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Designing Policies to Make Cars Greener

Author

Listed:
  • Soren T. Anderson

    (Department of Economics, Michigan State University, East Lansing, Michigan 48824)

  • James M. Sallee

    (Department of Agricultural and Resource Economics, University of California, Berkeley, California 94720)

Abstract

We review what is known about the economic efficiency of fuel taxes relative to efficiency standards aimed at mitigating environmental externalities from cars. We present a simplified model of car choice that allows us to emphasize the relationships between fuel economy, other car attributes, and miles traveled. We focus on greenhouse gas emissions, although we note how other environmental externalities affect our conclusions. Our main conclusion—that standards are substantially less efficient than a fuel tax—is already familiar. Less familiar are points we make about the relative importance of the rebound effect, on the effects of attribute-based policies, and the implications of behavioral biases. We point to areas where we believe future research can have the greatest contribution, including work on uncertainty, heterogeneity, and empirical studies in low- and middle-income countries.

Suggested Citation

  • Soren T. Anderson & James M. Sallee, 2016. "Designing Policies to Make Cars Greener," Annual Review of Resource Economics, Annual Reviews, vol. 8(1), pages 157-180, October.
  • Handle: RePEc:anr:reseco:v:8:y:2016:p:157-180
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    File URL: http://www.annualreviews.org/doi/10.1146/annurev-resource-100815-095220
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    More about this item

    Keywords

    fuel-economy regulation; fuel taxation; automobiles; greenhouse gas emissions;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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