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

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  • Andrew N. Kleit

Abstract

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) Copyright 2004, Oxford University Press.

Suggested Citation

  • Andrew N. Kleit, 2004. "Impacts of Long-Range Increases in the Fuel Economy (CAFE) Standard," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 279-294, April.
    • Handle: RePEc:oup:ecinqu:v:42:y:2004:i:2:p:279-294
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    File URL: http://hdl.handle.net/10.1093/ei/cbh060
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    More about this item

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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