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Should Corporate Average Fuel Economy (CAFE) Standards Be Tightened?

Author

Listed:
  • Parry, Ian

    () (Resources for the Future)

  • Fischer, Carolyn

    () (Resources for the Future)

  • Harrington, Winston

    () (Resources for the Future)

Abstract

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.

Suggested Citation

  • Parry, Ian & Fischer, Carolyn & Harrington, Winston, 2004. "Should Corporate Average Fuel Economy (CAFE) Standards Be Tightened?," Discussion Papers dp-04-53, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-04-53
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-04-53-REV.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Eskeland, Gunnar S. & Mideksa, Torben K., 2008. "Transportation fuel use, technology and standards: The role of credibility and expectations," Policy Research Working Paper Series 4695, The World Bank.
    2. Changzheng Liu and David L. Greene, 2014. "Vehicle Manufacturer Technology Adoption and Pricing Strategies under Fuel Economy/Emissions Standards and Feebates," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    3. Stavins, Robert, 2005. "The Effects of Vintage-Differentiated Environmental Regulation," Working Paper Series rwp05-031, Harvard University, John F. Kennedy School of Government.
    4. Parry, Ian & Strand, Jon, 2012. "International fuel tax assessment: an application to Chile," Environment and Development Economics, Cambridge University Press, vol. 17(02), pages 127-144, April.
    5. Brozovic, Nicholas & Ando, Amy Whritenour, 2009. "Defensive purchasing, the safety (dis)advantage of light trucks, and motor-vehicle policy effectiveness," Transportation Research Part B: Methodological, Elsevier, vol. 43(5), pages 477-493, June.
    6. Soren T. Anderson & Ian W. H. Parry & James M. Sallee & Carolyn Fischer, 2011. "Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 89-108, Winter.
    7. Austin, David & Dinan, Terry, 2005. "Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 562-582, November.
    8. Parry, Ian W.H., 2012. "Reforming the tax system to promote environmental objectives: An application to Mauritius," Ecological Economics, Elsevier, vol. 77(C), pages 103-112.
    9. Parry, Ian W.H. & Evans, David & Oates, Wallace E., 2014. "Are energy efficiency standards justified?," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 104-125.
    10. Parry, Ian W.H., 2007. "Are the costs of reducing greenhouse gases from passenger vehicles negative?," Journal of Urban Economics, Elsevier, vol. 62(2), pages 273-293, September.
    11. Rasha Ahmed & Kathleen Segerson, 2007. "Emissions Control and the Regulation of Product Markets: The Case of Automobiles," Working papers 2007-40, University of Connecticut, Department of Economics.
    12. Rubin, Jonathan & Leiby, Paul N. & Greene, David L., 2009. "Tradable fuel economy credits: Competition and oligopoly," Journal of Environmental Economics and Management, Elsevier, vol. 58(3), pages 315-328, November.
    13. Ian W. H. Parry, 2005. "Is Pay-as-You-Drive Insurance a Better Way to Reduce Gasoline than Gasoline Taxes?," American Economic Review, American Economic Association, vol. 95(2), pages 288-293, May.

    More about this item

    Keywords

    fuel economy standards; oil dependency; carbon emissions; rebound effect; gasoline tax;

    JEL classification:

    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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