What's greener than a VMT tax?
What’s greener than a VMT tax? David L. Greene Senior Fellow, Howard H. Baker, Jr. Center for Public Policy The University of Tennessee TRB May 20, 2010 New Orleans, Louisiana
The case for an Indexed ROadway User Toll on Energy: Threats to the Motor Fuel Excise Tax Paying for public goods The simple physics of transportation An Indexed Energy User Fee Benefits of an IRoUTE Limitations of an IRoUTE
The #1 threat to the motor fuel tax for road finance has been inflation, then fuel economy improvement, then diversions to alternative fuels and transit.
Fuel economy improvements due to CAFE and higher oil prices decoupled VMT and fuel use. Future improvements will widen the gap. Miles of Travel and Fuel Use by Light-duty Vehicles: 1965-2007 240000
3000000
190000
Vehicle Travel Fuel USe 2000000
140000 1500000 90000 1000000 40000
500000
0
1965
-10000
1970
1975
1980
1985
1990
1995
2000
2005
Gallons (millions)
Vehicle Miles (millions)
2500000
Use of motor fuel excise tax revenues for funding transit and subsidizing ethanol have eroded highway revenues to a lesser degree.
Most roads, most of the time are provided to motorists as public goods. Public Goods are: Non-rivalrous Non-exclusive
Congestion destroys non-rivalrousness making roads a “common good”. Toll roads, HOV and HOT lanes are exclusive VMT pricing raises both political and practical questions. Privacy and preference The funding crisis is here, now. How quickly can VMT pricing be implemented?
Physics suggests a more practical, greener alternative to VMT pricing. Transportation is “WORK”. It requires application of a force over a distance. Work cannot be done without energy; the quantity of energy needed is proportional to the work done. W = fs = eE (e is a unitless measure of efficiency) VMT = E/ε
(ε has units of energy per mile)
$X/VMT = ε($Y/E) $Y = $X/ε
The fuel economy of the stock of vehicles on the road responds slowly and predictably even to rapid changes in new vehicle fuel economy. Fuel Economy Of New Light-Duty Vehicles Versus On-Road Fleet MPG, 1975-2005 25
Miles per Gallon
20 15 New Vehicle On-Road MPG
10
On-Road Fleet MPG
5 0 1975
1980
1985
1990
1995
2000
2005
Good estimates can be made based on adjusted EPA test fuel economy estimates. Higher gas prices lead to higher on-road MPG. On-Road Light-duty Vehicle MPG and CAFE Variables
24 CAFE CAR
22
FHWA CAR
Miles per Gallon
CAFE LDV
20
FHWA LDV CAFE LT
18
FHWA LT
16 14 12 10 1975
1980
1985
1990
1995
2000
2005
2010
A user fee on energy is greener because the VMT user fee affects only vehicle use. The energy fee has an equal effect on vehicle use but also promotes energy efficiency. (Numbers shown below are price elasticities of fuel use.) Fuel Price -0.1
Vehicle Use
Vehicle Technology & Design -0.1-0.2
In‐use Vehicle Stock Efficiency -0.1
Test Cycle (CAFE) Energy Efficiency
-0.1
Vehicle Choice
The Indexed Roadway User Toll on Energy must not be a simple motor fuel tax. Applies to all energy used to propel vehicles (including electricity). Indexed to energy efficiency (e.g., total highway miles per gallon, but there are many alternatives). Indexed to inflation using appropriate measure (e.g., National Highway Construction Cost Index, but there are many alternatives). Assuming today’s conditions, IRoUTE would save about 50 million more metric tons of CO2 per year than a VMT tax.
IRoUTE will not shine your shoes. Does essentially nothing for traffic congestion. Other measures, e.g., including automated tolling, are necessary. Will not accurately reflect cost responsibility of heavy vehicles (increases approximately linearly with vehicle mass). Implement universal road pricing for heavy vehicles? Is not a comprehensive externality tax; e.g., still need to price carbon, enforce emissions standards, etc.
IRoUTE is… Practical Reliable and stable Predictable Low cost As politically acceptable as meaningful alternatives A source of important environmental co-benefits One way to accustom motorists to paying by the mile. P.S.: It IS a VMT tax, on average.
Thank you.
The case for an Indexed ROadway User Toll on Energy: Threats to the Motor Fuel Excise Tax Paying for public goods The simple physics of transportation An Indexed Energy User Fee Benefits of an IRoUTE Limitations of an IRoUTE
The #1 threat to the motor fuel tax for road finance has been inflation, then fuel economy improvement, then diversions to alternative fuels and transit.
Fuel economy improvements due to CAFE and higher oil prices decoupled VMT and fuel use. Future improvements will widen the gap. Miles of Travel and Fuel Use by Light-duty Vehicles: 1965-2007 240000
3000000
190000
Vehicle Travel Fuel USe 2000000
140000 1500000 90000 1000000 40000
500000
0
1965
-10000
1970
1975
1980
1985
1990
1995
2000
2005
Gallons (millions)
Vehicle Miles (millions)
2500000
Use of motor fuel excise tax revenues for funding transit and subsidizing ethanol have eroded highway revenues to a lesser degree.
Most roads, most of the time are provided to motorists as public goods. Public Goods are: Non-rivalrous Non-exclusive
Congestion destroys non-rivalrousness making roads a “common good”. Toll roads, HOV and HOT lanes are exclusive VMT pricing raises both political and practical questions. Privacy and preference The funding crisis is here, now. How quickly can VMT pricing be implemented?
Physics suggests a more practical, greener alternative to VMT pricing. Transportation is “WORK”. It requires application of a force over a distance. Work cannot be done without energy; the quantity of energy needed is proportional to the work done. W = fs = eE (e is a unitless measure of efficiency) VMT = E/ε
(ε has units of energy per mile)
$X/VMT = ε($Y/E) $Y = $X/ε
The fuel economy of the stock of vehicles on the road responds slowly and predictably even to rapid changes in new vehicle fuel economy. Fuel Economy Of New Light-Duty Vehicles Versus On-Road Fleet MPG, 1975-2005 25
Miles per Gallon
20 15 New Vehicle On-Road MPG
10
On-Road Fleet MPG
5 0 1975
1980
1985
1990
1995
2000
2005
Good estimates can be made based on adjusted EPA test fuel economy estimates. Higher gas prices lead to higher on-road MPG. On-Road Light-duty Vehicle MPG and CAFE Variables
24 CAFE CAR
22
FHWA CAR
Miles per Gallon
CAFE LDV
20
FHWA LDV CAFE LT
18
FHWA LT
16 14 12 10 1975
1980
1985
1990
1995
2000
2005
2010
A user fee on energy is greener because the VMT user fee affects only vehicle use. The energy fee has an equal effect on vehicle use but also promotes energy efficiency. (Numbers shown below are price elasticities of fuel use.) Fuel Price -0.1
Vehicle Use
Vehicle Technology & Design -0.1-0.2
In‐use Vehicle Stock Efficiency -0.1
Test Cycle (CAFE) Energy Efficiency
-0.1
Vehicle Choice
The Indexed Roadway User Toll on Energy must not be a simple motor fuel tax. Applies to all energy used to propel vehicles (including electricity). Indexed to energy efficiency (e.g., total highway miles per gallon, but there are many alternatives). Indexed to inflation using appropriate measure (e.g., National Highway Construction Cost Index, but there are many alternatives). Assuming today’s conditions, IRoUTE would save about 50 million more metric tons of CO2 per year than a VMT tax.
IRoUTE will not shine your shoes. Does essentially nothing for traffic congestion. Other measures, e.g., including automated tolling, are necessary. Will not accurately reflect cost responsibility of heavy vehicles (increases approximately linearly with vehicle mass). Implement universal road pricing for heavy vehicles? Is not a comprehensive externality tax; e.g., still need to price carbon, enforce emissions standards, etc.
IRoUTE is… Practical Reliable and stable Predictable Low cost As politically acceptable as meaningful alternatives A source of important environmental co-benefits One way to accustom motorists to paying by the mile. P.S.: It IS a VMT tax, on average.
Thank you.
