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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would decline by 8 percent, or about $3.1 billion compared to FY 2007 receipts. 114
Strategies focused on heavy-duty vehicles would have a somewhat greater
impact than those focused on light-duty vehicles because of the higher tax rate
on diesel fuel. A shift from gasoline to diesel light-duty vehicles would have a
smaller revenue impact; while less total fuel is consumed, the tax rate on diesel
fuel is higher.
The revenue effects of alternative fuels will depend upon taxation policy. Since
2006, Federal policy has been to tax alternative fuels on an energy-equivalent
basis to gasoline. 115 This means that policies focused solely on increasing the use
of lower-carbon fuels should not have a significant revenue impact on the
Highway Trust Fund. On the other hand, current tax policies may have
implications for general fund revenue; for example, ethanol receives a substantial
tax credit which reduces general fund revenues, but a tariff is levied on imported
ethanol which could potentially generate revenue. The long-term finance
implications of a shift to hydrogen or electricity will depend on tax policy for
these fuels; current Federal policy does not tax these fuels for transportation
purposes, and therefore any shift to these fuels would result in lost revenues to
the Highway Trust Fund under the current finance structure.
Pricing measures, such as a cap and trade system, carbon tax, VMT fee, or
congestion pricing, would provide a new or alternative revenue source, which
could potentially be directed to transportation infrastructure finance. (The
revenue impacts of a cap and trade system would depend upon the extent to
which allowances are auctioned vs. given away.) While transportation-specific
pricing revenues are likely to be redirected towards transportation system
investment, it is less certain that a portion of revenues from economy-wide
measures such as cap and trade allowances or carbon taxes would be redirected
towards transportation. Finally, pricing measures that reduce the wear and tear
on existing road networks could also have fiscal implications to the extent they
lower the total cost of maintaining or improving system performance even if
investments in alternatives to carbon-intensive travel are increased.
114 Gasoline tax receipts accounted for about $25.5 billion of trust fund revenue in FY
2007, or about two-thirds of total receipts, so 20 percent * 60 percent * 2/3 = an 8
percent reduction or $3.1 billion. This calculation assumes that trust fund revenues
remain constant through 2030, which is consistent with AEO Reference case
projections of relatively constant fuel consumption (with increases in VMT offsetting
increases in fuel efficiency).
115 Ethanol users actually pay slightly more per gallon of gasoline equivalent even though
ethanol is taxed less on a volumetric basis (Vol. 2 Sec. 2.2).