IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

A benefit-cost assessment of new vehicle technologies and fuel economy in the U.S. market

Listed author(s):
  • Simmons, Richard A.
  • Shaver, Gregory M.
  • Tyner, Wallace E.
  • Garimella, Suresh V.

Increasingly stringent fuel economy and emissions regulations alongside efforts to reduce oil dependence have accelerated the global deployment of advanced vehicle technologies. In recent years, original equipment manufacturers (OEMs) and consumers have generally been successful in mutually deploying cleaner vehicle options with little sacrifice in cost, performance or overall utility. Projections regarding the challenges and impacts associated with compliance with mid- and long-term targets in the U.S., however, incur much greater uncertainty. The share of existing new vehicles that is expected to comply with future regulations, for example, falls below 10% by 2020. This article explores advanced technologies that result in reduced fuel consumption and emissions that are commercially available in 2014 Model Year compact and midsize passenger cars. A review of the recent research literature and publicly available cost and technical specification data addressing correlations between incremental cost and fuel economy is presented. This analysis reveals that a 10% improvement in the sales-weighted average fuel economy of passenger cars has been achieved between 2011 and 2014 at costs that are at or below levels anticipated by the regulations by means of reductions in weight, friction, and drag; advancements in internal combustion efficiency; turbocharging combined with engine downsizing; transmission upgrades; and the growth of hybrids. Benefit-cost analyses performed on best-selling models in the selected classifications reveal that consumers thus far are not substantially incentivized to purchase fuel economy. Under baseline conditions, benefit-cost ratios are above a breakeven value of unity for only 6 of 28 models employing improved fuel-economy technologies. Sales-weighted data indicate that the “average” consumer that elected to invest in greater fuel economy spent $1490 to realize a 17.3% improvement in fuel economy, equating to estimated savings of $1070. Thus savings were, on average, insufficient to cover technology costs in the baseline scenario. However, a sensitivity analysis reveals that a majority of new technologies become financially attractive to consumers when average fuel prices exceed $5.60/gallon, or when annual miles traveled exceed 16,400. The article concludes with techno-economic implications of the research on future fuel economy regulations for stakeholders. In general, the additional cost consumers incur in exchange for a given level of fuel economy improvement in the coming years will need to be steadily reduced compared to current levels to ensure that the expected benefits of fuel savings are financially warranted.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Applied Energy.

Volume (Year): 157 (2015)
Issue (Month): C ()
Pages: 940-952

in new window

Handle: RePEc:eee:appene:v:157:y:2015:i:c:p:940-952
DOI: 10.1016/j.apenergy.2015.01.068
Contact details of provider: Web page:

Order Information: Postal:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Cheah, Lynette & Heywood, John, 2011. "Meeting U.S. passenger vehicle fuel economy standards in 2016 and beyond," Energy Policy, Elsevier, vol. 39(1), pages 454-466, January.
  2. Greene, David L, 1991. "Short-run Pricing Strategies to Increase Corporate Average Fuel Economy," Economic Inquiry, Western Economic Association International, vol. 29(1), pages 101-114, January.
  3. Schipper, Lee & Tax, Wienke, 1994. "New car test and actual fuel economy: yet another gap?," Transport Policy, Elsevier, vol. 1(4), pages 257-265, October.
  4. Ross Morrow, W. & Gallagher, Kelly Sims & Collantes, Gustavo & Lee, Henry, 2010. "Analysis of policies to reduce oil consumption and greenhouse-gas emissions from the US transportation sector," Energy Policy, Elsevier, vol. 38(3), pages 1305-1320, March.
  5. Atabani, A.E. & Badruddin, Irfan Anjum & Mekhilef, S. & Silitonga, A.S., 2011. "A review on global fuel economy standards, labels and technologies in the transportation sector," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4586-4610.
  6. Greene, David L. & Duleep, K. G., 1993. "Costs and benefits of automative fuel economy improvement: A partial analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 27(3), pages 217-235, May.
  7. Turrentine, Thomas S. & Kurani, Kenneth S., 2007. "Car buyers and fuel economy?," Energy Policy, Elsevier, vol. 35(2), pages 1213-1223, February.
  8. Thomas Klier & Joshua Linn, 2012. "New‐vehicle characteristics and the cost of the Corporate Average Fuel Economy standard," RAND Journal of Economics, RAND Corporation, vol. 43(1), pages 186-213, March.
  9. Turrentine, Tom & Kurani, Kenneth S, 2007. "Car buyers and fuel economy?," Institute of Transportation Studies, Working Paper Series qt56x845v4, Institute of Transportation Studies, UC Davis.
  10. Greene, David L. & Evans, David H. & Hiestand, John, 2013. "Survey evidence on the willingness of U.S. consumers to pay for automotive fuel economy," Energy Policy, Elsevier, vol. 61(C), pages 1539-1550.
  11. David Greene, 2010. "Why the New Market for New Passenger Cars Generally Undervalues Fuel Economy," OECD/ITF Joint Transport Research Centre Discussion Papers 2010/6, OECD Publishing.
  12. Hunt Allcott & Nathan Wozny, 2014. "Gasoline Prices, Fuel Economy, and the Energy Paradox," The Review of Economics and Statistics, MIT Press, vol. 96(5), pages 779-795, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:157:y:2015:i:c:p:940-952. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.