External costs of freight trucks include air pollution, highway damage, and congestion. While diesel taxes reduce both the pollution and congestion externalities, we show that they worsen highway damage. We investigate the impact of fuel prices on cargo shipments using weight-in-motion data from New York and California. We obtained sensor readings on over 1.4 billion vehicle events. These data allow us to track daily changes in the weight and number of trucks at specific locations. We explain the average daily weight differential between New York and California as a function of the diesel price differential using unexpected weather as an instrument. We find that when fuel prices increase 10 percent, fuel use by heavy trucks declines 3.1 percent and average truck weight increases 3.2 percent. While total truck traffic decreases by around 1 percent, on net there is 19.6 percent more road damage. The dispatch effect changes the welfare comparison of using fuel taxes versus efficiency standards to control carbon emissions. WE find that a reduction in per-mile shipping cost from the standard causes freight to be reallocated across more trucks so that schedules are enhanced—that is, the rebound occurs on both a quality and a quantity dimension. In consequence, road damage declines. While there is considerable uncertainty about the cost of external congestion and safety of trucks, we find that fuel efficiency standards dominate fuel taxes as a policy to reduce carbon emissions for a wide range of parameter estimates.
