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Pennsylvania Convention Center, 111-A
American Economic Association
Friday, Jan. 5, 2018 10:15 AM - 12:15 PM
- Chair: Christopher R. Knittel, Massachusetts Institute of Technology
Mind the Gap! Tax Incentives and Incentives for Manipulating Fuel Efficiency in the Automobile Industry
AbstractMany governments institute environmental policies aimed at improving automobile fuel efficiency. There is, however, little empirical evidence to date as to the efficacy of these policies using real-world fuel efficiency data. The recent scandals over automakers’ falsification of official fuel efficiency figures and emissions data have rendered evidence based on automakers’ reports of fuel efficiency unreliable. This study identifies and examines the extent of a fuel efficiency gap—the disparity between official test results and what is actually achieved on the road—and the underlying incentives for manipulation on the part of the automobile industry. Using extensive high-frequency real-world fuel consumption data during on-road vehicle use, our identification strategy employs a regression discontinuity design that exploits Japanese consumers’ eligibility for large tax incentives based on vehicle fuel efficiency. The findings highlight a discontinuous increase in the fuel efficiency gap by 6% at the eligibility thresholds. While we have identified some of the mechanisms whereby automakers can inflate fuel efficiency figures during tests, the potential remains for ongoing manipulation. A variety of evidence supports the identification assumption, in particular suggesting the absence of a discontinuity in the efficiency gap at the levels of fuel efficiency not tied to the eligibility criteria.
Does an Energy Efficiency Gap Exist in the Light-duty Vehicle Market? Evidence From Fuel-saving Technology Adoption
AbstractDuring historical periods in which US fuel economy standards were unchanging, automakers increased performance but not fuel economy, contrasting with recent periods of tightening standards and rising fuel economy. This paper evaluates the welfare consequences of automakers forgoing performance increases to raise fuel economy as standards have tightened since 2012. Using a unique data set and a novel approach to account for fuel economy and performance endogeneity, we find undervaluation of fuel cost savings and high valuation of performance. Welfare costs of forgone performance approximately equal expected fuel savings benefits, suggesting approximately zero net private consumer benefit from tightened standards.
Pigou Creates Losers: On the Impossibility of Pareto Improvements From Pigouvian Taxes
AbstractThis paper uses data on gasoline consumption to compare the full distribution of burdens created by gasoline taxes and compares those to the burdens created by fuel-economy standards. It shows that heterogeneity in gasoline consumption is only coarsely correlated with observable characteristics (like income and demographics) that could form the basis of revenue-recycling schemes. As a result, the paper demonstrates that it is impossible to achieve Pareto improvements through gasoline taxation. The same point is shown more generally in a theoretical model. Next, the paper demonstrates that less-efficient policies that target durable goods, like fuel-economy standards or feebates, have less diffuse distributions of burdens, which makes it possible to achieve Pareto improvements. Thus, these regulatory alternatives trade-off Pareto improvements, which may create political acceptability, for the superior efficiency of gasoline taxes. A model shows that the final distribution of burdens depends on how vehicles depreciate. The paper provides original estimates of how utilization affects the depreciation of automobiles and uses that to estimate the final burden of durable-goods targeting policies.
University of California-San Diego
Massachusetts Institute of Technology
Simon Fraser University
- Q5 - Environmental Economics
- R4 - Transportation Economics