Marginal-Cost Vehicle Mileage Fee

Abstract

The vehicle mileage fee is a strong candidate to mitigate the funding gap in surface transportation caused by the declining purchasing power of fuel tax revenue, the emergence of hybrid and electric vehicles, and more restrictive corporate average fuel economy standards. This study computes the vehicle mileage fee on the basis of the marginal cost of travel and internalizes various externalities such as congestion, infrastructure deterioration, pollution emissions, and greenhouse gas emissions. Multiple regression models and discrete choice models are developed on the basis of the 2009 National Household Travel Survey data to analyze the impacts of the proposed marginal-cost vehicle mileage fee on vehicle ownership, fuel efficiency, vehicle miles traveled, energy consumption, emissions, and equity. In addition, the sensitivity of these impacts to exogenous fuel price volatility is estimated quantitatively. Results show that with consideration of all aforementioned externalities, the marginal-cost vehicle mileage fee by vehicle make and model would range from 7.7 to 9.1 cents/mi, which is much higher than the per mile equivalent of the current fuel taxes (about 1.2 cents/mi). Household vehicle use behavior is much more sensitive to the marginal-cost vehicle mileage fee than vehicle ownership decisions, with a significant (27.1%) reduction in vehicle miles traveled, but a minor increase in vehicle fuel efficiency (up to 4.2%). Nevertheless, the marginal-cost vehicle mileage fee can reduce energy consumption and pollution or greenhouse gas emissions by about a fourth. These sustainability benefits are even more significant if fuel prices continue to increase. Without consideration of the benefits from revenue redistribution, lower-income households, as expected, would be hurt more than higher-income households (1.3%).

Retail Fuel Price Stabilization and Revenue Generation of Dynamic Taxation Policy

“…All variables in the regression model are listed and explained else where (13). The main policy variable used to analyze the dynamic effects of the proposed CEIP policy is the driving cost per mile because that variable best reflects a tax or retail fuel price change.…”

“…A list of detailed variables employed in vehicle ownership model is presented elsewhere (13). For the purpose of this study, vehicles are classified into seven types: small car, large car, small SUV, large SUV, small pickup, large pickup, and minivan.…”

Equity performance evaluation of two different pricing options: fuel tax per gallon and VMT fee

“…Additional studies include the Zhang and Lu (2012). They study the marginal cost of a vehicle mileage fee, by taking into account in the model specification externalities such as congestion, and pollution emissions.…”

“…Their study shows that the implementation of the VMT fee would lead to a significant decrease of 27.1% in VMT, and a slight increase of 4.2% in vehicle fuel efficiency. Energy consumption and pollution emissions were found to decrease by 25% in such case (Zhang & Lu, 2012). Li et al (2011) studied the effect of gas price changes on vehicle purchases and usage.…”