| Abstract: | The EPA implements its policy of exhaust emission control by setting standards specified in terms of grams of pollutants per mile traveled. As a result, the tax must first restrain the vehicle miles traveled (VMT) if it is to have an impact on emission at all. EPA's choice of miles traveled as the medium through which its policy of pollution control must run is unfortunate, because travel is an activity that people resist giving up. This is reflected in a low long-run price elasticity of travel demand. Consequently, it takes substantial increases in the gasoline tax to make an impact on long-run travel demand. Simulation results show that under an alternative policy option, where EPA's standards are specified in terms of grams of pollutant per gallon of fuel burned, the same long-run reduction in exhaust emissions achievable today can be achieved (at an even higher level of confidence) with less than one-tenth of the increase in gasoline price required under the existing policy regime. |
