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.
AustinDavidDinanTerry (2005). “Clearing the Air: The Costs and Consequences of Higher CAFE Standards and Increased Gasoline Taxes.” Journal of Environmental Economics and Management50: 562-582.
2.
BurtrawDallasKrupnickAlan J.MansurErinAustinDavidFarrellDeirdre (1998). “The Costs and Benefits of Reducing Air Pollutants Related to Acid Rain.” Contemporary Economic Policy16: 379-400.
3.
CEC (2003). Benefits of Reducing Demand for Gasoline and Diesel. California Energy Commission, Sacramento, CA.
4.
CrandallRobert W.GrahamJohn G. (1989). “The Effects of Fuel Economy Standards on Automobile Safety.” Journal of Law and Economics32: 97-118.
5.
DelucchiMark A.MurphyJames (2004). US Military Expenditures to Protect the Use of Persian-Gulf Oil for Motor Vehicles. Institute of Transportation Studies, University of California, Davis, CA.
6.
DOC (2000). Statistical Abstract of the United States. Department of Commerce, Washington, DC.
7.
DreyfusMark K.ViscusiW. Kip (1995). “Rates of Time Preference and Consumer Valuations of Automobile Safety and Fuel Efficiency.” Journal of Law and Economics38: 79-98.
8.
EIA (2002). Annual Energy Review 2001. Energy Information Administration, U.S. Department of Energy, Washington, DC.
9.
EPA (1999). “Development of Light-Duty Emission Inventory Estimates in the Notice of Proposed Rulemaking for Tier 2 and Sulfur Standards.” EPA-420-R-99-005, Office of Air and Radiation, Washington, DC.
10.
FHWA (1997). Highway Cost Allocation Study 1997. Federal Highway Administration, Department of Transportation, Washington DC.
11.
FischerCarolynHarringtonWinstonParryIan W.H. (2005). Economic Impacts of Tightening the Corporate Average Fuel Economy (CAFE) Standards. Report prepared for the US Environmental Protection Agency and the National Highway Traffic Safety Administration.
12.
GerardDavidLaveLester (2003). “The Economics of CAFE Reconsidered: A Response to CAFE Critics and a Case for Fuel Economy Standards.” AEI-Rrookings Joint Center for Regulatory Studies, Regulatory Analysis 03-01.
13.
GoldbergPinelopi Koujianou (1998). “The Effects of the Corporate Average Fuel Efficiency Standards in the US.” Journal of Industrial Economics46:1-33.
14.
GreeneDavid L. (1991). “Short-run Pricing Strategies to Increase Corporate Average Fuel Economy.” Economic Inquiry29 pp. 101-114.
15.
GreeneDavid L. (1998). “Why CAFE Worked.” Energy Policy26: 595-614.
16.
GreeneDavid L.AhmadSanjana (2005). Costs of US Oil Dependence: 2005 Update. Oak Ridge National Laboratory, Oak Ridge, TN.
17.
GreeneDavid L.HopsonJanet L. (2003). “An Analysis of Alternative Forms of Automotive Fuel Economy Standards for the United States.” Paper presented at the 2003 Transportation Research Board Annual Meetings.
18.
HarringtonWinston (1997). “Fuel Economy and Motor Vehicle Emissions.” Journal of Environmental Economics and Management33.
19.
HarringtonWinstonSanchiricoJamesWallsMargaret (2003). “Effects of Climate Change Policies on the U.S. Household Transportation Sector.” Discussion paper, Resources for the Future, Washington, DC.
20.
KahaneCharles J. (1997). Relationships Between Vehicle Size and Fatality Risk in Model Year 1985-93 Passenger Cars and Light Trucks. DOT HS 808 570, National Highway Traffic Safety Administration, Washington, DC.
21.
KhazzoomJ. Daniel (1997). “Impact of Pay-at-the-Pump on Safety Through Enhanced Vehicle Fuel Efficiency.” The Energy Joumal18:103-133.
22.
KleitAndrew N. (2004). “Impacts of Long-Range Increases in the Corporate Average Fuel Economy (CAFE) Standard.” Economic Inquiry42: 279-294.
23.
LeibyPaul N.JonesDonald W.RandallT. CurleeLeeRussell (1997). Oil Imports: An Assessment of Benefits and Costs. Oak Ridge, Tennessee: Oak Ridge National Laboratory.
24.
McCarthyPatrick S. (1996). “Market Price and Income Elasticities of New Vehicle Demands.” Review of Economics and Statistics78: 543-547.
25.
McCubbinDonald R.DelucchiMark A.(1999). “The Health Costs of Motor Vehicle Related Air Pollution.” Journal of Transport Economics and Policy33: 253-286.
26.
MillerTed R.LevyDavid T.SpicerRebecca S.LetinaDiane C. (1998). “Allocating the Costs of Motor Vehicle Crashes Between Vehicle Types.” Transportation Research Record1635: 81-87.
27.
NHTSA (2002a). Corporate Average Fuel Economy Standards for MY 2005-2007 Light Trucks. National Highway Traffic Safety Administration, Washington, DC: US Department of Transportation.
28.
NHTSA (2002b). The Economic Impact of Motor Vehicle Crashes 2000. National Highway Traffic Safety Administration, US Department of Transportation, Washington, DC.
29.
NolandRobert B. (2004). “Motor Vehicle Fuel Efficiency and Traffic Fatalities.” The Energy Journal25:1-22.
30.
NordhausWilliam D. (2006). “Life After Kyoto: Alternative Approaches to Global Warming Policies.” American Economic Review96: 31-34.
31.
NordhausWilliam D. (2007). “The Stern Review on the Economics of Climate Change.” Science, forthcoming.
32.
NordhausWilliam D.BoyerJoseph (2000). Warming the World: Economic Models of Global Warming. Cambridge, MA, MIT Press.
33.
NRC (2002). Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards. National Research Council, Washington, DC, National Academy Press.
34.
ParryIan W.H. (2003). “Fiscal Interactions and the Case for Carbon Taxes Over Grandfathered Carbon Permits.” Oxford Review of Economic Policy19: 385-399.
35.
ParryIan W.H. (2004). “Comparing Alternative Policies to Reduce Traffic Accidents.” Journal of Urban Economics56: 346-368.
36.
ParryIan W.H. (2007). “Are the Costs of Reducing Greenhouse Gases from Passenger Vehicles Negative?” Journal of Urban Economics, forthcoming.
37.
ParryIan W.H.SmallKenneth A. (2005). “Does Britain or The United States Have the Right Gasoline Tax?” American Economic Review95: 1276-1289.
38.
PearceDavid (2005). “The Social Cost of Carbon.” InHelmDieter (ed.), Climate-Change Policy, Oxford University Press, Oxford, UK.
39.
RubinJonathanLeibyPaul N.GreeneDavid L. (2006). “Tradable Fuel Economy Credits; Competition and Oligopoly”. Discussion paper, Department of Resource Economics and Policy, University of Maine.
40.
SchrankDLomaxT. (2002). The 2002 Urban Mobility Report. Texas Transportation Institute, Texas A&M University, College Station, TX.
41.
ShirleyChadWinstonClifford (2004). “Firm Inventory behavior and the Returns from Highway Infrastructure Investments.” Journal of Urban Economics55: 398-415.
42.
SmallKenneth A.Van DenderKurt (2006). “Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect.” Energy Journal28: 25-52.
43.
SmallKenneth A.KazimiCamilla (1995). “On the Costs of Air Pollution from Motor Vehicles.” Journal of Transport Economics and Policy29: 7-32.
44.
SternNicholas (2006). Stem Review: The Economics of Climate Change. Cambridge University Press, Cambridge, MA.
45.
ThorpeSteven G. (1997). “Fuel Economy Standards, New Vehicle Sales, and Average Fuel Efficiency.” Journal of Regulatory Economics11:311-326.
46.
TolRichard S J. (2005). “The Marginal Damage Costs of Carbon Dioxide Emissions: An Assessment of the Uncertainties.” Energy Policy33: 2064-2074.
47.
TRB (2006). The Fuel Tax and Alternatives for Transportation Funding. Transportation Research Board, Washington, DC.
48.
Van AukenR.M.ZellnerJ.W. (2002). An Assessment of the Effects of Vehicle Weight on Fatality Risk in Model Year 1985-98 Passenger Cars and 1985-97 Trucks. Dynamic Research Inc., Torrance, CA.
49.
WestSarahWilliamsRoberton C. (2007). “Optimal Taxation and Cross-Price Effects on Labor Supply: Estimates of the Optimal Gas Tax.” Journal of Public Economics91: 593-617.
50.
WestSarahWilliamsRoberton C. (2005). “The Cost of Reducing Gasoline Consumption.” American Economic Review Papers and Proceedings95: 294-299.
51.
WhiteMichelle (2004). “The “Arms Race” on American Roads; the Effect of Sport Utility Vehicles and Pickup Trucks on Traffic Safety .”Journal of Law and EconomicsXLVII: 333-356.
52.
YeeJet (1991). “Effect of Consumption Standards on US Gasoline Consumption.” Journal of Policy Modeling13: 205-227.
