Policies focusing on energy conservation and sufficiency principles complement efficiency policies, in particular those aiming at changing end-user consumer behaviour and lifestyle by imposing some limitation to the demand for energy services. The “traditional” energy efficiency policies are still very necessary, but are not sufficient for reaching the Paris Agreement target and the rapid reduction of the energy demand. In some cases, the energy savings achieved have been less than expected, due to a rebound effect, or because external factors (e.g., growth in populations or economies) have increased energy consumption. Traditionally, energy efficiency policies have mainly targeted and promoted energy efficient technologies (e.g., energy performance standards for vehicles, appliances and buildings, financial incentives for new technologies, etc.). Given the stringency and urgency of the climate target and the current global increase of energy demand, in addition to investments in energy efficiency technologies, there is the need for a change of energy end-users behaviour and life style to obtain additional energy savings by limiting the demand for services. There is a strong consent among scholars and policy makers that limiting current global energy demand and gradually reducing it towards a sustainable level of consumption is a key component of any strategies and pathways to reach the Paris Agreement climate target, and, in particular, carbon neutrality by mid-century. Overall, our simulation shows that VMT tax could serve as a viable alternative to gasoline taxes. A VMT tax would be slightly more regressive than the gasoline tax, but the difference is negligible. In the meantime, we find no significant difference between the two types of tax in their total revenues, when the pre-tax gasoline prices fluctuate by different magnitudes. We estimate that a 50 percent increase in average miles per gallon (MPG) would lead to a 28 percent decrease in the total revenues raised by the current gasoline tax, while the same amount of increase in fuel economy would increase the VMT tax revenues by 4.4 percent (all relative to the 2009 baseline). Our results confirm that, compared to the current gasoline tax, a revenue-neutral flat VMT tax can be a more stable tax revenue source. Using the empirical estimates, we simulate the vehicle usage, tax burdens, and total tax revenues generated under a possible nationwide revenue-neutral flat VMT tax. In this paper, we investigate households' driving response to driving cost changes depending on their vehicle choices. A Vehicle Miles Traveled (VMT) tax is often proposed to replace fuel taxes for financing the nation's highway and road network.

Federal vmt tax