For the first 5-10 years of the proposal, while diesel trucks are being phased out, the use of biofuels in the trucking industry as a transition fuel should be incentivized. Biofuels were chosen because they require only minor upgrades to existing infrastructure, and there are currently 4,108 ethanol stations in the US, concentrated in the Midwest and Mid-Atlantic.[1]U.S. Department of Energy. “Alternative Fueling Station Counts By State.” Alternative Fuels Data Center, November 20, 2021. https://afdc.energy.gov/stations/states. This demonstrates that biofuels are a reliable alternate fuel.
To achieve more widespread use of biofuels, diesel should be taxed and ethanol should be subsidized, so that they achieve the same price per mile.
| Diesel | Ethanol | |
| Price per gallon[2]U.S. Department of Energy. “Alternative Fuel Price Report.” Alternative Fuels Data Center, July 2021. https://afdc.energy.gov/fuels/prices.html/. | $3.26/gallon | $2.62/gallon |
| Fuel efficiency[3]Monitor, NREL Technical, and Paul Norton. “Ethanol Heavy-Duty Truck Fleet,” n.d., 78. | 5.9 miles/gallon | 3.2 miles/gallon |
| Price per mile = (price per gallon)/(fuel efficiency) | $0.55 | $0.82 |
The above analysis shows that diesel and ethanol have a price difference of $0.27 per mile. If this difference was closed by only taxing diesel, a tax of $1.57 would be required. However, this is a huge tax relative to the price per gallon of ethanol, and thus this price difference can instead be closed using a mix of federal subsidies and taxes. An example is implementing a tax of $0.56 per gallon for diesel, and a subsidy of $1.01 per gallon for ethanol.
While diesel trucks are still on the road, this policy can generate revenue for the government if the money generated by the tax is more than the cost of the subsidy. As an example, according to calculations, the amount of revenue that would be generated in one year by a $0.56 tax per gallon with the current number of diesel trucks on the road. This is calculated to be $17 billion in one year (click for calculation), which would be expected to decline as more trucks are replaced by electric, ethanol, and other lower-emission options. Regardless, this is enough money to help supplement the other parts of the Trucks proposal.
The cost of the diesel tax will be borne by various entities that use diesel. This will have a negative effect for those in the trucking, agriculture, and mining industries, as well as others. More analysis is needed to ensure that these concerns are appropriately addressed and that the costs of the tax are accounted for.
This tax is intended to reduce the attractiveness of diesel, while encouraging some trucks to use ethanol rather than diesel while the fleet is transitioning over to electric. This policy also serves as a revenue generating plan to finance the other parts of the proposal.
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