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TGR in Your Tank: Would A Cap on Gas Consumption Solve U.S. Energy Problems?

By Martin Feldstein

June 7, 2006

Harvard economist Martin Feldstein recommends a system of tradeable gasoline rights (TGRs) as a way of capping U.S. gasoline consumption (The Wall Street Journal, 5 June 2006, A10). In his proposal, each adult would receive government distributed TGRs, which could he or she could choose to use or trade. The number of TGRs each household would receive would depend upon driving patterns in their geographic region. TGR debit cards would be required at gas stations in addition to money.

Feldstein’s TGR system provides an opportunity to economize on gasoline, as TGRs could be sold to create extra household income. Cash incentives would encourage individuals to drive less often, drive more slowly, and buy more fuel-efficient cars in order to use fewer TGRs. To decrease U.S. annual gasoline consumption, the government could decrease the number of TGRs distributed each year, increasing the market value of each TGR.

Feldstein, a former Chairman of the Council of Economic Advisors, argues that his system would be better than placing taxes on gasoline consumption because it would provide extra income to households. The extra revenue from a gasoline tax would likely only contribute to more government spending rather than returning to taxpayers. Feldstein also critiques calls for tougher mileage standards, as they would only affect new cars and would have little impact on the drivers of all other cars.

For a range of commentary on Feldstein’s proposal, see the following blogs of policy innovators:

Economist's View by Mark Thoma

Brad DeLong's Semi-Daily Journal

Angry Bear by Kash Mansori