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Technological Change, Vehicle Characteristics, and the Opportunity Costs of Fuel Economy Standards

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  • Klier, Thomas
  • Linn, Joshua

    (Resources for the Future)

Abstract

Many countries are tightening passenger vehicle fuel economy standards. The literature on passenger vehicle standards has used structural models to estimate their welfare effects. This paper provides the first empirical evidence on the effects of recently tightened fuel economy standards on technology adoption. Specifically, it investigates changes in the rate and direction of technology adoption, that is, the extent to which technology is used to increase fuel economy at the expense of other vehicle attributes. We find that recent US and European standards have both increased the rate of technology adoption and affected the direction of technology adoption. Producers reduced horsepower and torque compared to a counterfactual in which fuel economy standards remained unchanged. We estimate opportunity costs from reduced horsepower and torque to be of similar magnitude as the gains from fuel savings.

Suggested Citation

  • Klier, Thomas & Linn, Joshua, 2014. "Technological Change, Vehicle Characteristics, and the Opportunity Costs of Fuel Economy Standards," RFF Working Paper Series dp-13-40-rev, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-13-40-rev
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    References listed on IDEAS

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    Cited by:

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    2. Li, Shanjun & Kahn, Matthew E. & Nickelsburg, Jerry, 2015. "Public transit bus procurement: The role of energy prices, regulation and federal subsidies," Journal of Urban Economics, Elsevier, vol. 87(C), pages 57-71.

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    More about this item

    Keywords

    passenger vehicles; US greenhouse gas emissions rate standards; European carbon dioxide emissions rate standards; technology adoption;
    All these keywords.

    JEL classification:

    • 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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