RFF on the Issues

RFF on the Issues: CAFE Review and Fuel Economy

Mar 25, 2016 | Shannon Wulf Tregar

As cheap gas prices prompt consumers to buy trucks and sport utility vehicles instead of fuel efficient vehicles, automakers will likely seek adjustments to the federal fuel economy standards during their mid-term review. The New York Times notes “despite investing billions in fuel-saving technologies and introducing a raft of lower-mileage models and electric cars, the industry will be hard-pressed to meet its target of 54.5 miles per gallon in 2025.”

RFF’s Ben Leard, Josh Linn, and Virginia McConnell agree that lower gasoline prices incentivize consumers to purchase larger vehicles with lower fuel economy requirements. In research on preparing for the review of the CAFE standards, RFF’s Alan Krupnick, with Linn and McConnell, note: “Consumers may not be aware of how much fuel they will save over time with a more fuel-efficient vehicle, either because they have difficulty calculating the savings correctly or because it is not a salient feature compared to other attributes.”

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