Journal of Economic Perspectives: Vol. 6 No. 2 (Spring 1992)


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Policy Watch: Corporate Average Fuel Economy Standards

Article Citation

Crandall, Robert W. 1992. "Policy Watch: Corporate Average Fuel Economy Standards." Journal of Economic Perspectives, 6(2): 171-180.

DOI: 10.1257/jep.6.2.171


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.

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Crandall, Robert W. (Brookings Institution)

JEL Classifications

L62: Automobiles; Other Transportation Equipment
Q48: Energy: Government Policy


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