Impacts of Energy Regulations and Vehicular Technologies on Fuel Tax Revenues

Abstract

Various energy regulations including corporate average fuel economy (CAFE) are forcing auto manufacturers and auto distributors to improve the fuel efficiency of vehicles significantly over the next decade. Conversely, improved automotive technologies and higher gasoline fuel prices enable better alternative-fuel vehicles (AFV), including hybrid vehicles (HV) and electric cars. This research evaluates the impacts of CAFE regulations in automobile and light truck fleet fuel economies, and effects of HV and AFV in the fleet, on gasoline-tax-based revenues. The new sales survivability (NSS) model, along with new vehicle sales data and vehicle survivability data from 1980 to 2005, were used to estimate the fleet mix, vehicle miles traveled (VMT) by fleet mix, and revenue projections through the year 2025. Five scenarios were considered to analyze the impacts of CAFE regulations and introduction of HV and AFV on fuel consumption and fuel-tax-based revenues for highway revenues. The results show that the CAFE regulation alone is expected to reduce the fuel-tax-based revenue by more than 21% in the year 2025. Similarly, the introduction of HV and AFV along with CAFE regulations is expected to reduce fuel-tax-based revenues by more than 31 and 37%, respectively, in the year 2025. This paper shows the significance of considering the effects of new regulations and technological improvements in estimating future fuel-based revenues. The revenue estimated in this paper is much lower than the estimates developed by previous studies. This shows that modifications to the existing system of highway financing would be required much earlier than anticipated.