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Should Automobile Fuel Economy Standards be Tightened?

  • Carolyn Fischer
  • Winston Harrington
  • Ian W.H. Parry

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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Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 28 (2007)
Issue (Month): Number 4 ()
Pages: 1-30

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Handle: RePEc:aen:journl:2007v28-04-a01
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