Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives

Abstract

This paper discusses fuel economy regulations in the United States and other countries. We first describe how these programs affect fuel use and other dimensions of the vehicle fleet. We then review different methodologies for assessing the costs of fuel economy regulations and discuss the policy implications of the results. We also compare the welfare effects of fuel economy standards with those of fuel taxes and assess whether these two policies complement each other. Finally, we review arguments in favor of a "feebate" system, which imposes fees on inefficient vehicles and provides rebates for efficient vehicles.

Keywords: fuel economy regulations, costs, welfare effects, climate change, feebates

JEL Classification: Q48, Q58, H21, R48