This is about giving an overwhelming incentive to car manufacturers to focus on fuel efficiency and not on other things like a 12th airbag, 50kg more of fancy electronics, a few seconds less on the 0-100kph run,etc.... Make your cars fuel efficient, or you will sell them only to a small minority. Full stop.

As to taxes, I'd be partisan to jack up fuel taxes by 50c/l (i.e. 2$/gal) every year AND giving back the same amount of money equally to each owner of a car. In France, it's easy, as you need a carte grise (id paper for your car) - just divvy up the expected tax income by the number of non-corporate owned cartes grises, et voilà.

People with smaller cars or fuel efficient cars or who drive little will get more money out of the trade; those with big cars or big amounts of driving will lose out even if they don't change behavior and all will be incentivised by the higher fuel prices to drive less.

And that would actually be mildy redistributive, I expect.

In the long run, we're all dead. John Maynard Keynes