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

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  • Parry, Ian

    ()
    (Resources for the Future)

  • Fischer, Carolyn

    ()
    (Resources for the Future)

  • Harrington, Winston

    ()
    (Resources for the Future)

Abstract

This paper develops analytical and numerical models to explain and estimate the welfare effects of raising Corporate Average Fuel Economy (CAFE) standards for new passenger vehicles. The analysis encompasses a wide range of scenarios concerning consumers’ valuation of fuel economy and the full economic costs of adopting fuel-saving technologies. It also accounts for, and improves estimates of, CAFE’s impact on externalities from local and global pollution, oil dependence, traffic congestion, and accidents. The bottom line is that it is difficult to make an airtight case either for or against tightening CAFE on pure efficiency grounds, as the magnitude and direction of the welfare change varies across different, plausible scenarios.

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File URL: http://www.rff.org/RFF/documents/RFF-DP-04-53-REV.pdf
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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-04-53.

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Date of creation: 20 Dec 2004
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Handle: RePEc:rff:dpaper:dp-04-53

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Keywords: fuel economy standards; oil dependency; carbon emissions; rebound effect; gasoline tax;

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References

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Citations

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Cited by:
  1. Anderson, Soren & Parry, Ian & Sallee, James M. & Fischer, Carolyn, 2010. "Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives," Discussion Papers dp-10-45, Resources For the Future.
  2. Brozovic, Nicholas & Ando, Amy Whritenour, 2009. "Defensive purchasing, the safety (dis)advantage of light trucks, and motor-vehicle policy effectiveness," Transportation Research Part B: Methodological, Elsevier, vol. 43(5), pages 477-493, June.
  3. Parry, Ian & Strand, Jon, 2012. "International fuel tax assessment: an application to Chile," Environment and Development Economics, Cambridge University Press, vol. 17(02), pages 127-144, April.
  4. Parry, Ian W.H., 2012. "Reforming the tax system to promote environmental objectives: An application to Mauritius," Ecological Economics, Elsevier, vol. 77(C), pages 103-112.
  5. Ian W. H. Parry, 2005. "Is Pay-as-You-Drive Insurance a Better Way to Reduce Gasoline than Gasoline Taxes?," American Economic Review, American Economic Association, vol. 95(2), pages 288-293, May.
  6. Stavins, Robert, 2005. "The Effects of Vintage-Differentiated Environmental Regulation," Discussion Papers dp-05-12, Resources For the Future.
  7. 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.
  8. Parry, Ian W.H. & Evans, David A. & Oates, Wallace E., 2010. "Are Energy Efficiency Standards Justified?," Discussion Papers dp-10-59, Resources For the Future.
  9. Parry, Ian W.H., 2006. "Are the Costs of Reducing Greenhouse Gases from Passenger Vehicles Negative?," Discussion Papers dp-06-14-rev, Resources For the Future.
  10. Ian W.H. Parry & Jon Strand, 2011. "International Fuel Tax Assessment," IMF Working Papers 11/168, International Monetary Fund.
  11. Eskeland, Gunnar S. & Mideksa, Torben K., 2008. "Transportation fuel use, technology and standards: The role of credibility and expectations," Policy Research Working Paper Series 4695, The World Bank.
  12. Ian W.H. Parry, 2011. "Reforming the Tax System to Promote Environmental Objectives," IMF Working Papers 11/124, International Monetary Fund.

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