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

Andrew N. Kleit, Professor of Energy and Environmental Economics at the Pennsylvania State University.

2/12/2008
(Original Publish Date: 10/15/2002)

CAFE standards have been in place since 1978. After the increase in petroleum prices in 1998-99, CAFE standards again arose as a public policy issue. This paper attempts to model the impact of higher CAFE standards on producer and consumer welfare, gasoline consumption, externalities from increased driving, and the emissions of traditional pollutants, given that CAFE standards are successful in inducing manufacturers to engage in technology forcing. The study then examines CAFE standards from a cost-benefit and a cost-effectiveness viewpoint.