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Policy Watch: Corporate Average Fuel Economy Standards

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  • Robert W. Crandall

Abstract

Initially, the minimum corporate average fuel economy (CAFE) program was promoted as a policy to reduce U.S. vulnerability to oil shocks. In the past two years, however, concern about global warming has resulted in new political pressures to raise CAFE once again to reduce the growth in U.S. emissions of carbon dioxide, a greenhouse gas. In this paper, I do not attempt to provide a detailed critique of these two objectives. I simply take the goals as given and draw upon estimates from the empirical literature to show that CAFE is a very costly instrument for achieving them. In addition, I compare the costs of meeting the same objectives through a fuel or carbon tax.

Suggested Citation

  • Robert W. Crandall, 1992. "Policy Watch: Corporate Average Fuel Economy Standards," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 171-180, Spring.
    • Handle: RePEc:aea:jecper:v:6:y:1992:i:2:p:171-80
    Note: DOI: 10.1257/jep.6.2.171
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.6.2.171
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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