is structured to favor low-carbon fuels, it
could also assist in lowering the carbon contribution from the transporta-
tion fuel supply. However, there is much uncertainty about how consumers
and businesses would respond to higher fuel prices.
At least among private motorists, there is evidence that responsiveness
to changes in fuel costs may be decreasing as household income and the
value of time rise (favoring faster automobile travel over other modes).
Findings that VMT, in particular, is becoming less sensitive to higher fuel
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174 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation
costs suggest that fuel tax increases will need to be high to affect overall
energy demand—rising by $5.00 per gallon to reduce gasoline consump-
tion on the order of 25 percent over the next two decades. How sustained
higher fuel prices would affect energy use by the other energy-intensive
modes of freight and passenger transportation, trucking and aviation, is
also unclear because of limited experience with such high prices. Never-
theless, because these modes are highly competitive and sensitive to
costs, they have tended to be responsive to changing energy prices.
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. To many observ-
ers, this experience suggests that raising fuel taxes substantially to curtail
energy demand and emissions would be a nearly insurmountable chal-
lenge. However, sustained higher fuel taxes would generate substantial
government revenues that could be used to replace other taxes or provide
other government services. Indeed, it is difficult to envision a scenario in
which policy makers could generate public support for higher fuel taxes
without offering a compelling plan for use of the revenues.
At least in recent years, raising vehicle efficiency standards has proved
to be more practical than raising fuel taxes to any substantial degree.
Efficiency standards have long been the principal means by which the
federal government has sought to reduce oil use by cars and light trucks
and, more recently, to control emissions of GHGs. Such standards are
likely to be applied in other transportation modes. Recent increases in
automobile fuel economy standards, coupled with GHG performance
standards, are likely to contribute significantly to stabilizing petroleum
use and emissions from the light-duty vehicle fleet over the next decade
or more. Vehicles with much higher fuel economy will cost less to drive
(in terms of fuel expenses), which may prompt an increase in VMT, espe-
cially if fuel prices do not increase significantly.
If vehicle energy efficiency goes up faster than fuel prices, motorist
demand for energy savings may weaken further, complicating efforts to
raise the efficiency standards over time. Preventing such an outcome may
prove crucial in sustaining public support for efficiency standards. Finan-
cial incentives such as feebate programs may motivate greater interest
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Policy Options
in energy and emissions efficiency, among both buyers and suppliers of
vehicles and energy. LCFS programs and others that encourage energy
providers to innovate and develop new fuels to diversify the fuel supply
may prove helpful in achieving the much longer-term goal of a fuel sup-
ply having limited impacts on the carbon cycle.
To temper growth in VMT may require policies that work hand-in-
hand 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.
Coordinating the decisions of the dozens of local governments that
make up each metropolitan area complicates VMT reduction through
these means. Whether incentives for regionwide VMT targets can be cre-
ated by the financial and regulatory programs of federal and state govern-
ment is now being explored in California. Similar experiments in other
jurisdictions will be vital in assessing whether these policy actions can
have a complementary role in reducing transportation energy use and
emissions.
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