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Technological Change, Vehicle Characteristics, and the Opportunity Costs of Fuel Economy Standards

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  • Klier, Thomas
  • Linn, Joshua

    (Resources for the Future)

Abstract

Many countries are tightening passenger vehicle fuel economy standards. In assessing the welfare effects of standards, the literature has not properly accounted either for their effects on the rate of technology adoption, or for improvements in vehicle characteristics in the absence of tightening standards. A dynamic model shows that accounting for both factors has ambiguous effects on estimated welfare costs. We find that recent US and European standards have affected the rate of technology adoption as well as horsepower and torque. Estimated welfare losses from reduced horsepower and torque are of similar magnitude to the welfare gains from fuel savings.

Suggested Citation

  • Klier, Thomas & Linn, Joshua, 2013. "Technological Change, Vehicle Characteristics, and the Opportunity Costs of Fuel Economy Standards," RFF Working Paper Series dp-13-40, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-13-40
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    References listed on IDEAS

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    2. Fournel, Jean-François, 2023. "Electric Vehicle Subsidies: Cost-Effectiveness and Emission Reductions," TSE Working Papers 23-1465, Toulouse School of Economics (TSE).

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    More about this item

    Keywords

    passenger vehicles; US greenhouse gas emissions rate standards; European carbon dioxide emissions rate standards; technology adoption;
    All these keywords.

    JEL classification:

    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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