Designing Policies to Make Cars Greener

Soren Anderson and James Sallee

Annual Review of Resource Economics, 2016, vol. 8, issue 1, 157-180

Abstract: We review what is known about the economic efficiency of fuel taxes relative to efficiency standards aimed at mitigating environmental externalities from cars. We present a simplified model of car choice that allows us to emphasize the relationships between fuel economy, other car attributes, and miles traveled. We focus on greenhouse gas emissions, although we note how other environmental externalities affect our conclusions. Our main conclusion—that standards are substantially less efficient than a fuel tax—is already familiar. Less familiar are points we make about the relative importance of the rebound effect, on the effects of attribute-based policies, and the implications of behavioral biases. We point to areas where we believe future research can have the greatest contribution, including work on uncertainty, heterogeneity, and empirical studies in low- and middle-income countries.

Keywords: fuel-economy regulation; fuel taxation; automobiles; greenhouse gas emissions (search for similar items in EconPapers)
JEL-codes: H23 Q48 Q54 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (36)

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