Comparing Transport-Specific and Economy-Wide Emissions Reduction Tools
Often, computational tools used to reduce oil use and greenhouse gas emissions are not coordinated and can impact the other tool’s efficiency. New U.S. Department of Energy (DOE) research from the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change has demonstrated the importance of jointly considering the effects of instruments used to reduce oil consumption and greenhouse gas emissions. Karplus and colleagues studied a sector-specific tool—fuel economy standards—and compared the results to those under an economy-wide tool, a cap-and-trade system. They then combined the two instruments to assess those effects as well. Using the DOE-supported Emissions Prediction and Policy Analysis Model (EPPA), a component of a broader integrated assessment model, the study finds that fuel economy standards are projected to be six to 14 times more expensive than a fuel tax and the results take longer to be seen. The model predicts that increasing fuel efficiency reduces the per-mile cost of driving, incentivizing a modest increase in travel that offsets the total reduction. Fuel efficiency is also only applied to the newest vintage of vehicles, taking many years to affect efficiency of the fleet. The tax provides a direct incentive for households to reduce gasoline use, both by investing in vehicle fuel efficiency and reducing total mileage.
Karplus, V. J., S. Paltsev, M. Babiker, and J. M. Reilly. 2012. “Should a Vehicle Fuel Economy Standard Be Combined with an Economy-Wide Greenhouse Gas Emissions Constraint? Implications for Energy and Climate Policy in the United States,” Energy Economics, DOI: 10.1016/j.eneco.2012.09.001.