Impacts of Long-Range Increases in the Fuel Economy (CAFE) Standard |
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| Authors: | Andrew N Kleit |
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| Institution: | Kleit:;Professor of Energy and Environmental Economics, The Pennsylvania State University, 507 Walker Building, The Pennsylvania State University, University Park, PA 16802–5010. Phone 1–814–865–0711, Fax 1–814–865–3663, E-mail |
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| Abstract: | This work models the impact of higher CAFE standards on producer and consumer welfare, gasoline consumption, externalities from increased driving, and the emissions of traditional pollutants. In particular, a long-run 3.0 MPG increase in the CAFE standard is estimated to impose welfare losses of about $4 billion per year and save about 5.2 billion gallons of gasoline per year, for a hidden tax of $0.78 per gallon conserved. An 11-cent-per-gallon increase in the gasoline tax would save the same amount of fuel at a welfare cost of about $290 million per year, or about one-fourteenth the cost. (JEL L51 , Q30 ) |
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