Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes [An article from: Journal of Environmental Economics and Management]

This digital document is a journal article from Journal of Environmental Economics and Management, published by Elsevier in . The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
Concerns about energy security and climate change have sparked legislators' interest in reducing gasoline consumption by increasing corporate average fuel-economy (CAFE) standards. Using an empirically rich simulation model and cost estimates for anticipated fuel-economy technologies, we estimate annual costs of reducing long-run gasoline consumption by 10% via a 3.8 miles per gallon increase in the standards, and the potential cost savings from allowing manufacturers to buy and sell fuel-economy credits. Maximum gasoline savings would be realized only after all existing vehicles were replaced, or 14 years in our model. A gasoline tax would produce greater immediate savings by encouraging people to drive less, and eventually to choose more-fuel-efficient vehicles. We demonstrate the advantage of a tax by comparing the cost of the higher CAFE standards over the first 14 years against the cost of a gasoline tax that would save the same amount of gasoline over that time.