EFFECTS OF A $0.25 FEDERAL GAS TAX INCREASE ON U.S. ECONOMY, FUEL USE, FLEET COMPOSITION

Energy Innovation's analysis finds that a $0.25 federal gas tax increase would generate $1.1 trillion in revenue through 2050, reduce fuel consumption by over 1.3 billion barrels, and add 2.5 million electric vehicles to U.S. roads by 2050. The tax is equivalent to a carbon tax of $25-$29 per ton, exceeding current U.S. pricing schemes like the California-Quebec and Regional Greenhouse Gas Initiative systems.

• A federal gas tax increase of $0.25 per gallon, phased in at $0.05 per year starting in 2021, is projected to generate approximately $50 billion in annual government revenue by 2025 and a total of $1.1 trillion through 2050. This aligns with U.S. Chamber of Commerce estimates of $394 billion over 10 years, which Energy Innovation's modeling places at roughly $395 billion.
• The implementation of a $0.25 gas tax would increase the adoption of electric vehicles (EVs), leading to an increase in annual EV sales of approximately 210,000 by 2050 and adding around 2.5 million additional EVs to U.S. roads by that year.
• A $0.25 tax increase would lower total fuel consumption in the U.S. by over 1.3 billion barrels through 2050. Specifically, annual gasoline consumption would drop by 30 to 38 million barrels (saving nearly a billion barrels total), and annual diesel consumption would decrease by about 14 million barrels (saving nearly 400 million barrels total).
• A $0.25 gas tax is equivalent to a carbon tax of $29 per ton for gasoline and $25 per ton for diesel. This rate is higher than the record high allowance auction prices of the California-Quebec cap-and-trade system ($17.87 per ton in February 2020) and the Regional Greenhouse Gas Initiative cap-and-trade system ($7.50 per ton in December 2015).

APA

ORVIS, R., & MAHAJAN, M. (2020). EFFECTS OF A $0.25 FEDERAL GAS TAX INCREASE ON U.S. ECONOMY, FUEL USE, FLEET COMPOSITION. Energy Innovation. https://energyinnovation.org/wp-content/uploads/Effects-of-a-0.25-Federal-Gas-Tax_April-2020-Update.pdf

Chicago

ORVIS, ROBBIE, and MEGAN MAHAJAN. EFFECTS OF A $0.25 FEDERAL GAS TAX INCREASE ON U.S. ECONOMY, FUEL USE, FLEET COMPOSITION. Energy Innovation, 2020. https://energyinnovation.org/wp-content/uploads/Effects-of-a-0.25-Federal-Gas-Tax_April-2020-Update.pdf.

Wikipedia

{{cite report |last1=ORVIS |first1=ROBBIE |last2=MAHAJAN |first2=MEGAN |title=EFFECTS OF A $0.25 FEDERAL GAS TAX INCREASE ON U.S. ECONOMY, FUEL USE, FLEET COMPOSITION |publisher=Energy Innovation |date=April 2020 |url=https://energyinnovation.org/wp-content/uploads/Effects-of-a-0.25-Federal-Gas-Tax_April-2020-Update.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{orvis2020effects, author = {ORVIS, ROBBIE and MAHAJAN, MEGAN}, title = {{EFFECTS OF A \$0.25 FEDERAL GAS TAX INCREASE ON U.S. ECONOMY, FUEL USE, FLEET COMPOSITION}}, institution = {Energy Innovation}, year = {2020}, month = apr, url = {https://energyinnovation.org/wp-content/uploads/Effects-of-a-0.25-Federal-Gas-Tax_April-2020-Update.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }