November 15, 2010

The Taxation of Fuel Economy

by James Sallee

- Policy-makers have instituted a variety of fuel economy tax policies -- polices that tax or subsidize new vehicle purchases on the basis of fuel economy performance -- in the hopes of improving fleet fuel economy and reducing gasoline consumption. This article reviews existing policies and concludes that while they do work to improve vehicle fuel economy, the same goals could be achieved at a lower cost to society if policy-makers instead directly taxed fuel.

James Sallee (2010). "The Taxation of Fuel Economy." NBER Working Paper No. 16466, Oct 2010.