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Policy Watch: Corporate Average Fuel Economy Standards

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  • Robert W. Crandall

Abstract

Initially, the minimum corporate average fuel economy (CAFE) program was promoted as a policy to reduce U.S. vulnerability to oil shocks. In the past two years, however, concern about global warming has resulted in new political pressures to raise CAFE once again to reduce the growth in U.S. emissions of carbon dioxide, a greenhouse gas. In this paper, I do not attempt to provide a detailed critique of these two objectives. I simply take the goals as given and draw upon estimates from the empirical literature to show that CAFE is a very costly instrument for achieving them. In addition, I compare the costs of meeting the same objectives through a fuel or carbon tax.

Suggested Citation

  • Robert W. Crandall, 1992. "Policy Watch: Corporate Average Fuel Economy Standards," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 171-180, Spring.
  • Handle: RePEc:aea:jecper:v:6:y:1992:i:2:p:171-80 Note: DOI: 10.1257/jep.6.2.171
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.6.2.171
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    References listed on IDEAS

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    1. Carmen Difglio & K.G. Duleep & David L. Green, 1990. "Cost Effectiveness of Future Fuel Economy Improvements," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 65-86.
    2. Train, Kenneth, 1985. "Discount rates in consumers' energy-related decisions: A review of the literature," Energy, Elsevier, vol. 10(12), pages 1243-1253.
    3. Crandall, Robert W & Graham, John D, 1989. "The Effect of Fuel Economy Standards on Automobile Safety," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 97-118, April.
    4. Kleit, Andrew N, 1990. "The Effect of Annual Changes in Automobile Fuel Economy Standards," Journal of Regulatory Economics, Springer, vol. 2(2), pages 151-172, June.
    5. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
    6. John E. Kwoka, 1983. "The Limits of Market-Oriented Regulatory Techniques: The Case of Automotive Fuel Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 695-704.
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    More about this item

    JEL classification:

    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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