Skip Ribbon Commands
Skip to main content
Home | Support RFF | Join E-mail List | Contact
RFF Logo
Skip navigation links
RESEARCH TOPICS
CENTERS
PUBLICATIONS
NEWS
EVENTS
RESEARCHERS
ABOUT RFF
 

 

 
Join E-mail List
Please provide your e-mail address to receive periodic newsletters and invitations to public events
 
 
Related Subtopics: CAFE Standards

In The Medium Run, CAFE Costs Decrease
RFF Feature
February 3, 2011

From its inception in the late 1970s, Corporate Average Fuel Economy (CAFE) standards reduced the weight and power of vehicles on American roads in order to increase fuel economy. Now, with CAFE standards expected to increase by 40 percent by 2020, observers are wondering how much the changes will cost and how consumers will react to an increase in fuel economy.

Previous analytical models have looked at the short run (one to two years), using price changes to adjust to standards, and the long-run (10 years and over), when there was time for a large technology overhaul. In New Vehicle Characteristics and the Cost of the Corporate Average Fuel Economy Standard, Thomas Klier and Joshua Linn assess the medium run. Manufacturers redesign vehicles every four to five years, altering weight, power, and fuel economy to meet the new CAFE standards. The authors discover that in this model, modifications are indeed less costly than short-term adjustments to the sales mix. Will consumers pay for this increase in fuel economy? Klier and Linn find that consumers value an increase in power over an increase in fuel economy.

RFF Home | RFF Press: An Imprint of Routledge Terms of Use | Privacy Policy | Copyright Notice
1616 P St. NW, Washington, DC 20036 ยท 202.328.5000 Feedback | Contact Us