Assessment of Fuel Economy Technologies for Medium and Heavy ...

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million VMT for injury crashes. 25 Based on these average rates, the rebound effect analysis (3.2 - 15 billion additional VMT annually) implies a national increase of 80 - 360 fatalities per year and 1,600 – 7,700 injuries per year. For estimation of change in marginal cost: The increase in rural and urban Class 8 truck VMT is 1.9 to 8.7 billion VMT (58 percent of the previously estimated 3.2 to 15 billion VMT increase) and 1.3 to 6.3 billion VMT (42 percent of the 3.2 to 15 billion VMT increase), respectively. 26 Using Parry‘s marginal congestion costs of $0.034 per-mile in rural areas and $0.018 per-mile in urban areas, the total increase in cost ranges from $0.09 billion to $0.4 billion (e.g. $0.09 billion = 1.9 billion rural VMT * $0.034 per-mile + 1.3 billion urban VMT * $0.018 per-mile) 2. Alternative Approaches to Improving Fuel Efficiency Three alternative approaches to improving fuel efficiency are discussed in this section: a fuel tax, congestion pricing, and improvements in intermodal transport to divert freight from truck to rail. (i) Fuel Tax Key Question: What impact would an increase in the fuel tax (assessed on diesel fuel, all motor vehicle fuels, or an all fuels based on carbon content) have on truck fuel consumption Background: A fuel tax would affect truck fuel consumption in two ways: first, it would reduce truck traffic volumes, and second, it would encourage the purchase of more fuel-efficient vehicles and the retrofitting of existing vehicles with fuel-saving technology. It is possible to estimate the first effect, truck VMT reduction due to operating cost increase, using the elasticities of VMT with respect to price of truck travel as described in section (1)(ii). The second effect can similarly be evaluated using evidence on the elasticity of truck fuel efficiency with respect to fuel price. While there is considerable literature on this subject as applied to overall on-road vehicle traffic, this literature generally does not distinguish between personal and commercial vehicle elasticities and therefore the primary effects represented are for personal vehicles and travel. For example, Small and Van Dender (2007) provide a review of previous studies as well as recent estimates using data through 2004. The authors estimate elasticities of VMT, fuel intensity (gallons/mile), and total fuel consumption (VMT multiplied by fuel intensity) with respect to fuel price changes. Elasticities are estimated both over a historical time period (1966 to 2004) and within the past few years (2000 to 2004) to examine how elasticities might be changing. These findings are shown in Table 1. 25 Federal Motor Carrier Safety Administration, ―Commercial Vehicle Facts,‖ November 2007 http://www.fmcsa.dot.gov/facts-research/facts-figures/analysis-statistics/cmvfacts.htm (Accessed September 16, 2009). 26 Federal Highway Administration, Highway Statistics, 2009 and Bureau of Transportation Statistics, Pocket Guide to Transportation, January 2009. - 16 -
Table 1 Historical and Recent Long-Run Elasticities With Respect to Fuel Price Calculated Long-Run Price Elasticities With Respect to Fuel Price of: Elasticity 1966 to 2004 Elasticity 2000 to 2004 Vehicle Miles Traveled -0.210 -0.057 Fuel Intensity -0.193 -0.191 Fuel Consumption -0.363 -0.237 Rebound Effect (Percentage) 21.0% 5.7% Source: Small and Van Dender (2007). The values shown in this table are “long-run” elasticities – i.e., response over a multi-year period after the price change. Long-run elasticities will be greater than the immediate or short-term response since travelers are able to make more fundamental adjustments to their activity patterns, such as changing residence or worksite locations or changing the number and types of vehicles owned. The findings imply, for example, that based on data from the 1966 to 2004 period, a 100 percent increase in fuel price should lead to a 21 percent reduction in VMT and a 19 percent increase in the fuel efficiency of vehicles, for an overall net decrease in fuel consumption of 36 percent. For the more recent period of 2000 to 2004, the elasticity of VMT with regard to fuel price declined substantially, such that a 100 percent increase in fuel price would lead to only a 6 percent long term decline in VMT. Table 1 shows that historically, about half of the impact of a fuel price increase would be on VMT reduction and the other half on fuel efficiency; but that in recent years, the VMT response to price increases has become much lower – less than one-third the magnitude of the fuel efficiency effect. Another recent review of elasticities by Sperling 27 suggests that elasticity values are higher, but also reaches a similar conclusion that elasticities with respect to VMT have declined in recent years. Sperling found that long run elasticities of fuel consumption with regard to fuel price “may be as low as -0.2.” Converting Small and van Dender‘s fuel intensity elasticity, which is measured in response to fuel prices, to an elasticity based on overall vehicle operating expenses, would imply about a two to three times higher elasticity (since fuel cost represents only about one-half to one-third of total operating costs, as discuss in Section (1)(ii)), or up to around two to three times -0.19 (about -0.4 to -0.6). Doing the same with the 1966-2004 VMT elasticity produces a similar result, which falls at the lower end of the range identified previously through studies specific to truck traffic, and about half the value selected above based on FHWA‘s report (-0.97). Approach: The question investigated here is what level of fuel tax would be required to reduce truck fuel consumption by roughly 20 to 40 percent, the same range of benefits assumed in the scenarios evaluated in Section (1)(ii). It is not known how well the elasticities reported by Small and Van Dender represent responses for the commercial vehicle sector. However, if it is assumed that the fuel intensity response is about the same magnitude as the VMT response, the previous analysis of VMT response can be used as a basis for estimating the combined response, by answering the question of what fuel price increase would be required to reduce VMT by 10 to 20 percent (and 27 Sperling, Dan, ―Consumer Response to Fuel Price Changes: Implications for Policy,‖ January 15, 2008. - 17 -
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