Reducing Oil Dependence through Energy and Climate Policy

Speakers (l-r): David Austin, Adele Morris, David Montgomery, Chad Stone, Patrick O'Connor, James Corless, and Jack Basso

Reducing Oil Dependence through Energy and Climate Policy

Thursday, April 29, 2010
3:00 – 4:30 p.m.
253 Russell Senate Office Building

On April 29, 2010, the Environmental and Energy Study Institute (EESI) held a briefing to examine the potential effects of pending energy and climate legislation on the transportation sector and U.S. dependence on oil. Policies that create a sustained and predictable price on carbon for transportation fuels have the potential to promote fuel-efficient vehicles, low-carbon fuels, and more energy-efficient transportation decisions by businesses and consumers. However, how such a price is determined, how it is applied, and how generated revenues are used can greatly influence the benefits and costs of such a policy. This briefing focused on the economic and environmental implications of alternative ways to reduce oil use and greenhouse gas emissions in the transportation sector and how key stakeholders are likely to respond. Speakers for this event included:

  • Dr. David Austin, Senior Economist, Congressional Budget Office
    Presentation (pdf format)
  • Dr. Adele Morris, Policy Director for Energy and Climate Economics, Brookings Institution
    Presentation (pdf format)
  • Dr. David Montgomery, Vice-President, Charles River Associates
    Presentation (pdf format)
  • Dr. Chad Stone, Chief Economist, Center for Budget and Policy Priorities
    Presentation (pdf format)
  • Patrick O’Connor, Legislative Counsel, NAFA Fleet Management Association
    Presentation (pdf format)
  • James Corless, Director, Transportation for America
  • Jack Basso, Director of Program Finance and Management, American Association of State Highway and Transportation Officials (AASHTO)

Audio recording of the briefing (mp3)

Click video to play:

Highlights from Speaker Presentations

  • An economy-wide price on carbon would create a very modest price signal on transportation fuels. For example, carbon price of $17 per ton would equate to roughly 15 cents per gallon. This price increase would be less than the variation that consumers typically experience from place to place, station to station, and month to month.
  • An economy-wide carbon price would promote more energy efficient behavior. Short-term, drivers will choose to drive less, drive more slowly, and shift travel to off-peak times. In the long-run, consumers will choose more fuel-efficient vehicles and make choices to shorten travel distances for commuting and other trips.
  • A carbon price on transportation fuels is different than a gas tax. A gas tax is intended to raise revenue. A carbon price is specifically intended to incentivize efficient behavior, not raise revenue.
  • Revenues can be returned to consumers via rebates or reduction in other taxes, or invested in public goods to benefit consumers such as transportation infrastructure and less-costly travel alternatives. The value of a carbon price is not a cost to the economy, but represents a transfer from carbon emitters (polluters) to carbon reducers.
  • A share of revenues could also be targeted toward transportation measures that specifically reduce oil use and GHG emissions, including directives for transportation agencies to incorporate oil and GHG reduction goals into long-term transportation plans.
  • The magnitude of the effect of an economy-wide carbon price applied to transportation fuels, however, is not likely to be sufficient to achieve oil independence or greenhouse gas (GHG) reduction goals, especially in the first 10-20 years.
  • There are many reasons that transportation is less sensitive to a carbon price compared to electricity. Gasoline is less carbon-intensive than coal, and affordable options to avoid the cost are not available to many people.
  • A carbon price can affect lower-income households disproportionately, but return of carbon revenues can be structured to address this such that low and moderate income households come out ahead overall.
  • There is not one "silver bullet" to reduce oil consumption in the transportation sector. A suite of measures will be required, including improved vehicle and fuel technology; reduced congestion; reduced travel demand through telecommuting, pricing, ride-sharing, and more efficient development patterns; and increased use of public transportation and bicycle/pedestrian travel options.
  • Underinvestment in transportation infrastructure can potentially increase GHG emissions and oil dependence by adding to congestion. Transportation infrastructure investments are a justifiable use of revenues from energy and climate legislation.


Fuel use in the transportation sector is widely regarded to be less sensitive to changes in price, relative to electricity and other sectors of the economy, due in part to limited availability of transportation options and substitutes for petroleum fuels. Recent swings in fuel prices, corresponding demand responses, and other research suggest, however, that modest price signals — especially sustained price signals — can spur investments in clean transportation and create significant benefits for the transportation sector. Options to create a carbon price through a fee on transportation fuels can be designed to be as effective and predictable as other policy options based on tradable allowances. Any revenues generated through such policies can be returned to consumers and businesses, reinvested in transportation infrastructure and advanced vehicle and fuel technology, or directed to a combination of public uses.

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