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The Elusive Effects of CAFE Standards

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  • Kenneth A. Small

    (Department of Economics, University of California-Irvine)

Abstract

Despite decades of empirical assessment, economists have not reached consensus on key impacts of Corporate Average Fuel Economy (CAFE) standards, including how much they reduce fuel consumption. Evaluating CAFE is complicated by factors such as consumers' expectations of future fuel prices, their valuation of and responsiveness to changes in fuel economy, automakers' optimal technological and strategic behavior, changes in used-vehicle markets, and the path of energy prices. I investigate the effects of many of those factors in a quantitative assessment of CAFE. I do so by modifying the U.S. Department of Energy’s National Energy Modeling System and using it to simulate variations from a set of reference assumptions. Results are especially sensitive to consumers’ valuation of expected fuel cost savings and to the future course of oil prices.

Suggested Citation

  • Kenneth A. Small, 2017. "The Elusive Effects of CAFE Standards," Working Papers 171803, University of California-Irvine, Department of Economics.
    • Handle: RePEc:irv:wpaper:171803
    as

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    File URL: https://www.economics.uci.edu/research/wp/1718/17-18-03.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Fuel efficiency; CAFE; Motor vehicles; Energy paradox.;
    All these keywords.

    JEL classification:

    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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