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Energy Innovation analysis finds $0.25 Fed gas tax boost would add 1.2M EVs to roads by 2050

Implementing a $0.25/gallon increase in the Federal fuel user fee (gasoline tax) as proposed by the US Chamber of Commerce would result in an additional 1.2 million Evs on US roads by 2050, according to an analysis by Energy Innovation. Annual EV sales would increase by about 100,000 units per year in 2050 under that scenario.

Energy Innovation also observed that a $0.25 gas tax would be equivalent to a $29 per ton carbon tax, based on the heat and carbon content of gasoline. As a general rule of thumb, each dollar of a carbon tax is about the same as $0.01 increase in the gas price, the clean energy analysis firm noted.

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That price compares to the California-Québec cap-and-trade system’s record high allowance auction price of $15.06 per ton (set in November 2017) and the Regional Greenhouse Gas Initiative cap-and-trade system’s record high allowance auction price of $7.50 per ton (set in December 2015).

Background. The Federal fuel tax has not been increased in 25 years and has thus lost nearly 40% of its value in real terms over that time as inflation has increased. The federal trust fund that pays for highways and transit projects through gas tax revenue is projected to run a $138-billion deficit by 2027 unless it slashes funding or finds new sources of revenue.

The US Chamber of Commerce proposed phasing in a gasoline tax increase at $0.05 per year until it reaches $0.25 per gallon.

To evaluate the potential impacts of a gas tax increase on the US economy, total energy demand, and transportation fleet composition, Energy Innovation ran a variety of simulations using the Energy Policy Simulator (EPS) computer model. The open-source and peer-reviewed EPS uses government data to assess the impacts of dozens of energy-related policies on emissions, costs and savings, and fuel consumption.

Other findings from the study include:

  • Assuming it starts in 2018, the tax increase would create $39 billion in government revenue per year by 2022, and about $840 billion through 2050.

  • Annual gasoline consumption would be reduced by between 30 and 35 million barrels with the full $0.25 tax, saving more than a billion barrels through 2050.

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