Policies to Reduce Emissions from the Transportation Sector

This brief discusses public policy tools available to reduce greenhouse gas (GHG) emissions from the transportation sector. Reducing GHG emissions from transportation, which comprise one third of total U.S. CO2 emissions, will need to be a key part of any strategy to limit economy-wide emissions. Transportation energy use and emissions are determined by three elements: the fuels used to power the vehicles, characteristics of the vehicles themselves, and total miles traveled. Of the various transportation modes, passenger vehicles consume the most energy, followed by truck, rail and ship transport of freight, and then air travel. To reduce emissions, the sector can be included in a multi-sector cap-and-trade program or managed through sector-specific measures, or both. The critical issues for transportation policy are understanding market imperfections, where individuals are somewhat insensitive to changes in fuel price and tend to undervalue fuel economy. This makes it difficult to harness market forces (such as a cap-and-trade program) to drive investment in long-term transportation technology. To guarantee significant emission reductions from the transportation sector, especially in the short term, sector-specific policies can complement (or substitute for) the cap. These policies will need to focus on all three elements of the sector for major emission sources within the transportation sector. Policy tools include pricing policies (e.g., taxes, tolls, and congestion changes), standards (e.g., fuel economy standards), and funding for research, development, and deployment. Policies for the transportation sector will have to address several objectives at the same time: energy security and GHG reduction goals, a transition to low carbon fuels and alternative vehicle types, and an alignment of infrastructure and land use planning with GHG goals.