Capping fuel use
- Many economists view the market for motor fuel as flawed, because the market price doesn’t account for social costs of consumption, such as environmental damage and traffic congestion. As a result, motorists consume fuel to excess.
- For over 30 years, government has tried to correct this market failure by promoting greater automotive fuel economy. But this is an inefficient way to reduce fuel use and the social costs associated with driving.
- Government policies favored by economists that rely on the power of prices to reduce both fuel consumption and driving include higher fuel taxes, taxes on greenhouse gas emissions and congestion pricing on busy roads.
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