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The impact of the corporate average fuel economy standards on technological changes in automobile fuel efficiency

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  • Wang, Yiwei
  • Miao, Qing

Abstract

This paper empirically examines the effect of the U.S. Corporate Average Fuel Economy (CAFE) standards on the technological progress in automobile fuel efficiency. Using detailed vehicle attributes data from 1978 through 2018, we find that more stringent fuel economy standards increase the rate of technological improvements in new passenger cars, and this effect is primarily driven by the response of U.S. automakers. We do not find evidence that CAFE standards have a similar effect on the technical change in light-duty trucks. Our results also indicate that higher gasoline prices have a significant and positive effect on the improvement of fuel-saving technology in both passenger cars and light trucks. Using our empirical estimates, we project that the recent rollback of Obama-era CAFE standards would forego an approximately 2-percent increase in cars’ fuel economy over the 2021–2025 period as a result of technological progress.

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  • Wang, Yiwei & Miao, Qing, 2021. "The impact of the corporate average fuel economy standards on technological changes in automobile fuel efficiency," Resource and Energy Economics, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:resene:v:63:y:2021:i:c:s0928765520304206
    DOI: 10.1016/j.reseneeco.2020.101211
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    Cited by:

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    More about this item

    Keywords

    CAFE standards; Technological change; Fuel economy; Gasoline prices;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • 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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