Chapter Title: The Taxation of Fuel Economy

mance. These policies vary in detail. Some provide subsidies to vehicles that utilize a specific technology (e.g., hybrids), while others apply to all vehicles of a given fuel economy. Some levy taxes directly on auto-makers, while others operate through the personal income tax system. All attempt to provide automakers and consumers with an incentive to choose more fuel economical vehicles so as to reduce the consumption of quences, and distill lessons that may inform future policy. The principal economic motivation for the taxation of fuel economy is to correct for externalities associated with fuel consumption. Fuel economy itself does not create externalities, but it indirectly determinesgasoline. The purpose of this paper is to review themotivation and struc-ture of these policies, describe their intended and unintended conse-