Concerns about climate change, dependence on oil, and unstable gasoline prices have led to significant efforts by policymakers to cut greenhouse gas (GHG) emissions and oil consumption. The transportation sector is one of the principle emitters of CO₂ in the US. It accounts for two-thirds of total U.S. oil consumption and is almost entirely dependent on oil. Within the transportation sector, the light-duty vehicle (LDV) fleet is the main culprit. It is responsible for more than 65 percent of the oil used and for more than 60 percent of total GHG emissions. If a significant fraction of the LDV fleet is gradually replaced by more fuel-efficient technologies, meaningful reductions in GHG emissions and oil consumption will be achieved.

This dissertation investigates the potential benefits and impacts of deploying more fuel-efficient vehicles in the LDV fleet. Findings can inform decisions surrounding the development and deployment of the next generation of LDVs. The first essay uses data on 2003 and 2006 model gasoline-powered passenger cars, light trucks and sport utility vehicles to investigate the implicit private cost of improving vehicle fuel efficiencies through reducing other desired attributes such as weight (that is valued for its perceived effect on personal safety) and horsepower. Breakeven gasoline prices that would justify the estimated implicit costs were also calculated. It is found that to justify higher fuel efficiency standards from a consumer perspective, either the external benefits need to be very large or technological advances will need to greatly reduce fuel efficiency costs.

The second essay estimates the private benefits and societal impacts of electric vehicles. The findings from the analysis contribute to policy deliberations on how to incentivize the purchase and production of these vehicles. A spreadsheet model was developed to estimate the private benefits and societal impacts of purchasing and utilizing three electric vehicle technologies instead of a similar-sized conventional gasoline-powered vehicle (CV). The electric vehicle technologies considered are gasoline-powered hybrid and plug-in hybrid electric vehicles and battery electric vehicles. It is found that the private benefits are positive, but smaller than the expected short-term cost premiums on these technologies, which suggest the need for government support if a large-scale adoption of electric vehicles is desired. Also, it is found that the net present values of the societal benefits that are not internalized by the vehicle purchaser are not likely to exceed $1,700. This estimate accounts for changes in GHG emissions, criteria air pollutants, gasoline consumption and the driver's contribution to congestion.

The third essay explores the implications of a large-scale adoption of electric vehicles on transportation finance. While fuel efficiency improvements are desirable with respect to goals for achieving energy security and environmental improvement, it has adverse implications for the current system of transportation finance. Reductions in gasoline consumption relative to the amount of driving that takes place would result in a decline in fuel tax revenues that are needed to fund planning, construction, maintenance, and operation of highways and public transit systems. In this paper the forgone fuel tax revenue that results when an electric vehicle replaces a similar-sized CV is estimated. It is found that under several vehicle electrification scenarios, the combined federal and state trust funds could decline by as much as 5 percent by 2020 and as much as 12.5 percent by 2030. Alternative fee systems that tie more directly to transportation system use rather then to fuel consumption could reconcile energy security, environmental, and transportation finance goals.