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Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307 (2011)

Chapter: 5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions

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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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Suggested Citation:"5 Policy Options to Reduce Transportation's Energy Use and Greenhouse Gas Emissions." Transportation Research Board. 2011. Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307. Washington, DC: The National Academies Press. doi: 10.17226/13194.
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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

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.

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.

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

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.

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.

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).

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

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.

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.

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.

144 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation With respect to automobiles, there is a growing body of empirical work estimating how consumers make trade-offs in vehicle price and future fuel savings when they make purchase decisions.5 Some of the studies support the hypothesis that consumers undervalue fuel economy, while others do not. Recently, for example, Beresteanu and Li (2011) ana- lyzed sales of hybrid vehicles to infer the trade-off between fuel savings and vehicle price. They found that buyers of these cars applied a low discount rate to fuel savings but noted that this result may have reflected the strong environmental values of a niche set of consumers. In contrast, Allcott and Wozny (2009), using a large data set of new and used car sales, found that consumers are only willing to pay $0.37 for more fuel- efficient vehicles to reduce expected discounted gasoline expenditures by $1. On the other hand, a study of new vehicle pricing by Langer and Miller (2008) found that manufacturers increase the sales price of fuel- efficient vehicles following gasoline price spikes in ways that are consis- tent 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. To explain this response, Greene (2011) contends that consumers are generally loss averse: they are reluctant to pay higher up-front costs for the uncertain future savings in fuel. Another possible source of this response may be that the trade-off between vehicle price and fuel economy price can be a particularly complex calculation for car buyers, requiring them to anticipate future gasoline prices and to be aware of the added value that higher vehicle efficiency can bring in the future market for their cars once used. In addition, consumers may incur high transaction costs in obtaining and understanding information about fuel-saving technolo- gies or in isolating attributes that contribute to fuel economy from those that affect other aspects of vehicle performance. Turrentine and Kurani (2007) found that car owners had little understanding of the relationship between vehicle fuel economy and vehicle purchase price. Hence, some researchers have argued that when the cost of obtaining such informa- 5 For a review of the literature, see Greene (2010).

145 Policy Options tion is high, consumers will use simple experience-based techniques to guide their purchase decisions. For example, they may use 3- or 5-year payback rules and thus neglect the full stream of fuel savings over the vehicle’s much longer service life. Another line of argument is that the observed reluctance to invest in fuel-saving vehicle technologies may be a manifestation of consumers’ unwillingness to sacrifice some other highly valued vehicle attribute in return for fuel savings. For example, high fuel efficiency is often associated with lower acceleration performance. Thus, while consumers may appear to be underinvesting in fuel economy, they may simply be trading off fuel savings for some other desired vehicle characteristics. These sacrifices are sometimes referred to as the hidden costs of fuel economy improvements. If it is descriptive of consumer decision making, such behavior does not represent a market failure. Instead, it is a reflection of fuel prices being too low for consumers to place a higher value on the fuel saved from increased energy efficiency relative to the sacrifice that must be made in vehicle styl- ing, handling, size, or some other aspect of performance. 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 pric- ing policies to reduce energy use and reduce GHG emissions may prove to be much less effective than expected unless these barriers are overcome. Under these circumstances, regulations that require vehicle manufactur- ers to increase the fuel economy of their vehicles may be a more appealing approach. On the other hand, if consumers only appear to be short-sighted in their valuation of future fuel savings but are actually placing a higher value on other vehicle attributes given the relatively low cost of gasoline, policies that raise fuel prices may provide ample incentive for consumers to start demanding fuel-saving vehicle designs and technologies. Responses to High Fuel Prices in Other Modes The behavior of private motorists in responding to higher fuel prices should be distinguished from the behavior of commercial carriers offer- ing passenger and freight transportation services. As explained in Chap- ter 2, motor carriers and air carriers have demonstrated a long-standing

146 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation sensitivity to the price of fuel, because they travel long distances and function in highly competitive industries in which fuel expenditures account for 20 percent or more of operating costs. Carriers who are cost- conscious 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. For example, they may adjust the size, density, and fre- quency of their shipments; the configuration of their distribution net- works; and the mix of freight modes they use. Hagler Bailly estimates that the average long-run price elasticity of truck freight is −0.4, which means that a 10 percent increase in trucking rates causes a 4 percent decline in the demand for truck service.6 Similarly, in summarizing a number of esti- mates of freight price elasticities, Small and Winston (1999) found that most values fall within the range of −0.25 to −0.35. A similar sensitivity to fuel prices can be found in the long-distance passenger modes. The demand for airline service, for example, is espe- cially price-sensitive in leisure markets, where travelers often have a choice of traveling by car, bus, or train or of forgoing travel altogether when air fares are high. Price elasticities on the order of −0.4 for all air travel demand—which includes the less price-sensitive business travel market—suggest that a 10 percent increase in air fares will cause a 4 per- cent reduction in passenger demand (Small and Winston 1999). Because fuel is a major operating expense of airlines, higher-priced jet fuel leads to multiple fuel-saving responses by airlines, particularly through the use of more efficient aircraft but also through changes in operations, such as conserving fuel during ground operations (taxiing, idling), increasing the rate of aircraft utilization (increasing load factors and aircraft seat- ing density), and adjusting scheduling and routing. Of course, airlines must balance interest in saving fuel with competing passenger demands for services, as evidenced by the increased provision of onboard enter- tainment systems that add weight to aircraft. Airlines also recognize that departure frequencies are important in some market segments, such as in 6 www.tc.gc.ca/Envaffairs/subgroups1/fuel_tax/study1/final_Report/Final_Report.htm.

147 Policy Options business markets, which can lead to the use of smaller jets that are easier to fill with passengers when more frequent trips are scheduled. These aircraft burn more fuel per passenger mile than do larger aircraft.7 The airline response to higher fuel prices can be hindered by the large capital investment required to obtain new aircraft. The economic life span of a single airplane can range from 20 to 35 years, while the life span of a family of airplanes can last even longer (Lee et al. 2001). The long life spans (far in excess of those for cars and trucks) 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. Raising fuel taxes to very high levels so that they make up the major portion of the retail price of gasoline and diesel (as is found in Europe) will by itself dampen the effect of volatile crude oil prices on the retail prices paid by motorists for gaso- line. But fuel tax policies can also be designed in other ways to dampen this price volatility, especially if the primary goal is to create an environ- ment more conducive to industry and consumer investments in energy efficiency and alternative fuels. One example of such a design is a variable tax that moves inversely with the price of crude oil.8 Borenstein (2008), for example, has analyzed the concept of a variable oil tax targeted at ensuring a minimum retail price for gasoline. Borenstein showed how a variable tax applied to a barrel of crude oil can ensure a target price for gasoline (for example, $3.00 per gallon) even as crude oil prices fluctuate. The frequency of adjustments to the variable tax would depend on the volatility of crude prices. Various entities have endorsed the general con- cept of a variable oil tax, including the Alliance of Automobile Manufac- turers9 and the California Secure Transportation Energy Partnership.10 7 http://www.theicct.org/documents/0000/0974/ICCT_Aircraft_Efficiency_final.pdf. 8 http://www.ucei.berkeley.edu/PDF/csemwp182.pdf. 9 http://www.its.ucdavis.edu/events/outreachevents/asilomar2009/presentations/Keynote%20 Presentations/McCurdy_Asilomar_2009.pdf. 10 h ttp://www.calstart.org/Libraries/Policy_Documents/CalSTEP_recommendations_to_ Commission_on_21st_Century_Economy.sflb.ashx.

148 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation Because such a variable tax would not be a stable source of govern- ment revenue, its purpose would need to be linked to stimulating interest in diversifying the energy supply and not financing highway infrastruc- ture. The most significant practical challenge in administering such a variable tax is the potential for consumer resistance to sharp tax increases (and the loss of a fuel-savings windfall) when world oil prices are fall- ing. Although this challenge exists in making adjustments to all types of fuel taxes (including traditional taxes per gallon), it could be particularly problematic for a variable tax that must undergo repeated adjustments (and thus repeated scrutiny) 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. A critical one is the long-standing reluctance of elected officials to raise fuel taxes even slightly. Gasoline taxes generate more rev- enue than any other transportation fuel tax. However, the combination of inflation and improvements in vehicle fuel economy has led to declin- ing tax revenue relative to inflation and increased VMT. The federal tax on gasoline was last raised in 1993, despite repeated calls since then for higher fuel taxes to finance the transportation system. For example, in its assessment of future surface transportation investment requirements, the congressionally mandated National Surface Transportation Policy and Revenue Study Commission (2007) concluded that revenues required to meet the nation’s highway infrastructure needs over the next several decades are equivalent to $0.60 to $1.00 per gallon of fuel consumed.11 To help close this gap, the commission recommended that federal motor fuel taxes be increased by $0.05 to $0.08 per gallon annually over the next 5 years and then adjusted regularly for inflation. Three years later, these tax policy recommendations have not been pursued (National Surface Transportation Policy and Revenue Study Commission 2007; TRB 2006). The fact that European and Japanese motorists pay gasoline taxes that are 5 to 10 times higher than those in the United States is often presented as evidence that higher rates can be achieved in this country. 11 http://transportationfortomorrow.org/final_report/vol_1_chapter_1.aspx.

149 Policy Options This assumption may be valid; however, Japan and European countries introduced high fuel taxes long before a majority of their citizens owned automobiles. These levies were originally instituted as luxury taxes to support government funding generally and to support domestic energy production. An increase in taxes in the United States to similar levels would occur in an environment where automobiles have long been com- monplace. The use of fuel tax revenues to support general government funding might be more acceptable to consumers if the tax supplanted other less popular (or less efficient or less equitable) 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. Automobile fuel economy standards have been in effect for more than 30 years in the United States through the Corporate Average Fuel Economy (CAFE) program. The federal Energy Independence and Security Act of 2007 calls for major increases in passenger car and light truck CAFE standards over the next decade. It mandates that new cars and light trucks sold in model year 2020 test for a combined average fuel economy of 35 miles per gallon (mpg), equivalent to an annual increase in new vehicle mpg of about 3 percent per year. As explained earlier in this report, the higher CAFE standards have recently been coupled with GHG performance standards for cars and light trucks administered by the U.S. Environmental Protec- tion Agency (EPA). The GHG standards are likely to be met by manufac- turers largely through accelerated fuel efficiency improvements, causing the 35-mpg mark to be reached by 2016. Achievement of these efficiency standards by the industry would represent the largest sustained increase 12 Some studies have examined the issue of the recycling of revenues, including the cited RFF-NEPI study (Krupnick et al. 2010).

150 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation table 5-4 Existing and Proposed Vehicle Fuel and GHG Efficiency Standards in the United States and Other Countries Unadjusted Country or Model Year Standard Fleet Target Targeted Region Effective Type or Measure Structure Fleet 34.1 mpg 2016 United Fuel Footprint-based Cars, light (14.5 km/L) or States economy, corporate trucks 250 g of CO2/mile GHG average (155 g of CO2/km) 2016 155 g of CO2/km Canada GHG Footprint-based Cars, light (proposal) corporate trucks average 2015 130 g of CO2/km European GHG Weight-based Cars, light Union corporate trucks average 2010 222 g of CO2/km Australia GHG Single average Cars, light trucks 2015 16.8 km/L Japan Fuel Weight-based Cars economy corporate average 2015 14.2 km/L China Fuel Weight-based Cars, light (proposal) economy per vehicle and trucks corporate average 2015 17 km/L or 140 g South Korea Fuel Weight-based Cars, light of CO2/km (proposal) 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”), which are intended to make it easier for manufacturers of vehicles of many different sizes and types to comply with the standards and to address other concerns. This program change, 13 Although the new standards for GHGs can also be met through means other than improving fuel economy (e.g., by reducing emissions from air-conditioning systems), most of the improvements will be attained through fuel economy increases.

151 Policy Options which is described below, made support for higher fuel economy stan- dards easier to gain and may do so in the future. However, by essentially holding smaller vehicles to higher fuel economy targets than larger vehi- cles, the newly designed program could make consumers less inclined to buy the more fuel-efficient smaller vehicles. Such an unintended effect could make it more difficult for manufacturers to meet the fleetwide 35-mpg target, since declining interest in smaller vehicles will require that more of the improvement in efficiency come from larger vehicles. implications of attribute-based standards Under the newly revised CAFE program, each manufacturer’s fuel econ- omy average will be defined as a function of the footprints of its vehicles— that is, each vehicle’s track width multiplied by its wheelbase.14 This change in program design was largely a response to the difficulties encountered by domestic automobile manufacturers in meeting a single mpg standard averaged over the wide variety of car and light truck models and types that each makes.15 In addition, the traditional single-vehicle-type standards (one applied to cars and another applied to light trucks) had long been criticized over concern that they caused manufacturers to produce smaller and lighter vehicles in which occupants are at greater risk of serious injury from a crash. The attribute-based approach is intended to reduce the incentive to downsize vehicles and thus to cause manufacturers to pay greater attention to developing fuel-saving technologies for each footprint class. 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) to achieve the program’s mpg and GHG performance targets. The reason is that automobile 14 The National Highway Traffic Safety Administration elected to use footprint as the defining attribute over weight because of the potential for a weight-based system to deter manufacturers from seeking out lightweight materials. Under a weight-based system, a lighter vehicle could be subject to even more stringent fuel economy targets. 15 This means that a manufacturer that makes primarily smaller vehicles does not have to spend as much to comply as manufacturers of larger vehicles. This is especially a problem if a country’s domestic automakers are the ones making the larger vehicles, as in the United States.

152 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation manufacturers will no longer gain a compliance advantage by encourag- ing consumers to buy smaller cars or light trucks to achieve the previous standard, which was based on the average mpg of all passenger cars or light trucks sold. In practice, the higher CAFE and GHG efficiency standards will con- tinue to encounter the problem of motorists having limited financial incen- tive 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. Success in meeting the higher standard, there- fore, will depend even more on progress in furthering the effectiveness and affordability of fuel-saving technologies that can be applied to larger vehi- cles. If this progress does not materialize, consumers may face the choice of higher-priced vehicles or sacrifices in vehicle size and performance. Absent higher energy prices, consumers may be reluctant to accept this choice and may demand weaker (or static) standards instead. consumer acceptance of stricter standards Examinations of the technological potential for increasing light-duty vehi- cle efficiency suggest that fuel economy can be increased by 3 to 4 percent per model year over the next two decades by using a range of technologies that are emerging or becoming available (NRC 2010a; Bandivadekar et al. 2008). If mpg continues to grow by an average of 4 percent per model year from 2010 to 2030, as is now required for the next 5 years, the average fuel economy of new light-duty vehicles will reach 49 mpg by 2030. At current rates of fleet turnover, this increase in new vehicle mpg would cause the on-road average for the fleet to reach 38 mpg (up an average of 3.1 per- cent per year).16 If VMT increases by 1.5 percent per year over this period, plus another 0.2 percent per year due to a rebound effect from the higher vehicle fuel economies, total fuel consumption will decrease by about 1.4 percent per year, a reduction of about 25 percent in 2030 compared with consumption today. 16 The rate of growth in mpg for the entire on-road fleet is slower than that for new vehicles because of the lag in the impact of the standards as older vehicles are retired.

153 Policy Options Whether such a large savings in fuel can be achieved will depend on more than technology-driven gains in vehicle efficiency. It will also depend on whether consumers accept the more energy- and emissions- efficient vehicles required by the standards. Vehicles will need not only to be priced acceptably but also to have performance qualities that are desired by consumers. The more that consumers are financially moti- vated to care about efficiency, the more willingly they will trade off some or all of these qualities for enhanced fuel-saving performance. The importance of consumer demand is revealed by the experience of the 1990s. During that period, gasoline prices were falling, which renewed consumer interest in larger vehicles in the form of light trucks that are subject to lower CAFE standards. Because the advances occurring at the time in fuel-saving technologies (e.g., lighter materials, fuel-injection systems, front-wheel drive) were utilized to make these larger vehicles more energy efficient, the result of the technological advancement was a small change in total energy consumption. 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 effi- ciency 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. The most common efficiency metric used for light-duty vehicles, gallons of fuel consumed per vehicle mile, is less suited to freight trucks and passenger aircraft, which encompass a diversity of vehicle types, carry- ing capacities, and end-user applications. To set a single mileage-based standard for freight trucks, for example, could favor smaller vehicles with less hauling capacity and thus inadvertently result in more trucks on the road and an increase in overall fuel consumption. Similarly, a mileage- based standard for aircraft would need to take into account the variability 17 The Energy Independence and Security Act of 2007 (Public Law 110-140, December 19, 2007), Section 108, requires the U.S. Department of Transportation to establish fuel economy standards for medium- and heavy-duty vehicles.

154 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation in aircraft designs, each optimized for flying different stage lengths and with different passenger loads. Across all of these freight and passenger modes, the metrics for efficiency may need to be based on the regulated vehicle’s productivity, such as its fuel consumption per ton-mile carried or passenger mile flown. Heavy-duty trucks are often built and customized in stages by multiple manufacturers. Thus, determining the point in the truck manufacturing and assembly process at which an efficiency standard should be applied (and who would be held accountable) could be difficult: two trucks con- figured with similar power trains and frames could have substantially different fuel consumption characteristics depending on differences in their weight, rolling resistance, and aerodynamics that are introduced during the latter stages of customization. The trailers in tractor–trailer combinations are interchangeable, often owned by shippers (and not car- riers), and built separately from the tractor. Under these circumstances, whether the mandated level of efficiency for the tractor is being achieved when it is configured in combinations would be even more difficult to determine. The complexities of these regulatory issues as they pertain to large trucks are discussed in more detail in a National Research Council (NRC) report examining technologies and approaches for reducing the fuel consumption of medium- and heavy-duty vehicles (NRC 2010b). In the case of aircraft, any fuel efficiency standard would need to be com- patible (in scale and schedule of change) with the requirement of safety assurance and would need to recognize that new or reengineered designs will be subject to long and complex certification procedures. Such a stan- dard would have to avoid inadvertently impeding the introduction of safety innovations. 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. Among them are the provision of income tax credits to buyers of electric vehicles (EVs) and the long-standing “gas-guzzler” tax, which is intended to reduce demand for cars with low fuel economy. Tax subsidies

155 Policy Options such as the federal EV credit are also intended to stimulate manufacturer interest in developing these vehicles and to accelerate their introduction. Subsidylike programs could be designed in many ways to promote consumer and manufacturer interest in favored types of vehicles and technologies (such as EVs) or to stimulate greater consumer and sup- plier interest in vehicle fuel and GHG performance generally. They are not described here. Instead, this report examines a single policy instrument—a “feebate”—to illustrate how a subsidy program might be introduced to motivate interest in vehicle fuel and emissions efficiency but without the program being designed to favor a specific technology. The idea behind a feebate program is to combine a financial disincentive for the purchase of a low-performing vehicle with a financial incentive for the purchase of a higher-performing vehicle.18 Under such a program, all new vehicles would be tested to determine their level of efficiency relative to a prescribed performance threshold, such as miles per gal- lon or grams of CO2-eq per mile. Buyers of vehicles would be charged a graduated fee based on by how much the vehicle falls below the threshold or provided a graduated rebate depending on by how much the vehicle exceeds the threshold. As described in Chapter 3, the federal government has long imposed a gas-guzzler tax on manufacturer sales of cars that test at 22.5 mpg or lower. In this respect, the program raises the prices of these cars and discourages consumer interest in them. However, these taxes apply to a small share of passenger cars sold and are not accompanied by a rebate program that motivates interest in highly efficient vehicles. One of the perceived advantages of the feebate approach is that it would establish a consistent and known price for developing and introducing efficiency- enhancing technologies. Whereas vehicle manufacturers do not currently have a strong incentive to exceed fuel economy standards, feebate pro- grams would encourage them to make vehicles more efficient in response to pricing and consumer demand. As shown in Table 5-5, a number of countries are beginning to adopt feebatelike programs to create consumer demand for efficiency. 18 For more discussion of feebates and other incentives, see Greene (2009), Greene et al. (2005), and German and Meszler (2010).

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) Fee (tax only) Noncontinuous feebate (gas-guzzler fee) Fleet affected Light-duty vehicles Light-duty vehicles All light-duty Cars less than Light-duty vehicles with varied miles per between 96 mpg between 49 mpg vehicles 22.5 mpg gallon coverage (60 g of CO2/km) (120 g of CO2/km) and 25 mpg and 28 mpg (300 g of CO2/km) (225 g of CO2/km) Pivot point About 42 mpg N/A N/A N/A About 24 mpg for cars and 22 mpg for others (140 g of CO2/km) Deviation from Incomplete Fees only Fees only Fees only Differing feebate schedule by vehicle a true feebate coverage type Incomplete Annual only Does not cover system Not continuous coverage majority of fleet Majority of fleet falls into zero feebate Some fees based band Not continuous on engine size Not continuous Not continuous S OURCE: Derived from German and Meszler 2010.

157 Policy Options In principle, financial incentive programs such as feebates could be applied to other modes such as large trucks and aircraft. However, the feasibility of structuring a program for these modes would depend in large part on establishing appropriate productivity-related efficiency metrics for vehicle efficiency. Low-Carbon Fuel Standards description of standards Two fuel-oriented programs have recently been adopted in the United States to promote the replacement of the petroleum-based fuels used by cars and trucks with biomass-based and other alternative fuels having lower GHG emissions. The first program, adopted at the federal level, is EPA’s Renewable Fuel Standard (RFS), which sets a timetable for the replacement of petroleum-based motor fuels by a specific volume of renewable fuels. EPA recently instituted the second generation of this program, known as RFS2, in compliance with federal law (the Energy Independence and Security Act of 2007) that requires a greatly expanded supply of renewable fuels attaining certain GHG performance thresh- olds. The second program, adopted by California, is a low-carbon fuel standard (LCFS), which requires transportation fuel suppliers to reduce gradually the average GHG emission impacts of their fuels, including those of the fuel production process. Both the California and EPA pro- grams apply mainly to cars and trucks. 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 con- sumed. The California program currently calls for a 10 percent reduction in GHG emissions (grams of CO2-eq) per unit of energy used in transpor- tation fuels by 2020. To implement the standard, the program establishes a default value for the GHG life-cycle emissions associated with a wide range of fuel types including biofuels and other alternatives such as natural gas. 19 Much of the description of the LCFS program in California is derived from Sperling (2010).

158 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation Fuel suppliers are free to sell whatever mix of fuel types suits them best; however, the average GHG performance of the mix must meet the LCFS. In seeking compliance, the supplier can also petition for the use of a lower emissions value for its fuels if justified, for example by demonstrating that fuel production processes are low in GHG emissions. Because GHGs are emitted during the “upstream” process of fuel production, storage, and distribution, the LCFS covers all of these emissions sources in addition to emissions from fuel combustion. In so doing, carbon-intensive fuel pro- duction processes, such as the production of gasoline from tar sands, are covered by the standards. The federal RFS2 program, in comparison, focuses exclusively on bio- fuels as the means of GHG reduction. 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, includ- ing 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. Thus, a fundamental difference between California’s LCFS and the federal RFS2 is that the former program does not require the supply of specific types of fuels or specific methods of GHG reduction. The program, instead, is designed to be performance-based. It incorporates various features intended to motivate energy suppliers to seek innova- tive ways of reducing GHGs emitted from the burning and produc- tion of fuel. Although RFS2 mandates the supply of cellulosic biofuels, which provides an incentive for their development, it does not provide incentives for the development of other fuel alternatives or processes for reducing GHGs during fuel production. Key to the California LCFS is a provision allowing fuel suppliers to buy and sell emissions credits when they exceed or fall short of the standard. Oil refiners and import- ers, for example, can buy credits from a supplier of low-carbon biofuels to offset the emissions from their supplies of gasoline and diesel fuels. In this way, the tradable credits provision is intended to reward energy suppliers who are innovative and able to produce low-carbon fuels at lower cost.

159 Policy Options lcfs implementation and effectiveness issues A number of jurisdictions in this country and abroad are considering an LCFS,20 but California is the furthest along in implementation.21 There are several challenges to full implementation of an LCFS. As is true of any carbon emissions pricing or regulatory program, program administra- tors must have a practical means of measuring and accounting for the emissions. As mentioned above, California is using a “default and opt- in” approach whereby regulators assign different fuel types default values for CO2-eq emissions per energy unit. The fuel supplier can either accept these values or provide evidence that its production system leads to lower emissions. 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. A state-based LCFS program, for example, will not preclude regional or national fuel suppliers from shifting their higher-carbon energy supplies to other states or regions. This “leakage” problem can nullify the emissions benefits of such a program. An LCFS that has a larger area of coverage— beyond one state or a region—would raise the cost of such behavior and thus increase the likelihood of achieving the targeted cuts in emissions. Measures to Curb Private-Vehicle Travel The nation’s 115 million households own and operate more than 225 mil- lion cars and light trucks and account for about 90 percent of all VMT by light-duty vehicles. More than three-quarters of these households are located in metropolitan areas, and they alone account for about 40 per- cent of all CO2 emitted from transportation. Hence, any serious effort to reduce energy use and emissions from transportation must cut the 20 For example, the European Union is moving toward an LCFS through its Fuel Quality Directive. In addition, 11 Northeastern and Mid-Atlantic states signed an agreement in January 2009 committing to cooperation in developing a regional LCFS. 21 The standard was adopted in April 2009 and set to take effect in January 2010. http://www.energy. ca.gov/low_carbon_fuel_standard/.

160 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation amount of energy used and GHGs emitted from private vehicles, espe- cially those in metropolitan areas. All of the policy interventions covered so far in this chapter would affect the energy efficiency and use of household vehicles. However, addi- tional measures that further reduce the use of these vehicles may be war- ranted. 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. Addi- tional policies aimed at tempering the growth in motor vehicle travel, therefore, may complement this regulatory program. Focusing on the vehicle travel that takes place in metropolitan areas may be warranted because such locations account for a substantial por- tion of vehicle travel. Moreover, metropolitan areas presumably offer the greatest opportunity for reducing automobile travel through investments in alternative modes of transportation such as walking, bicycling, and public transit. Within metropolitan areas, the most significant sources of VMT are the households residing in the expanding suburbs. Today, more than half of the U.S. population lives in suburbs, which in comparison with the cities they surround have lower densities, more separation of land uses, more parking and road capacity, higher levels of motor vehicle ownership and use, and less walking and transit use. moderating growth in metropolitan driving In examining the various policy instruments available to curb driving in metropolitan areas, it is helpful to consider how the urban concen- tration of people, businesses, and activities influences the amount and pattern of personal travel. Compared with residents of more dispersed rural areas, urban residents must travel shorter distances on average between their origins and destinations. The shorter average trip distances can reduce VMT and make mass transit, walking, and bicycling more competitive with driving. At the same time, the concentration of trip ori- gins and destinations in urban areas can lead to more traffic congestion and slower travel in transportation corridors and to more competition for scarce parking spots. In addition, travel in these congested areas can be energy intensive due to frequent cold starts, engine idling, and stop– start operations. Given these basic relationships, urban transportation

161 Policy Options policies aimed at moderating growth in household VMT tend to focus on (a) creating more compact patterns of land development that further reduce average trip lengths and increase the appeal of alternatives to driving, (b) expanding the array of transportation options available to enable less reliance on the private automobile, and (c) increasing the price of park- ing to make driving less economical in comparison with other modes. Policies affecting each of these areas are discussed below. Compact Land Development Policies Compact land development policies are broadly aimed at increasing the concentration of households and businesses in metropolitan areas, resulting in trip origins and destinations that are closer to each other. Their aims are to reduce VMT by making travel by foot or bicycle more practical and to create the traffic densities needed to make traditional fixed-route transit services more competitive with the private automobile. The connections between urban land use patterns and household trip making and mode choice have been subjects of research and policy debate for years. A Transportation Research Board (TRB) report (TRB 2009b) examined the research into these connections in detail. The report concluded that urban areas that develop at higher residential and employment densities are, in general, likely to generate less VMT than their more spread-out counterparts, especially if alternative modes are convenient and affordable. Illustrative scenarios developed in the report suggest that “significant increases in more compact, mixed-use develop- ment will result in modest short-term reductions in energy consump- tion and CO2 emissions, but these reductions will grow over time” (TRB 2009b, 6). However, the report concedes an uncertainty about this rela- tionship. It states that “problems of measurement, issues of scale, and adequate controls for confounding variables (e.g., socioeconomic fac- tors, self-selection) have resulted in widely varying results concerning the importance of changes in land use and the magnitude of their effects on travel” (TRB 2009b, 89). 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.

162 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation As detailed in the TRB report, most of the policy levers available to influence urban land use are held by state and local governments, mostly by the latter (TRB 2009b, 8–9). Some states have sought to encourage more centralized land use planning that favors more compact devel- opment, but their means for doing so are often limited. For example, Lewis et al. (2009) examined the implementation and effects of Mary- land’s “smart growth” initiative, which was considered to be one of the nation’s pioneering state-level programs aimed at influencing regional patterns of development when it was instituted in 1997. By establishing priority funding areas (PFAs) agreed to by local governments, the state sought to contain development by concentrating state infrastructure spending in these areas. However, the authors found that the PFAs had limited impact because most of the funds for financing land development continued to come from local and private sources. Similarly, a recent examination of the effects of Florida’s growth management program on development found that the state program led to lower population den- sities in urban areas while it produced higher population densities in suburban areas (Boarnet et al. 2011). The reason for this outcome, the authors surmise, is that the state program had limited influence over land use regulation but was effective in channeling development to suburban places with available infrastructure. The experiences in Florida and Maryland illustrate how state influence on local land development patterns can be important but tends to be exer- cised mainly through the funding of transportation infrastructure and environmental regulation. The challenge is in making the state and federal roles more influential in encouraging metropolitan development patterns that are less automobile-oriented. In forming the Transportation and Cli- mate 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 poli- cies 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.

163 Policy Options mental regulation to encourage local communities to favor development patterns that can help moderate growth in VMT. A state law passed in 2008 known as SB 375 requires that the California Air Resources Board develop regional GHG emissions reduction targets applicable to cars and light trucks for 2020 and 2035. The 18 metropolitan planning organiza- tions (MPOs) in the state are charged with developing a plan and strate- gies to meet these targets through reductions in VMT in their respective regions. As an incentive for compliance, private developers will get relief from certain environmental reviews under California law when their projects are consistent with the MPO plan and strategies. In addition, state transportation funding is tied to the development of such a regional plan. 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. All three alternatives tend to be slower than driving for most trips, offer less protection from weather, and are not well suited for carrying and securing personal items. Favorable land development patterns require both a concentration and a mix of land uses to maximize the number of trip-making opportunities available by foot. The utility of a bicycle also increases when origins and destinations are clustered, but this utility can be reduced where congested roads create safety hazards. In the United States, utilitarian cycling has traditionally been highest in university towns, such as Boulder, Colorado; Davis, California; Eugene, Oregon; Madison, Wisconsin; and Palo Alto, California. Recently, however, some larger cities—such as Chicago, Illi- nois; Portland, Oregon; San Diego, California; and Washington, D.C.— have been actively encouraging cycling, with reported success, through the provision of dedicated travel lanes and bicycle-sharing programs. Relative to walking and bicycling, public transit has been the recipient of much more government attention and resources over the past several decades. In the nation’s older, larger cities, public transit continues to play a significant role in personal transportation, both for commuting and for other travel activity. However, for the nation as whole, more than

164 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation 85 percent of all metropolitan trips are made in private vehicles, com- pared with only about 3 percent by public transit. 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 emis- sions. Public transit now accounts for about 20 percent of all government surface transportation expenditures (Taylor, Miller, et al. 2009). During the past 30 years, significant investments have been made in new and extended suburban rail transit services, causing the nation’s total transit rail miles to grow by more than 25 percent since 1993. As metropolitan areas have spread out, pressure to extend new transit investments into sprawling, less- transit-friendly suburbs has been increasing, contributing to declining service efficiency (e.g., fewer passengers per revenue vehicle hour). Despite these rail investments, most regular public transit users con- tinue to come from low-income urban households with limited access to private vehicles. Bus transit, in particular, is most competitive with private vehicles in these lower-income urban markets because this ser- vice is more affordable and can be offered with high frequency in city locations with higher population and ridership densities. Thus, policies that keep bus fares low and increase service frequency (i.e., reduce wait times) have proved to be highly effective in attracting additional transit patronage (Taylor, Miller, et al. 2009). In general, whether the transit ser- vice consists of bus or rail, experience suggests that service investments alone cannot ensure heavy patronage. Research suggests a number of practical steps that can also help boost transit patronage concurrent with service investments. They include providing more frequent service on heavily traveled transit lines to reduce waiting times at stops, increasing safety monitoring of riders, and providing real-time traveler information at transit stops to reduce the perception of an excessive time penalty from traveling by transit (Taylor, Iseki, et al. 2009). Increasing transit’s appeal and utility has many potential benefits, espe- cially by reducing traffic congestion and travel delays during peak travel periods. However, public transit accounts for a small share of household person trips, and even a 25 percent increase in transit ridership would

165 Policy Options have limited impacts on total energy use and emissions from automobile travel. To bring about much larger impacts on energy and emissions may require changes in the provision and nature of transit services that are far more dramatic than the marginal effects of increases in transit service quality and capacity. It would likely require innovations both in transit technology and in how these services are organized, funded, and pro- vided by the public and private sectors. Given transit’s many functions in urban communities, bringing about such fundamental change may require an alignment of many interests in addition to curtailing transpor- tation energy use and emissions. A combination of higher energy prices, increasing traffic congestion, and new capabilities offered by advance- ments in transportation and information technology may be necessary to create an environment receptive to such change over time. Pricing Parking Pricing parking represents an opportunity for curtailing at least some pri- vate driving in urban areas. However, in most urban locations in the United States, including many city centers, motorists do not pay to park. Indeed, in many urban areas the cost of supplying parking is capitalized in the cost of developing a building, as many local zoning requirements compel developers to provide off-street parking. The result is an excess supply of parking spaces, which drives the market price of parking to zero. Shoup (1997), who has written extensively on parking behavior and policies in the United States, estimated that urban motorists often save more from this built-in subsidy when they make a trip for commuting or shopping than they spend on the gasoline consumed for the travel. In addition, he finds that the expectation of being able to locate free or underpriced street park- ing in many commercial districts encourages motorists to drive exces- sively in search of a parking space, consuming fuel and emitting GHGs in the process (Shoup 1997; Shoup 2006; Shoup 2007). 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. He has proposed other complementary

166 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation measures that would foster such behavior, such as encouraging employers to give their commuting employees the option of receiving cash or a transit subsidy in lieu of unpriced or subsidized parking (Shoup 2005). Most parking is controlled by local government and thus often viewed as central to economic development. In this regard, policies that increase the cost of parking are often resisted by local businesses out of concern that more costly parking will discourage workers and shoppers. However, many of the benefits of reduced traffic congestion, as well as the genera- tion of parking revenues, would be conferred on the local community. Building the local support needed to raise the cost of parking will require the balancing of the two sets of interests. pricing road use An often-cited dilemma of policies aimed at reducing solo driving is that the resulting reductions in traffic congestion could reduce the cost of driving and thus induce some additional vehicle travel. This effect, termed “latent demand” by transportation analysts, is conceptually sim- ilar 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. A related option is to price road use directly, such as by charging higher tolls and even assessing a fee on each mile of vehicle travel, known as VMT charging. Although the concept of charging directly for road use through toll- ing is not new, interest in using tolls to relieve traffic congestion has been growing in the United States and worldwide. The focus has been on the use of tolls that vary on the basis of traffic levels. Nearly 100 variable toll- ing facilities are in operation, are in development, or are being planned around the world.23 Implementation of variable tolls in the United States has typically been confined to newly constructed facilities because of the resistance that would be encountered in charging motorists for the use of existing facilities that were previously unpriced. Whether variable tolls reduce overall VMT is unclear, since some of the motorists affected by 23 For more information on these projects and their rationale, see the special issue on congestion pricing in the July–August 2009 TR News (http://onlinepubs.trb.org/onlinepubs/trnews/trnews263toc.pdf).

167 Policy Options the tolls will shift their driving to other roads or other times of the day when tolls are lower. Systemwide congestion pricing has not been tried in any U.S. community. Thus, while facility-specific charges can yield congestion benefits in individual highway corridors, the narrow scope of most applications is likely to limit their overall potential to reduce vehicle use, fuel consumption, and emissions at the metropolitan level. For road pricing initiatives to have a broader effect on VMT and energy use would presumably require the use of more universal forms of road pricing, such as charging motorists per mile of travel anywhere on the highway system. Gasoline taxes already increase the per mile cost of driving. 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 difficul- ties 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. For this reason, a TRB (2006) report, The Fuel Tax and Alternatives for Transportation Funding, recommended the pilot testing of road use metering and mileage charging. Subsequently, a report by the congressionally mandated National Surface Transportation Infrastructure Financing Commission (2009) urged the creation of a new transportation finance system that would use targeted tolling and more direct user fees based on miles driven. The commission concluded that to generate the same revenue as current federal, state, and local taxes on gasoline, the fee would need to average about $0.025 per mile. To have a significant impact on the total amount of driving, however, mileage-based charges would presumably need to be much higher than $0.025 per mile. VMT charges have been used in the United States and abroad to a limited extent. Oregon, for example, has instituted a pilot program in which partic- ipants agree to pay a fee based on miles driven, as derived from odometer readings. Oregon also collects weight–distance taxes from motor carriers in lieu of diesel taxes. Germany has instituted a system of charging trucks tolls on the basis of miles traveled, exhaust emissions, and number of axles. In this program, the charges are calculated by using onboard Global Posi- tioning System equipment and wireless communication devices. A concept related to VMT fees is “pay-as-you-drive” automobile insurance. These programs charge insurance on the basis of miles driven,

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.

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

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-

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.

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

173 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

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

175 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. References abbreviations CBO Congressional Budget Office NRC National Research Council TRB Transportation Research Board Allcott, H., and N. Wozny. 2009. Gasoline Prices, Fuel Economy, and the Energy Paradox. Department of Economics, Massachusetts Institute of Technology, Cambridge, Nov. Bandivadekar, A., K. Bodek, L. Cheah, C. Evans, T. Groode, J. Heywood, E. Kasseris, M. Kromer, and M. Weiss. 2008. On the Road in 2035: Reducing Transportation’s Petroleum Consumption and GHG Emissions. Laboratory for Energy and the Environment, Massachusetts Institute of Technology, Cambridge. Beresteanu, A., and S. Li. 2011. Gasoline Prices, Government Support, and the Demand for Hybrid Vehicles in the United States. International Economic Review, Vol. 52, No. 1, pp. 161–182. Boarnet, M. G., R. B. McLaughlin, and J. I. Carruthers. 2011. Does State Growth Management Change the Pattern of Urban Growth? Evidence from Florida. Regional Science and Urban Economics, Vol. 41, No. 3, pp. 236–252.

176 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation Bordoff, J. E., and P. J. Noel. 2008. Pay-as-You-Drive Auto Insurance: A Simple Way to Reduce Driving-Related Harms and Increase Equity. Brookings Institution, Wash- ington, D.C. http://www.brookings.edu/papers/2008/07_payd_bordoffnoel.aspx. Borenstein, S. 2008. The Implications of a Gasoline Price Floor for the California Budget and Greenhouse Gas Emissions. Working paper CSEM WP 182. University of California, Berkeley. CBO. 2008. Policy Options for Reducing CO2 Emissions. Publication 2930. Washington, D.C., Feb. http://www.cbo.gov/ftpdocs/89xx/doc8934/02-12-Carbon.pdf. Fawcett, A. A., K. V. Calvin, F. C. de la Chesnaye, J. M. Reilly, and J. P. Weyant. 2009. Overview of EMF 22 U.S. Transition Scenarios. Energy Economics, Vol. 31, pp. S198–S211. http://emf.stanford.edu/files/res/2369/fawcettOverview22.pdf. German, J., and N. Lutsey. 2010. Size or Mass? The Technical Rationale for Selecting Size as an Attribute for Vehicle Efficiency Standards. International Council on Clean Transportation. German, J., and D. Meszler. 2010. Feebate Review and Assessment: Best Practices for Feebate Program Design and Implementation. International Council on Clean Transportation. Gillingham, K., R. G. Newell, and K. L. Palmer. 2006. Energy Efficiency Policies: A Retrospective Examination. Annual Review of Environment and Resources, Vol. 31, pp. 161–192. Greenberg, A. 2009. Designing Pay-per-Mile Auto Insurance Regulatory Incentives. Transportation Research D, Vol. 14, No. 6, pp. 437–445. Greene, D. L. 2009. Feebates, Footprints and Highway Safety. Transportation Research D, Vol. 14, No. 6, pp. 375–384. Greene, D. L. 2010. How Consumers Value Fuel Economy: A Literature Review. Techni- cal Report EPA-420-R-10-008. U.S. Environmental Protection Agency, March. Greene, D. L. 2011. Uncertainty, Loss Aversion, and Markets for Energy Efficiency. Energy Economics, Vol. 33, No. 4, pp. 608–616. Greene, D. L., P. D. Patterson, M. Singh, and J. Li. 2005. Feebates, Rebates and Gas- Guzzler Taxes: A Study of Incentives for Increased Fuel Economy. Energy Policy, Vol. 33, pp. 757–775. Hausman, J. A. 1979. Individual Discount Rates and the Purchase and Utilization of Energy Using Durables. Bell Journal of Economics, Vol. 10, No. 1, pp. 33–54. Krupnick, A. J., I. W. H. Parry, M. A. Walls, T. Knowles, and K. Hayes. 2010. Toward a New National Energy Policy: Assessing the Options. Resources for the Future, Washington, D.C., Nov. Langer, A., and N. Miller. 2008. Automobile Prices, Gasoline Prices, and Consumer Demand for Fuel Economy. Economic Analysis Group Discussion Paper EAG 08-11. Department of Economics, University of California at Berkeley, Dec.

177 Policy Options Lee, J. J., S. P. Lukachko, I. A. Waitz, and A. Schäfer. 2001. Historical and Future Trends in Aircraft Performance, Cost, and Emissions. Annual Review of Energy and the Environment, Vol. 26, pp. 167–200. Lewis, R., G.-J. Knaap, and J. Sohn. 2009. Managing Growth with Priority Funding Areas: A Good Idea Whose Time Has Yet to Come. Journal of the American Planning Association, Vol. 75, No. 4, pp. 457–478. Morrow, W. R., K. Sims-Gallagher, G. Collantes, and H. Lee. 2010. Analysis of Policies to Reduce Oil Consumption and Greenhouse Gas Emissions from the U.S. Transportation Sector. Energy Policy, Vol. 38, No. 3, pp. 1305–1320. National Surface Transportation Infrastructure Financing Commission. 2009. Paying Our Way: A New Framework for Transportation Finance. http://financecommission. dot.gov/Documents/NSTIF_Commission_Final_Report_Mar09FNL.pdf. National Surface Transportation Policy and Revenue Study Commission. 2007. Trans- portation for Tomorrow: Report of the National Surface Transportation Policy and Revenue Study Commission. http://transportationfortomorrow.com/final_report/ index.htm. NRC. 2001. Energy Research at DOE: Was It Worth It? Energy Efficiency and Fossil Energy Research 1978 to 2000. National Academy Press, Washington, D.C. NRC. 2010a. Real Prospects for Energy Efficiency in the United States. National Academies Press, Washington, D.C. NRC. 2010b. Technologies and Approaches to Reducing the Fuel Consumption of Medium- and Heavy-Duty Vehicles. National Academies Press, Washington, D.C. Parry, I. W. H., and K. A. Small. 2005. Does Britain or the United States Have the Right Gasoline Tax? American Economic Review, Vol. 95, No. 4, pp. 1276–1289. Shoup, D. 1997. The High Cost of Free Parking. Journal of Planning Education and Research, Vol. 17, pp. 3–20. http://www.uctc.net/papers/351.pdf. Shoup, D. 2005. Parking Cash Out. American Planning Association, Chicago, Ill. Shoup, D. 2006. Cruising for Parking. Transport Policy, Vol. 13, No. 6, Nov., pp. 479–486. Shoup, D. 2007. Gone Parkin’. New York Times. http://www.nytimes.com/2007/03/29/ opinion/29shoup.html?ex=1332820800&en=cdabf3ece6c4a862&ei=5088& partner=rssnyt&emc=rss. Small, K. A. 2010. Energy Policies for Automobile Transportation: A Comparison Using the National Energy Modeling System. Resources for the Future and National Energy Policy Institute, June. http://www.rff.org/Documents/Features/ NEPI/RFF-BCK-Small-AutoPolicies.pdf. Accessed June 29, 2010. Small, K. A., and K. Van Dender. 2007. Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect. Energy Journal, Vol. 28, No. 1, pp. 25–51. Small, K. A., and C. Winston. 1999. The Demand for Transportation: Models and Applications. In Essays in Transportation Economics and Policy (J. A. Gómez-Ibáñez,

178 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation W. B. Tye, and C. Winston, eds.), Brookings Institution Press, Washington, D.C., pp. 11–55. Sperling, D. 2010. Policies to Promote Low-Carbon Transportation Fuels: What Works? TR News, No. 268, May–June, pp. 29–31. Taylor, B. D., H. Iseki, M. A. Miller, and M. Smart. 2009. Thinking Outside the Bus: Understanding User Perceptions of Waiting and Transferring in Order to Increase Transit Use. UCB-ITS-PRR-2009-8. California Partners for Advanced Transit and Highways, Berkeley. Taylor, B. D., D. Miller, H. Iseki, and C. Fink. 2009. Nature and/or Nurture? Analyzing the Determinants of Transit Ridership Across U.S. Urbanized Areas. Transportation Research A, Vol. 43, No. 1, pp. 60–77. DOI: 10.1016/j. tra.2008.06.007. TRB. 1996. Special Report 246: Paying Our Way: Estimating Marginal Social Costs of Freight Transportation. TRB, National Research Council, Washington, D.C. http:// onlinepubs.trb.org/onlinepubs/sr/sr246.pdf. TRB. 2006. Special Report 285: The Fuel Tax and Alternatives for Transportation Fund- ing. TRB, National Research Council, Washington, D.C. TRB. 2009a. Special Report 297: Funding Options for Freight Transportation Projects. Transportation Research Board of the National Academies, Washington, D.C. TRB. 2009b. Special Report 298: Driving and the Built Environment: The Effects of Compact Development on Motorized Travel, Energy Use, and CO2 Emissions. Transportation Research Board of the National Academies, Washington, D.C. TRB. 2009c. Special Report 299: A Transportation Research Program for Mitigating and Adapting to Climate Change and Conserving Energy. Transportation Research Board of the National Academies, Washington, D.C. Turrentine, T., and K. Kurani. 2007. Car Buyers and Fuel Economy? Energy Policy, Vol. 35, pp. 1213–1223.

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Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation: Special Report 307 Get This Book
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TRB Special Report 307: Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation examines the potential for policies to yield major changes in transportation energy use and emissions trends by policy measures targeting cars and light trucks, medium and heavy trucks, and commercial airliners. These three modes are by far the largest users of energy by U.S. transportation because they account for the vast majority of passenger trips and freight.

According to the committee that produced the report, it will take more than tougher fuel economy standards for U.S. transportation to significantly cut national petroleum use over the next half century. It will likely require a combination of measures that foster consumer and supplier interest in vehicle fuel economy, alternative fuels, and a more efficient transportation system.

Major policy options examined in the report-fuel taxes, vehicle efficiency standards, fuel standards, infrastructure investments, and coordinated transportation and land use planning-have the potential to bring about large energy and emissions savings from these modes over time; however, each option presents particular challenges with respect to the scope and timing of its impacts. The report suggests that combining transportation policy options to increase the timeliness and expand the scale and scope of the response may be warranted.

Saving energy in transportation can have important implications for the cost of securing the world's oil supplies, since transportation accounts for most of the petroleum consumed in the United States. It can also help with controlling the buildup of greenhouse gases (GHGs), which will require major reductions in carbon dioxide (CO2) emissions from economic sectors that are heavy users of carbon-rich fossil fuels. Scientific analyses and models indicate a need to stabilize atmospheric concentrations of CO2 and other GHGs by the middle of this century to reduce the risks of climate change. A response by the transportation sector to this energy and emissions challenge will be important because it produces between one-quarter and one-third of all of the CO2 emitted from the country's energy consumption.

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