How Much Do Consumers Value Fuel Economy and Performance? Evidence from Technology Adoption
Current US passenger vehicle fuel economy and greenhouse gas standards will roughly double fuel economy and cut emissions. Recently tightened standards have reduced fuel costs, but have had roughly zero net effect on consumer well-being.
- The US Department of Transportation and Environmental Protection Agency are currently reviewing federal fuel economy and greenhouse gas emissions standards, which have been controversial in terms of their effects on vehicle consumers.
- New analysis of consumer survey data indicates that consumers undervalue fuel economy when purchasing a new vehicle, suggesting that consumers benefit from the fuel savings of tighter standards.
- However, recently tightened standards have caused automakers to forgo performance improvements.
- The value of the fuel savings roughly equals the cost of forgone performance improvements to consumers, suggesting roughly zero net private benefits to consumers.
Josh Linn is a senior fellow at RFF. His research centers on the effects of environmental policies and economic incentives for new technologies in the transportation, electricity, and industrial sectors.
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