Several Members of Congress and public interest groups have recently proposed policies that would reduce gasoline consumption in the United States. Such proposals stem primarily from a desire to enhance the nation's energy security and to decrease its emissions of carbon dioxide, a key greenhouse gas that affects the Earth's climate. This Congressional Budget Office (CBO) study--prepared at the request of the Senate Committee on Environment and Public Works--compares three methods of reducing gasoline consumption: increasing the corporate average fuel economy (CAFE) standards that govern passenger vehicles, raising the federal tax on gasoline, and setting a limit on carbon emissions from gasoline combustion and requiring gasoline producers to hold allowances for those emissions (a policy known as a cap-and-trade program).

The study weighs the relative merits of those policies against several major criteria: whether they would minimize costs to producers and consumers; how reliably they would achieve a given reduction in gasoline use; their implications for automobile safety; and their effects on such factors as traffic congestion, requirements for highway construction, and emissions of air pollutants other than carbon dioxide. In addition, the analysis examines two more policy implications that lawmakers may be concerned about: the impact on people at different income levels and in different regions, and the effects on federal revenue. In keeping with CBO's mandate to provide objective, impartial analysis, this report makes no recommendations.

The study was written by Terry Dinan and David Austin of CBO's Microeconomic and Financial Studies Division, which is directed by Roger Hitchner. Robert Dennis, Barbara Edwards, Arlene Holen, Mark Lasky, Deborah Lucas, John Peterson, and Tom Woodward of CBO provided valuable comments, as did Haynes Goddard of the University of Ohio at Cincinnati and Margaret Walls of Resources for the Future.

Christian Spoor edited the study, and Christine Bogusz proofread it. Angela McCollough and Cecil McPherson produced initial versions of the tables and figures, Kathryn Winstead prepared the study for publication, and Annette Kalicki prepared the electronic versions for CBO's Web site.

Dan L. Crippen
Director
November 2002