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TRB Paper Number 12-4609 Marginal-Cost Vehicle Mileage Fee Lei Zhang1,* and Yijing Lu2 1. Assistant Professor (*Corresponding Author); 2. Graduate Research Assistant; Department of Civil and Environmental Engineering, University of Maryland 1173 Glenn Martin Hall, College Park, MD 20742, 301-405-2881, lei@umd.edu Draft: July 30, 2011; Word Count: 5,823 +1,250 (five tables and figures) = 7,073 Abstract With the declining purchasing power of fuel tax revenue, emergence of hybrid and electric vehicles, more restrictive CAFE standard, and rapidly increasing cost, there is a major funding gap in surface transportation financing in the United States. Politicians, transportation professionals, and concerned citizens are actively seeking alternative revenue sources to supplement and/or replace fuel taxes. Among other options, vehicle mileage fee has emerged to be one of the strong candidates. This paper computes vehicle mileage fee based on marginal cost of travel, internalizing various externalities such as congestion, infrastructure deterioration, and pollution emissions, and green house gas (GHG) emissions. Multiple regression models and discrete choice models are developed based on the 2009 NHTS data to analyze the impacts of the proposed marginal-cost vehicle mileage fee on vehicle ownership, fuel efficiency, vehicle miles traveled, energy consumption, emissions, and equity. In addition, the sensitivity of these impacts with respect to exogenous fuel price volatility is also estimated quantitatively. Results show that with consideration for all aforementioned externalities, the marginal-cost vehicle mileage fee would range from 7.7 cents/mile to 9.1 cents/mile (varying by vehicle make and model), which is much higher than the per-mile equivalent of the current fuel taxes (about 1.2 cents/mile). Household vehicle use behavior is much more sensitive to marginal-cost vehicle mileage fee than vehicle ownership decisions. Consequently, the implementation of marginal-cost vehicle mileage fee would cause significant (27.1%) reduction in vehicle miles traveled, but just minor increase in vehicle fuel efficiency (up to 4.2%). Nevertheless, marginal-cost vehicle mileage fee can reduce energy consumption and pollution/GHG emissions by about a quarter. These sustainability benefits are even more significant if fuel prices continue to increase. As expected, lower-income households (consumer surplus decrease by 3.6% without considering the benefits from revenue redistribution) would be hurt more than higher-income households (1.3%). This research does not consider the benefits to user if the much higher revenue (four to five times higher than fuel tax revenue) from marginal-cost vehicle mileage fee is properly redistributed through strategized investment and/or subsidies to certain population groups. A less aggressive and partial marginal-cost vehicle mileage fee scheme that just produces necessary revenue, however defined, is probably more practical and politically feasible. 1 TRB 2012 Annual Meeting Paper revised from original submittal.
