CARS, GAS, AND POLLUTION POLICIES† Distributional and Efficiency Impacts of Gasoline Taxes: An Econometrically Based Multi-market Study

Because of its potential to improve the envi-ronment and enhance national security, reduc-ing automobile-related gasoline consumption has become a major U.S. public policy issue. Recently, many analysts have called for new or more stringent policies to discourage gasoline consumption. Proposals include a tightening of corporate average fuel economy (CAFE) stan-dards and subsidies to retirements of older (gas-guzzling) vehicles, as well as increments to the federal gasoline tax. This paper examines the gas-tax option, employing an econometrically based multi-market simulation model to explore the pol-icy’s efficiency and distributional implications. This study differs from earlier work in severa