More Fuel Efficient Cars Spell Less Money For Mass Transit

Consumer Reports characterized this year’s North American International Auto show as “the rise of the mainstream plug-in hybrid,” foretelling a definite trend that’s emerging among automakers: fuel-efficiency is becoming the name of the game.

This is great news for the environment, and for consumers, but with the vehicle fleet becoming more efficient in the USA, a probable negative consequence may emerge along with it. Specifically, as cars become more efficient, there will be less funding for mass transit infrastructure – an unfortunate systemic outcome indeed.

So, how are the two linked?

At issue is the federal gasoline tax, which at 18.4 cents per gallon, is one of the world’s lowest rates. This tax goes into the Highway Trust Fund (HTF), which was created in 1956 to finance highway construction nationally. In 1982, Congress expanded its scope to fund mass-transit as well. In short, gas taxes help fund mass transit, and today, the fund is being stretched beyond its limits.

According to the Economist, HTF revenues were down by one seventh between 2007 and 2010 alone; a combination of fewer miles driven by Americans, and in more fuel efficient cars. If this trend continues, it will have a significant adverse impact on an already shaky infrastructure, as the HTF accounts for 22 percent of all highway funding and 17 percent of mass transit funding.

Things could get tighter, still, as more stringent Corporate Average Fuel Economy (CAFE) standards are introduced over time. Specifically, CAFE will require auto manufacturers meet rising fleet-average  targets; from 35.5 mpg in 2016 to 54.5 mpg by 2025.

But, this isn’t just a future problem. States already take more from the HTF than they put in, and Congress already had to transfer $34.5 billion from general revenues into the HTF between 2008 and 2010 to keep pace with expenses. The Economist goes on to report that the Congressional Budget Office forecasts the HTF will be unable to fund highway maintenance by 2013. The fate of mass transit is likely to be no better.

More efficient vehicles are to be celebrated and should be complemented by a greater choice of mass transit options. This is surely the way to manage a sustainable transportation future. But to achieve it, the right incentive needs to exist. And it’s simply the wrong incentive for sustainable transportation to only be appropriately funded by using more oil.

So, what needs to be done? In this tax-adverse Congress, it seems unlikely that we’ll see a raise on the gas tax, but that’s not an unreasonable place to start since it hasn’t been increased since 1993. That might go some way towards offsetting today’s problem.

But what about the longer term? If, in the future, a reliance on oil moves in a downward trajectory, sooner or later some other tax basis (a per-mile charge perhaps?) might need to be introduced, or the source of future infrastructure funding will need to be changed altogether. What do you think?

Image credit: ElvertBarnes

Phil Covington holds an MBA in Sustainable Management from Presidio Graduate School. In the past, he spent 16 years in the freight transportation and logistics industry. Today, Phil's writing focuses on transportation, forestry, technology and matters of sustainability in business.

5 responses

  1. My belief is until surface transportation for people and goods is considered a utility, the situation will only lead to failure.  As a utility, people and goods would be charged for their consumption of transportation.  We pay for every gallon of water and kilowatt of electricity consumed, why not pay for each mile moved?  Who knows, maybe different residential location decisions would be made.  Maybe even reduce sprawl and therefore reduce the need for other infrastructure investments (water, sewer, etc.)

  2. This could bring a short term advantage for the consumer but in my opinion as a commoner, it could still give a negative effect in the future because it could lower down the budget for the infrastructure maintenance.

  3. The current rate of 18.4 cents per gallon gas tax is nearly 20 years old.  It is woefully inadequate for maintenance on current infrastructure (especially mass transit) and also for providing a meaningful disincentive to driving.  While Americans have in recent years protested over $3 to $4 per gallon gas, most Europeans have been paying $3 to $4 per liter for more than a decade.  The higher rates would serve to fund mass transit, curb use of personal automobiles and maintain highways.

  4. The real question here should be – Why should gas taxes be used to fund mass transit at all?  People who use mass transit should pay.  Increase the cost of a ticket so the mass transit system can cover it’s costs.  We don’t ask TV advertisers to subsidize the movies which makes about as much sense.

  5. MikeR,

    I respectfully disagree.  The fundamental issue is ALL transportation should be considered a utility where every traveler – irregradless the mode – pays for the service used.  Roadways are currently subsidized at a rate similar to public transportation.  It is a misconception that roadway users pay the full amount of the service rendered through the payment of gas tax.

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