Transportation's Role in Reducing U.S. Greenhouse Gas Emissions ...

Transportation's Role in Reducing U.S. Greenhouse Gas Emissions: Volume 1
Table 4.1
Cap and Trade/Carbon Tax Price Impacts
Gasoline Diesel Jet Fuel
Carbon Content kg CO2/gallon 8.81 10.15 9.57
Allowance Price or Carbon Tax per
ton CO2
Gasoline $ per
gallon
Diesel $ per
gallon
Jet fuel $ per
gallon
$10 $0.09 $0.10 $0.10
$15 $0.13 $0.15 $0.14
$20 $0.18 $0.20 $0.19
$30 $0.26 $0.30 $0.29
$40 $0.35 $0.41 $0.38
$50 $0.44 $0.51 $0.48
Source: Carbon content from U.S. EPA (2007). Inventory of Greenhouse Gas Emissions and Sinks: 1990
to 2005, Annex 2.1.
$/gallon = kg CO2/gallon * 1 metric ton/1000 kg * allowance price or carbon tax.
Note: The price impacts shown are only due to the combustion of fuel. Since
upstream and refining emissions will be included under cap and trade, the cost
of these emissions will be reflected in the price seen by the consumer to some
degree. The estimate also does not include general equilibrium effects, e.g., the
dynamic effects on fuel prices from lowered demand for fuel as a result of the
carbon price. These price increases are low in comparison to the gas price
increase of $2 per gallon experienced between 2004 and 2008, 129 which
contributed to some leveling off of GHG emissions from the transportation sector
but not steep declines.
According to a U.S. Department of Energy analysis of gas price increases over
the last 10 years, gas demand was relatively inelastic, at -0.02 for prices over
$2.50 per gallon. 130 This means a 100 percent increase in gas price is associated
with a 2 percent reduction in gas consumption. Long run elasticities are
greater, 131 as consumers have time to purchase more fuel efficient vehicles and
move residences closer to work and other destinations. Researchers Small and
129 U.S. Department of Energy, Energy Information Administration (2009). Monthly
Energy Review, Table 9.4 Motor Gasoline Retail Prices, U.S. City Average, May 2009,
http://tonto.eia.doe.gov/merquery/mer_data.asptable=T09.04
130 U.S. Department of Energy, Energy Information Administration (2008). “Short-Term
Energy Outlook Supplement: Motor Gasoline Consumption 2008: A Historical
Perspective and Short-Term Projections.”
131 Graham, D.J. and S. Glaister (2002). “The Demand for Automobile Fuel: A Survey of
Elasticities.” Journal of Transport Economics and Policy 36(1):1-26, January 2002.
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