Many countries are tightening passenger vehicle fuel economy standards. This paper provides the first empirical evidence on the effects of fuel economy standards on technology adoption. We investigate changes in the rate and direction of technology adoption, that is, the extent to which technology is used to increase fuel economy at the expense of other vehicle attributes. We find that recent changes in US and European standards have both increased the rate of technology adoption and affected the direction of technology adoption. Producers reduced horsepower and torque compared to a counterfactual in which fuel economy standards remained unchanged. We estimate opportunity costs from reduced horsepower and torque to be economically significant relative to the gains from fuel savings.
How Have Recent Fuel Economy and GHG Standards for New Passenger Vehicles Affected the US and European Markets?
Concerns about global warming and energy security have caused many countries to tighten passenger vehicle standards for greenhouse gases and fuel e...
Understanding the Tradeoffs of CAFE Standards
Though the Corporate Average Fuel Economy (CAFE) standards have been regulating the fuel economy of US vehicles since 1978, the levels of the stand...
What Does an Electric Vehicle Replace?
Vehicles replaced by EVs are relatively fuel-efficient.