Fuel Economy: New RFF Study Shows Social Benefits of Obama-Era Standards

WASHINGTON, DC—As the Trump administration dramatically weakened fuel economy standards, Resources for the Future (RFF) today released a new working paper and blog post demonstrating that the standards have benefited society overall. In the first comprehensive social welfare estimates of recent fuel economy standards, the authors find that benefits of the Phase 1 (2012-2016) standards outweigh their costs by about $4 billion per year.

The study focuses on fuel economy standards established by the Department of Transportation and US Environmental Protection Agency, which set benchmarks for fuel economy of cars and light trucks sold from 2012 through 2016. Here are a few highlights of their findings:

• The net benefits of $4 billion per year are equivalent to a cost of about $6 per metric ton of carbon dioxide.
• The majority of fuel economy improvements are made by trading off horsepower for fuel economy, rather than by adding fuel-saving technology.
• Most of the costs to consumers are due to decreased horsepower; the standards reduced horsepower by about 30 percent.
• Initial agency assessments overestimated the benefits of the standards, but this analysis accounts for previously underestimated costs and still finds that the standards’ benefits outweighed their costs.

The study, “Have US Fuel Economy and Greenhouse Gas Emissions Standards Improved Social Welfare?,” was authored by RFF Senior Fellow Joshua Linn, RFF Fellow Benjamin Leard, and Georgetown University Assistant Professor Katalin Springel. The authors used a new model of the US vehicle market, which allowed for a more comprehensive analysis than has been conducted previously. To learn more, read the blog post by the authors.