Should Corporate Average Fuel Economy (CAFE) Standards Be Tightened?

This paper develops analytical models to estimate the welfare effects of higher Corporate Average Fuel Economy (CAFE) standards on new passenger vehicles. The analysis incorporates a broad range of fuel-and-driving-related externalities, fuel taxes, different assumptions concerning consumers' valuation of fuel saving technologies and their alternative value in enhancing other vehicle attributes, and endogenous vehicle fleet composition. To implement the analysis, we develop estimates of CAFE's impact on local pollution, nationwide congestion, and traffic accidents. We find that higher fuel economy standards can produce anything from moderate welfare gains, to very little or no effect, to substantial welfare losses, depending on how consumers value fuel economy technologies and their opportunity costs.


Issue Date:
2004
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/10605
Total Pages:
49
JEL Codes:
R48; Q48; H23
Series Statement:
Discussion Paper 04-53




 Record created 2017-04-01, last modified 2017-08-23

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)