WASHINGTON—The road to greater fuel economy and lower greenhouse gas emissions (GHG) now traveled by automotive vehicles is paved with the good intentions of both federal and state programs. However, a study posted today by Resources for the Future (RFF) provides a new map identifying some important bumps in that road and how to avoid them.
The new paper, The Role of State Policies under Federal Light-Duty Vehicle Greenhouse Gas Emissions Standards, by RFF Senior Fellows Joshua Linn and Virginia McConnell analyzes the harmony—and occasional lack of it—between federal and state policies that attempt to reduce the external costs of passenger vehicles.
Under current federal programs, reductions in both fuel consumption and carbon emissions are projected to roughly double between 2011 and 2025. At the same time, many states have adopted or are considering their own policies to reduce their passenger vehicle fuel consumption and their vehicle-generated GHG emissions. In principle, the authors note, federal and state policies may interact in important ways—either positively or negatively.
They find, for instance, that state policies targeting only emissions of new vehicles—and particularly alternative fuel vehicles such as electric cars—are unlikely to decrease national GHG emissions in the short run, primarily due to interactions with federal regulations.
When they examine, alternatively, the conditions under which state and federal policies can have positive long-run social benefits, they find that while it is inefficient for state and federal policies to target the same objective, the limitations of federal standards also can create an opportunity for state policies. They conclude that direct subsidies by states such as tax credits for goals such as purchases of alternative fuel vehicle technologies could be justified if federal subsidies are below the socially optimal levels. They state: “Carefully constructed state policies can complement the federal policies and achieve states’ objectives.”