Alternative fuels, better efficiency will have gradual effect on Trust Fund

News AASHTO Journal October 15, 2004
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Neither alternative fuels nor advances in fuel efficiency are likely to erode fuel tax revenue in the near future, according to

Neither alternative fuels nor advances in fuel efficiency are likely to erode fuel tax revenue in the near future, according to a report by Cambridge Systematics.


The report, prepared for the National Cooperative Highway Research Program of the Transportation Research Board, examined the potential impacts to the Highway Trust Fund of alternative fuels, hybrid vehicles and potential changes in fuel efficiency.


The report noted that gasoline consumption is forecast to increase 19% between 2000 and 2010 and by 37% between 2000 and 2020. "The gasoline tax, at 18.3 cents per gallon (plus 0.1 cents for leaking underground storage tanks) will yield more than $4.2 billion more per year by 2010 than 2000." Diesel fuel usage is projected to increase by 52% between 2000 and 2010, and the 24.3-cent per gallon diesel tax "will yield more than $3.6 billion more per year by 2010 than in 2000."


The biggest threat to future highway revenues--increased consumption of ethanol fuels--is eliminated with the President's approval of the corporate tax bill conference agreement.


According to the study, other "alternative fueled vehicles that are powered by fuels such as hydrogen, pure electricity, natural gas and other uncommon fuels" have very low or extremely low probability of entering vehicle fleets by 2020.


Regarding the impact of increased fuel efficiency eroding Highway Trust Fund income, the report notes that although fuel economy for light-duty vehicles increased between 1975 and 1985, there has been a gradual decrease in fuel economy in ensuing years. Should Congress increase fuel economy standards, or automakers improve efficiency voluntarily, impacts on the Highway Trust Fund would be gradual since it takes approximately 12 years for a turnover in the vehicle fleet.


The report does note that a "supply shock" in the availability of fuel could increase pressure for increased fuel economy standards, generating a cumulative impact on the Trust Fund over time.


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