The Government's 3p-a-litre rise in fuel duty planned for January could lead to 35,000 job losses, campaigners say.
The rise could also have a 0.1% effect on economic growth, the report prepared for the FairFuelUK group said.
As a result of the job losses and damage to growth, the tax increase will only bring in just over half the expected extra tax revenue - £800 million rather than £1.5 billion, said the report.
Produced by the National Institute for Economic and Social Research, the report said cutting fuel duty by 3p instead of raising it by 3p would create 70,000 new jobs and boost growth by 0.2%.
The report added that the 6p relative difference between the two options would normally have been estimated to have lost the Treasury about £3 billion.
However, because of the boost to the UK economy, that loss of revenue is much less - at £1.8 billion.
FairFuelUK will present the report when its leaders meet Chief Secretary to the Treasury Danny Alexander in London.
Quentin Willson, national spokesman for FairFuelUK said today: "We have always argued that fuel duty shouldn't be the Treasury's sacred cash cow - it should be used a lever for growth.
"And we've proved our argument with robust financial research and modelling that shows if you raise duty you destroy jobs and damage growth."
Mr Willson went on: "Danny Alexander understands this critical point and is one of the few politicians who's actually listening to the facts and engaging with our argument. We appreciate the Government's aspiration to reduce the deficit but know that hiking fuel duty up by 3p in January will only make things much worse."
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