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

Transportation's Role in Reducing U.S. Greenhouse Gas Emissions: Volume 1
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The use of sector-specific market signals—including both incentives (such as
rebates and tax deductions) and pricing mechanisms (such as taxes and fees)—
can encourage consumers to more quickly adopt less carbon-intensive vehicles,
technologies, and travel behaviors. By altering consumer demand, these market
signals can spur more rapid private sector research and development of
advanced technologies and decrease demand for more carbon intensive
approaches to mobility.
Fuel Incentives
At the national level, the Energy Independence and Security Act of 2007 (EISA)
requires a certain volume of renewable fuels (e.g., cellulosic ethanol, biomassbased
diesel), with increasing volumes from 2006 through 2022. Along with
these requirements, the law provides credits for producing additional renewable
fuel. EISA sets production benchmarks of 36 billion gallons of renewable fuel by
2022, of which 21 billion gallons must be advanced biofuel. The bill (in
Section 712) authorizes the use of grants and government-backed loans to assist
manufacturers in converting plants to encourage domestic production and sales
of efficient hybrid and advanced diesel vehicles, as well as components of those
vehicles. The bill also extends the Flexible Fuel Vehicle Credit Program
(Section 109), allowing manufacturers to take fuel economy credit for dual-fueled
(i.e., flex-fuel) vehicles for their corporate average fuel economy (the credit
phases out in 2019).
National targets and incentives for manufacturers such as these can be supported
by market signals at the consumer level that would encourage purchase of highefficiency
and non-carbon-based vehicles, as well as retrofits of existing vehicles
with technologies that improve fuel efficiency.
Rebates, Fees, Tax Incentives
A series of incentives and disincentives can be implemented to promote the rapid
market penetration of low-GHG emission vehicles. These price signals would
encourage consumers to purchase new technologies, thereby creating a stronger
market demand that spurs production. The success of tax incentives for hybrid
vehicles provides a good example of this approach. Tax credits and feebates can
target individual households to encourage the purchase of low-carbon vehicles.
Feebates impose a fee on purchasers of inefficient vehicles and provide a rebate
to purchasers of high efficiency vehicles. Similarly, tax incentives can be
implemented to encourage businesses to invest in new technology vehicles.
Fee structures that provide disincentives for the purchase of high-carbon
vehicles—such as graduated registration fees that increase based on carbonintensity
and fees on the purchase of high-carbon vehicles—also provide pricing
signals that reward GHG-reducing consumer behavior.
To be most effective, the design of these consumer incentives/disincentives
should be technology-neutral, based on GHG emission-level metrics that are not