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Impacts of Long-Range Increases in the Fuel Economy (CAFE) Standard

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  • Andrew N. Kleit
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    Abstract

    This work models the impact of higher CAFE standards on producer and consumer welfare, gasoline consumption, externalities from increased driving, and the emissions of traditional pollutants. In particular, a long-run 3.0 MPG increase in the CAFE standard is estimated to impose welfare losses of about $4 billion per year and save about 5.2 billion gallons of gasoline per year, for a hidden tax of $0.78 per gallon conserved. An 11-cent-per-gallon increase in the gasoline tax would save the same amount of fuel at a welfare cost of about $290 million per year, or about one-fourteenth the cost. (JEL L51, Q30) Copyright 2004, Oxford University Press.

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    File URL: http://hdl.handle.net/10.1093/ei/cbh060
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    Bibliographic Info

    Article provided by Western Economic Association International in its journal Economic Inquiry.

    Volume (Year): 42 (2004)
    Issue (Month): 2 (April)
    Pages: 279-294

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    Handle: RePEc:oup:ecinqu:v:42:y:2004:i:2:p:279-294

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    Cited by:
    1. Soren T. Anderson & James M. Sallee, 2011. "Using Loopholes to Reveal the Marginal Cost of Regulation: The Case of Fuel-Economy Standards," American Economic Review, American Economic Association, vol. 101(4), pages 1375-1409, June.
    2. David Anthoff & Robert Hahn, 2010. "Government failure and market failure: on the inefficiency of environmental and energy policy," Oxford Review of Economic Policy, Oxford University Press, vol. 26(2), pages 197-224, Summer.
    3. Rasha Ahmed & Kathleen Segerson, 2007. "Emissions Control and the Regulation of Product Markets: The Case of Automobiles," Working papers 2007-40, University of Connecticut, Department of Economics.
    4. Shiau, Ching-Shin Norman & Michalek, Jeremy J. & Hendrickson, Chris T., 2009. "A structural analysis of vehicle design responses to Corporate Average Fuel Economy policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(9-10), pages 814-828, November.
    5. Kenneth Small, 2011. "Energy Policies for Passenger Motor Vehicles," Working Papers 101108, University of California-Irvine, Department of Economics.
    6. Liu, Yimin & Helfand, Gloria E., 2009. "The Alternative Motor Fuels Act, alternative-fuel vehicles, and greenhouse gas emissions," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(8), pages 755-764, October.
    7. Manuel Frondel & Colin Vance, 2013. "Fuel Taxes versus Efficiency Standards – An Instrumental Variable Approach," Ruhr Economic Papers 0445, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    8. Steven Tenn & John M. Yun, 2005. "When adding a fuel efficient car increases an automaker's CAFE penalty," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 51-54.
    9. Yizao Liu, 2010. "Gasoline Prices, Fuel Economy Efficiency And Automobile Replacement Dynamics," Working Papers 02, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    10. Clerides, Sofronis & Zachariadis, Theodoros, 2008. "The effect of standards and fuel prices on automobile fuel economy: An international analysis," Energy Economics, Elsevier, vol. 30(5), pages 2657-2672, September.
    11. Sofronis Clerides & Theodoros Zachariadis, 2006. "Are standards Effective in Improving Automobile Fuel Economy?," University of Cyprus Working Papers in Economics 6-2006, University of Cyprus Department of Economics.

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