tee are based on its review of the past experience with and potential effectiveness of the possible policies described in Chapter 6, and on the committee’s own evaluation of policies and policy combinations in Chapter 5. Regulatory policies such as Corporate Average Fuel Economy (CAFE) standards, pricing policies (either economy-wide or directed at fuel supply sectors) such as feebates for vehicles, and regulatory or pricing policies directed at fuel supply sectors will likely be essential to attaining the 2050 goals for reducing LDV petroleum consumption and GHG emissions. Additional policies may also be required if a transition to alternative vehicle and fuel systems turns out to be the best way to attain the goals. Such transition policies include infrastructure investments and possible subsidies. Because of uncertainties and unforeseen circumstances in the future, policies must be adaptive in response to technology and to market conditions over time to ensure that the goals are met in a cost-effective way.

7.1 POLICIES TO ENCOURAGE THE CONTINUED IMPROVEMENT OF THE FUEL EFFICIENCY OF THE LIGHT-DUTY VEHICLE FLEET

Even if the fuel economy and CO2 reduction standards for new LDVs currently being implemented by NHTSA and the EPA are met, further improvement in the fuel efficiency of vehicles could be made in and after model year (MY) 2025. Although the committee believes that it is premature to suggest a specific fuel economy target for new LDVs by MY2050, a “ballpark” estimate is that a further doubling (that is, a doubling beyond the doubling that is scheduled to occur between 2005 and 2025) of the average new LDV fleet fuel economy standard by 20501 will be technically feasible but costly. The modeling results in Chapter 5 indicate that such an increase in the CAFE standard could reduce GHG emissions by about 50 percent in 2050 compared to the 2005 level. Reaching such ambitious fuel economy targets will require a mix of policies that affect the decisions of vehicle manufacturers to produce fuel-efficient vehicles and the decisions of consumers to purchase them.

FINDING. The CAFE standard has been effective in reducing vehicle energy intensity, and further reductions can be realized through even higher standards if combined with policies to ensure that they can be achieved.

POLICY OPTION. The committee suggests that LDV fuel economy and GHG emissions standards continue to be strengthened to play a significant role after model year 2025 as part of this country’s efforts to improve LDV fuel economy and reduce GHG emissions.

FINDING. “Feebates,” rebates to purchasers of high-fuel-economy (i.e., miles per gallon [mpg]) vehicles balanced by a tax on low-mpg vehicles is a complementary policy that would assist manufacturers in selling the more-efficient vehicles produced to meet fuel economy standards.

POLICY OPTION. The committee recognizes that U.S. government “feebates” based on the fuel consumption of LDVs could have a role as a complement to LDV fuel economy and GHG emissions standards to facilitate and accelerate the introduction of significantly more efficient vehicles into the market to the meet the 2050 timing of the goals. The committee suggests that the U.S. government include “feebates” as part of a policy package to reduce LDV fuel use.

7.2 POLICIES TARGETING PETROLEUM USE

Petroleum consumption can be reduced by a variety of policies. Placing a quantity constraint on petroleum consumption (also known as rationing) would reduce its use directly and increase its price. A tax on petroleum would directly increase the price of petroleum, providing a signal to both producers and consumers to find ways to reduce use of petroleum-based fuels, redesign vehicles, or replace petroleum-based fuels with other fuels. Other approaches include requiring quantities of alternative fuels to be sold (such as through application of the Renewable Fuel Standard) or using subsidies to reduce the prices of alternative fuels to make their cost lower than the cost of petroleum-based fuels. As discussed in Chapter 6, it can be difficult to design a policy that successfully mandates the sale of certain fuels when they are more expensive than petroleum-based fuels. Subsidies require government revenue to fund, whereas taxes raise revenue that either can be used to fund programs related to energy and GHG emissions reduction or can be refunded to the taxpayer.

Placing a quantity limit on oil consumption (or use of petroleum fuels by LDVs specifically) has rarely been proposed and would be expected to have significant adverse social impacts.

What has been widely discussed for many years is taxation that would directly target petroleum demand or petroleum imports. Existing U.S. motor fuel taxes were adopted to raise revenues for funding roads. Historically, these taxes have helped support petroleum demand by facilitating vehicle use while remaining low enough to avoid significantly affecting fuel demand. A small exception to the historical rationale was the $0.043 per gallon gasoline tax increase of 1993 (the last time U.S. fuel taxes were raised), which had been proposed originally as a “Btu tax” to foster energy

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1Such a further doubling of on-road fleet fuel economy between 2025 and 2050 cannot, by itself, achieve the goals set forth in the charge to this committee. Additional changes involving fuels and VMT also will be needed. See the committee’s scenarios in Chapter 4 for details.



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