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The New CAFE Standards: Are They Enough on Their Own?

  • McConnell, Virginia


    (Resources for the Future)

New Corporate Average Fuel Economy (CAFE) standards were recently passed in the United States with the twin goals of reducing greenhouse gas emissions and oil use. The new standards represent a dramatic change from recent policy. This paper examines the key features of the new rules, and compares them to previous CAFE standards in terms of flexibility and structure. The importance of consumer preferences and market forces on CAFE outcomes are identified. In the second part of the paper, the perspective of the consumer is explored. Consumer assessments of fuel economy savings with more fuel-efficient vehicles may be biased or incomplete, leading many to argue that there is an “energy efficiency gap” in consumer demand for vehicles. Reasons for such a gap, such as market failures, behavioral responses, and market barriers, are summarized. The implications for policy are discussed, including the role of combining CAFE with other policies.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-13-14.

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Date of creation: 01 May 2013
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Handle: RePEc:rff:dpaper:dp-13-14
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  1. Thomas Klier & Joshua Linn, 2010. "The Price of Gasoline and New Vehicle Fuel Economy: Evidence from Monthly Sales Data," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 134-53, August.
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  3. Tsvetan Tsvetanov & Kathleen Segerson, 2011. "Re-Evaluating the Role of Energy Efficiency Standards: A Time-Consistent Behavioral Economics Approach," Working papers 2011-24, University of Connecticut, Department of Economics.
  4. Christopher R. Knittel, 2011. "Automobiles on Steroids: Product Attribute Trade-Offs and Technological Progress in the Automobile Sector," American Economic Review, American Economic Association, vol. 101(7), pages 3368-99, December.
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  6. Turrentine, Thomas S. & Kurani, Kenneth S., 2007. "Car buyers and fuel economy?," Energy Policy, Elsevier, vol. 35(2), pages 1213-1223, February.
  7. Gillingham, Kenneth & Palmer, Karen, 2013. "Bridging the Energy Efficiency Gap: Insights for Policy from Economic Theory and Empirical Analysis," Discussion Papers dp-13-02, Resources For the Future.
  8. Gloria Helfand & Ann Wolverton, 2011. "Evaluating the Consumer Response to Fuel Economy: A Review of the Literature," NCEE Working Paper Series 200904, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Apr 2011.
  9. Kenneth Gillingham & Richard G. Newell & Karen Palmer, 2009. "Energy Efficiency Economics and Policy," NBER Working Papers 15031, National Bureau of Economic Research, Inc.
  10. 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.
  11. Whitefoot, Kate S. & Skerlos, Steven J., 2012. "Design incentives to increase vehicle size created from the U.S. footprint-based fuel economy standards," Energy Policy, Elsevier, vol. 41(C), pages 402-411.
  12. Anderson, Soren T. & Kellogg, Ryan & Sallee, James M., 2013. "What do consumers believe about future gasoline prices?," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 383-403.
  13. 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.
  14. Howarth, Richard B. & Andersson, Bo, 1993. "Market barriers to energy efficiency," Energy Economics, Elsevier, vol. 15(4), pages 262-272, October.
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