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Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives

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  • Anderson, Soren
  • Parry, Ian

    ()
    (Resources for the Future)

  • Sallee, James M.
  • Fischer, Carolyn

    ()
    (Resources for the Future)

Abstract

This paper discusses fuel economy regulations in the United States and other countries. We first describe how these programs affect fuel use and other dimensions of the vehicle fleet. We then review different methodologies for assessing the costs of fuel economy regulations and discuss the policy implications of the results. We also compare the welfare effects of fuel economy standards with those of fuel taxes and assess whether these two policies complement each other. Finally, we review arguments in favor of a “feebate” system, which imposes fees on inefficient vehicles and provides rebates for efficient vehicles.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-10-45.

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Date of creation: 13 Oct 2010
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Handle: RePEc:rff:dpaper:dp-10-45

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Keywords: fuel economy regulations; costs; welfare effects; climate change; feebates;

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References

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  1. Thomas H. Klier & Joshua Linn, 2008. "New vehicle characteristics and the cost of the corporate average fuel economy standard," Working Paper Series WP-08-13, Federal Reserve Bank of Chicago.
  2. Kahn, James A, 1986. "Gasoline Prices and the Used Automobile Market: A Rational Expectations Asset Price Approach," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 323-39, May.
  3. Richard S. J. Tol, 2010. "The Economic Impact of Climate Change," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(s1), pages 13-37, 05.
  4. Christopher R. Knittel, 2009. "Automobiles on Steroids: Product Attribute Trade-Offs and Technological Progress in the Automobile Sector," NBER Working Papers 15162, National Bureau of Economic Research, Inc.
  5. Soren T. Anderson & James M. Sallee, 2009. "Using Loopholes to Reveal the Marginal Cost of Regulation: The Case of Fuel-Economy Standards," Working Papers 0901, Harris School of Public Policy Studies, University of Chicago.
  6. West, Sarah E. & Williams, R.C.Roberton III, 2004. "Estimates from a consumer demand system: implications for the incidence of environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 535-558, May.
  7. West, Sarah E., 2004. "Distributional effects of alternative vehicle pollution control policies," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 735-757, March.
  8. Austin, David & Dinan, Terry, 2005. "Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 562-582, November.
  9. Fischer, Carolyn, 2005. "On the importance of the supply side in demand-side management," Energy Economics, Elsevier, vol. 27(1), pages 165-180, January.
  10. Steve Newbold & Charles Griffiths & Christopher C. Moore & Ann Wolverton & Elizabeth Kopits, 2010. "The "Social Cost of Carbon" Made Simple," NCEE Working Paper Series 201007, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Aug 2010.
  11. Parry, Ian & Fischer, Carolyn & Harrington, Winston, 2004. "Should Corporate Average Fuel Economy (CAFE) Standards Be Tightened?," Discussion Papers dp-04-53, Resources For the Future.
  12. Shanjun Li, 2012. "Traffic safety and vehicle choice: quantifying the effects of the ‘arms race’ on American roads," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(1), pages 34-62, 01.
  13. Antonio M. Bento & Lawrence H. Goulder & Mark R. Jacobsen & Roger H. von Haefen, 2009. "Distributional and Efficiency Impacts of Increased US Gasoline Taxes," American Economic Review, American Economic Association, vol. 99(3), pages 667-99, June.
  14. Joseph E. Aldy & Alan J. Krupnick & Richard G. Newell & Ian W.H. Parry & William A. Pizer, 2009. "Designing Climate Mitigation Policy," NBER Working Papers 15022, National Bureau of Economic Research, Inc.
  15. Philippe Barla & Stef Proost, 2008. "Automobile fuel efficiency policies with international innovation spillovers," Center for Economic Studies - Discussion papers ces0817, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  16. Dominika Kalinowska & Kerim Keser & Uwe Kunert, 2009. "CO2 Based Taxation on Cars Is Rising in Europe," Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 5(23), pages 159-170.
  17. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
  18. Fischer, Carolyn, 2008. "Comparing flexibility mechanisms for fuel economy standards," Energy Policy, Elsevier, vol. 36(8), pages 3106-3114, August.
  19. Greene, David L. & Patterson, Philip D. & Singh, Margaret & Li, Jia, 2005. "Feebates, rebates and gas-guzzler taxes: a study of incentives for increased fuel economy," Energy Policy, Elsevier, vol. 33(6), pages 757-775, April.
  20. Sarah E. West & Roberton C. Williams III, 2005. "The Cost of Reducing Gasoline Consumption," American Economic Review, American Economic Association, vol. 95(2), pages 294-299, May.
  21. Brown, Stephen P.A. & Huntington, Hillard G., 2010. "Reassessing the Oil Security Premium," Discussion Papers dp-10-05, Resources For the Future.
  22. Fischer, Carolyn, 2010. "Imperfect Competition, Consumer Behavior, and the Provision of Fuel Efficiency in Light-Duty Vehicles," Discussion Papers dp-10-60, Resources For the Future.
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Citations

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Cited by:
  1. Julie Rozenberg & Adrien Vogt-Schilb & Hallegatte Stéphane, 2013. "Efficiency and Acceptability of Climate Policies: Race Against the Lock-ins," Post-Print hal-00916861, HAL.
  2. Adriaan Perrels & Tarja Tuovinen, 2012. "The Effectiveness of Differentiation of the Finnish Car Purchase Tax according to Carbon Dioxide Emission Performance," Research Reports 168, Government Institute for Economic Research Finland (VATT).
  3. Rozenberg, Julie & Vogt-Schilb, Adrien & Hallegatte, Stephane, 2014. "Transition to clean capital, irreversible investment and stranded assets," Policy Research Working Paper Series 6859, The World Bank.
  4. Klier, Thomas & Linn, Joshua, 2012. "Using Vehicle Taxes to Reduce Carbon Dioxide Emissions Rates of New Passenger Vehicles: Evidence from France, Germany, and Sweden," Discussion Papers dp-12-34, Resources For the Future.
  5. Clifford Winston, 2013. "On the Performance of the U.S. Transportation System: Caution Ahead," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 773-824, September.
  6. Adamos Adamou & Sofronis Clerides & Theodoros Zachariadis, 2012. "Designing Carbon Taxation Schemes for Automobiles: A Simulation Exercise for Germany," University of Cyprus Working Papers in Economics 01-2012, University of Cyprus Department of Economics.
  7. Massimo Anna Alberini & Massimo Filippini & Markus Bareit, 2014. "Does the Swiss Car Market Reward Fuel Efficient Cars? Evidence from Hedonic Pricing Regressions, Matching and a Regression Discontinuity Design," CER-ETH Economics working paper series 14/190, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  8. Tsvetanov, Tsvetan & Segerson, Kathleen, 2013. "Re-evaluating the role of energy efficiency standards: A behavioral economics approach," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 347-363.
  9. Sallee, James M. & Slemrod, Joel, 2012. "Car notches: Strategic automaker responses to fuel economy policy," Journal of Public Economics, Elsevier, vol. 96(11), pages 981-999.
  10. Huse, Cristian & Lucinda, Claudio, 2013. "The Market Impact and the Cost of Environmental Policy: Evidence from the Swedish Green Car Rebate," MPRA Paper 48905, University Library of Munich, Germany.
  11. Adamos Adamou & Sofronis Clerides & Theodoros Zachariadis, 2012. "Trade-offs in CO2-Oriented Vehicle Tax Reforms: A Case Study of Greece," Working Paper Series 33_12, The Rimini Centre for Economic Analysis.
  12. Werner Antweiler & Sumeet Gulati, 2013. "Market-Based Policies for Green Motoring in Canada," Canadian Public Policy, University of Toronto Press, vol. 39(s2), pages 81-94, August.
  13. Huse, Cristian, 2014. "Fast and Furious (and Dirty): How Asymmetric Regulation May Hinder Environmental Policy," MPRA Paper 48909, University Library of Munich, Germany.
  14. Hallegatte, Stephane & Fay, Marianne & Vogt-Schilb, Adrien, 2013. "Green industrial policies : when and how," Policy Research Working Paper Series 6677, The World Bank.
  15. Adamos Adamou & Sofronis Clerides & Theodoros Zachariadis, 2012. "Assessment of CO2-Oriented Vehicle Tax Reforms: A Case Study of Greece," University of Cyprus Working Papers in Economics 04-2012, University of Cyprus Department of Economics.
  16. Klier, Thomas & Linn, Joshua, 2013. "Fuel prices and new vehicle fuel economy—Comparing the United States and Western Europe," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 280-300.

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