Impacts of Long‐Range Increases in the Fuel Economy (CAFE) Standard | Zendy

Kleit Andrew N. | Zendy

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Impacts of Long‐Range Increases in the Fuel Economy (CAFE) Standard

Author(s) -

Kleit Andrew N.

Publication year - 2004

Publication title -

economic inquiry

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.823

H-Index - 72

eISSN - 1465-7295

pISSN - 0095-2583

DOI - 10.1093/ei/cbh060

Subject(s) - gallon (us) , economics , gasoline , welfare , agricultural economics , consumption (sociology) , externality , fuel efficiency , fuel tax , consumer welfare , natural resource economics , microeconomics , waste management , engineering , market economy , social science , sociology , revenue , aerospace engineering , accounting

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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