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Automobile fuel-efficiency and government policy after 1985

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  • Ford, Andrew

Abstract

In this paper, we analyze the short-term effects of 3 potential policies that will be discussed in the debate over post-1985 automobile fuel-efficiency: 1.(1) continuation of corporate average fuel-efficiency standards for the automobile manufacturers,2.(2) continuation of the gas-guzzler tax on individual vehicles, and3.(3) enactment of a gasoline tax. Each policy is examined under 1990 conditions characterized by high gasoline prices and high automobile fuel-efficiencies. The paper describes the purchase prices and fuel-efficiencies of 5 car classes that would be available in 1990 if the automobile manufacturers retool all car lines to the optimal level, and a market mix model is used to describe the likely consumer response to the 1990 offering. For purposes of policy analysis, we consider the situation when the companies are not inclined, or not able, to retool all car lines to the optimal level, and we calculate the amount of policy intervention needed to generate a small improvement in average fleet fuel-efficiency through a consumer shift to more fuel-efficient cars. The 3 policies are compared in terms of their impact on automobile company revenues and their effects on households with different automobile preferences. The important finding from the analysis is that all 3 policies can increase fleet average fuel-efficiency but only by causing a substantial redistribution of funds between the automobile manufacturers, the consumers, and the government.

Suggested Citation

  • Ford, Andrew, 1982. "Automobile fuel-efficiency and government policy after 1985," Energy, Elsevier, vol. 7(9), pages 731-747.
    • Handle: RePEc:eee:energy:v:7:y:1982:i:9:p:731-747
    DOI: 10.1016/0360-5442(82)90021-4
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    Cited by:

    1. Mahlia, T.M.I. & Tohno, S. & Tezuka, T., 2013. "International experience on incentive program in support of fuel economy standards and labelling for motor vehicle: A comprehensive review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 25(C), pages 18-33.

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