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Aggressive OPEC Pushes Oil Prices Up

Oil prices are once again…

How the US Government can Help Encourage a Reduction in Fuel Consumption

How the US Government can Help Encourage a Reduction in Fuel Consumption

The United States has implemented a variety of policies in the effort to cut back gasoline use. For example, the Obama Administration has invested federal dollars into GM's electric vehicles. The EPA has introduced new fuel economy standards which are to be implemented over time, gradually becoming stricter. The government has also promoted the expansion of biofuels in automobile fuel. However, a new study from the Massachusetts Institute of Technology (MIT), has shown that these policies are not cost-effective and don’t sufficiently curb fuel usage. What is to be done to reduce fuel use and greenhouse gases from vehicle emissions?

Implementing a gasoline tax, by all measures, would be the most cost-effective way to reduce fuel use. Nothing influences a driver more than the effects on their wallet at the pump. In fact, the researchers found that a moderate tax could elicit the same reduction as all currently implemented policies at a sixth of the cost. Unfortunately, a new gas tax is highly unlikely to be adopted in the United States. It is simply politically unfeasible.

The MIT researchers found that implementing multiple policies to curb fuel use is not cost effective. They found that as the costs of the policies add up, the benefits do not. To come to this conclusion, they created a macroeconomic model which included information on advanced fuels and vehicles, ownership characteristics in different regions, and consumer investment in vehicle and fuel prices. It is an economic model in which advancements in technology is a major component.

The results show that the most politically possible solutions are also the most costly. This creates a great challenge for policy makers who must address this imbalance. It cannot be solved instantly, but instead must be a gradual process. MIT researcher, Valerie Karplus, explains:

"We need to find ways to get past the age-old debate, starting with what is possible today but with an eye to what might be possible tomorrow as today's policies change underlying incentives. Right now, economists push for the most cost-effective measures, and the policy community responds that such measures are politically impossible."

"Policies that are politically feasible now can be designed to maximize their cost-effectiveness, and every policy should include clear timelines for revisiting its impacts and for assessing the feasibility of moving to more cost-effective policies over time. That will help us achieve our critical energy security and climate goals."

The study has been published in the Autumn 2011 edition of the journal, Energy Futures.

By. David A Gabel

Source: Environmental News Network




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