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Cost Effectiveness of Future Fuel Economy Improvements

Carmen Difglio, K.G. Duleep, and David L. Green

Year: 1990
Volume: Volume 11
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No1-7
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Abstract:
U.S. petroleum use today is 2 million barrels per day lower than it would have been if automobile fuel economy had not improved since 1975. This paper explores the potential for and cost of further increases in domestic passenger car fuel economy using market-ready technologies and sales mix shifts. Using technology already included in manufacturers' production plans and based on consumers' willingness to pay for increased fuel economy, domestic auto mpg could be increased from the 1987 level of 27 mpg to 31.6 mpg in 1995 without reducing vehicle size or performance from 1987 levels. By2000, 34.3 mpg can be justifed on the same basis. A higher level, 36.4 mpg, is cost-effective, based on fuel cost savings over the entire expected vehicle life. The maximum level achievable with the technology included in this analysis is 39.4 mpg, but this level would not be cost-effective. Sales mix shifts stimulated by price subsidies for efficient cars and surcharges on inefficient models can cause about I or 2 mpg of higher fuel economy before becoming too costly.



CAFE OR PRICE?: An Analysis of the Effects of Federal Fuel Economy Regulations and Gasoline Price on New Car MPG, 1978-89

David L. Greene

Year: 1990
Volume: Volume 11
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No3-2
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Abstract:
Following a tripling of world oil prices in 1973-74, the U.S. Congress passed the Energy Policy and Conservation Act of 1975 establishing mandatory fuel economy standards for automobiles and light trucks. Beginning at 18 MPG in 1978, the passenger car standards increased to 27.5 MPG by 1985. There has been considerable debate about the influence of the standards, as opposed to the gasoline price increases in 1973-74 and 1979-80, on new car fuel economy.



The U.S. Demand for Highway Travel and Motor Fuel

Dermot Gately

Year: 1990
Volume: Volume 11
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No3-3
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Abstract:
This paper, based on an econometric analysis of annual data since 1965, examines the prospects for US highway travel and fuel demand, disaggregated by vehicle type (cars and light trucks). Despite projections by the US Department of Energy (DOE/EIA) of virtually no change in highway fuel use in the 1990s, we project a growth rate of about 1.3% annually. DOE/EIA assumes extraordinarily rapid improvement in fuel efficiency and relatively slow growth in large trucks' vehicle miles. We project slower gains in fuel efficiency, for all types of vehicles, and faster growth for large trucks' vehicle miles.



Vehicle Use and Fuel Economy: How Big is the "Rebound" Effect?

David L. Greene

Year: 1992
Volume: Volume 13
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No1-7
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Abstract:
By reducing the fuel costs of travel, motor vehicle efficiency, improvements tend to increase the demand for travel, thereby offsetting some of the energy-saving benefit of the efficiency improvement and creating a "rebound" effect. The key factor is the elasticity of vehicle travel with respect to fuel cost per mile. Past studies offer a wide range of estimates depending on model formulation and time period, with more recent analyses indicating that travel is insensitive to fuel costs and efficiency. This paper analyzes U.S. light-duty, vehicle miles travelled from 1966 89, examining a variety of statistical issuesthat bear on the size of the "rebound" effect, including error structure, functional form, and possible lagged effects. The results consistently confirm that the 'rebound" effect has been quite small, about 5 15%, or less; and that short-run (one year) adjustments accounted for essentially all of the change in travel due to fuel price and fuel economy changes. The findings imply that the energy savings of technical fuel economy improvements to cars and light trucks will be only slightly reduced by increased vehicle travel. They also imply that gasoline taxes would need to be very large in order to stimulate significant reductions in travel.



Global Warming and Urban Smog: Cost-Effectiveness of CAFE Standards and Alternative Fuels

Alan J. Krupnick, Margaret A. Walls, and Carol T Collins

Year: 1993
Volume: Volume14
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No4-5
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Abstract:
In this paper we estimate the cost-effectiveness, in terms of reducing greenhouse gas emissions, of increasing the corporate average fuel economy (CAFE) standard to 38 miles per gallon and substituting methanol, compressed natural gas (CNG), and reformulated gasoline for conventional gasoline. Greenhouse gas emissions are assessed over the entire fuel cycle and include carbon dioxide, methane, carbon monoxide, and nitrous oxide emissions. To account for joint environmental benefits, the cost per ton of greenhouse gas reduced is adjusted for reductions in volatile organic compound (VOC) emissions, an ozone precursor. CNG is found to be the most cost-effective of these alternatives, followed by increasing the CAFE standard, substituting methanol for gasoline, and substituting reformulated for conventional gasoline. Including the VOC benefits does not change the ranking of the alternatives, bug does make the alternative fuels look better relative to increasing the CAFE standard. None of the alternatives look cost-effective should a carbon tax of $35 per ton be passed, and only CNG under optimistic assumptions looks costeffective with a tax of $100 per ton of carbon.



Another Look at U.S. Passenger Vehicle Use and the 'Rebound' Effect from Improved Fuel Efficiency

Clifton T Jones

Year: 1993
Volume: Volume14
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No4-6
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Abstract:
Recently, Greene (1992) analyzed vehicle miles travelled for U.S. passenger vehicles over 1966-89 to econometrically estimate the "rebound" effect in fuel consumption resulting from improved fuel efficiency. He found that a static AR(1) model could not be rejected, implying that the rebound effect is small (13%) with no significant long-run adjustments, regardless of the assumed functional form(linear or loglinear). Another look at the data from a different model selection approach shows that while a loglinear AR(1) model is acceptable, the linear version is not. Using either form, a lagged dependent variable model cannot be rejected on statistical grounds yet has insignificant GNP effects, yielding similarly small short-run rebound effects but significant long-run rebound effects of about 30%. Thus, the evidence from these competing models for a significant long-run adjustment process is mixed, so that its presence cannot be completely ruled out.



Fuel Efficiency and Automobile Safety: Single-Vehicle Highway Fatalities for Passenger Cars

J. Daniel Khazzoom

Year: 1994
Volume: Volume15
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No4-4
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Abstract:
This paper reports the results of an effort to shed some light on the relationship that might exist between enhanced standards and single-vehicle passenger car highway fatalities. Quantification of this relationship is not an easy task Not surprisingly, the literature on modeling the relationship between fuel economy and highway fatalities is very scant. Our analytic framework consists of two submodes: a corporate average fuel economy (CAFE) submodel and a single-vehicle highway fatalities submodel. Some of the variables that enter the CAFE relationship affect single vehicle fatalities, as well. The results of this study are not unequivocal in every respect. However, they indicate that enhanced standards and automobile safety need not be at odds with each other.A main message that emerges from this study is the need not to confuse car downsizing with downweighting. Quantitative studies of highway fatalities have mostly treated weight and size interchangeably, and have used only the weight variable in the fatalities equation to avoid dealing with multicollinearity. Such references as "size/weight' which lump size and weight together as if they were the same variable are not uncommon in the safety literature. Our study indicates that weight and size are not a proxy to each other, and that in single vehicle crashes they are likely to have opposite effects on safety. Men researchers choose to drop the size variable and include only the weight variable in the fatalities equation, the weight estimate may end up with a negative sign, not necessarily because weight has a beneficial effect on safety., but because the omitted size variable has a dominant beneficial effect on safety, which is picked up by the weight variable that appears in the equation.



Pollution Control and Energy Conservation: Complements or Antagonists? A Study of Gasoline Taxes and Automobile Fuel Economy

Molly Espey

Year: 1997
Volume: Volume18
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No2-2
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Abstract:
Energy conservation regulations, such as fuel taxes and fuel economy mandates for automobiles, are often assumed to reduce air pollution in lock step with the reduction in fuel consumption. Under the current system of tailpipe emissions regulations in the United States, this is not necessarily true. This paper uses a simple graphical analysis to illustrate the relative impact of fuel taxes and fuel economy standards on pollution levels given the current tailpipe emissions standards and an alternative emissions standard. Under current tailpipe emissions standards, increases in fuel economy would actually raise emissions, and significantly larger fuel taxes would be required to achieve the same level ftollution reduction as under the proposed alternative standard. These results confirm earlier findings that used mathematical and stochastic simulation methods to address this issue.



Impact of Pay-at-the-Pump on Safety Through Enhanced Vehicle Fuel Efficiency

J. Daniel Khazzoom

Year: 1997
Volume: Volume18
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No3-5
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Abstract:
Pay-at-the-Pump (PATP) is a proposal for replacing the lump-sum payment of auto insurance by a system of surcharge on gasoline price. This study examines the main argument made against PATP-namely, that by stimulating the demand for fuel-efficient vehicles, PATP results in a drastic deterioration in highway safety. The study finds the evidence does not support this argument. Moreover, if as critics argue, PATP does indeed result in a substantially accelerated replacement of older vehicles with more fuel-efficient ones, the introduction of PATP may be expected to result in a substantially safer fleet of vehicles, as well.



An Almost Ideal Demand System Model of Household Vehicle Fuel Expenditure Allocation in the United States

Gbadebo Oladosu

Year: 2003
Volume: Volume 24
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol24-No1-1
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Abstract:
In this study I model vehicle-fuel expenditure allocation in multi-vehicle households based on the Almost Ideal Demand System (AIDS).Using data from surveys conducted by the Energy Information Administration in 1988, 1991 and 1994, I estimate the AIDS model, augmented with a comprehensive set of household and vehicle characteristics for households owning 1 to 4 vehicles ordered by vehicle age. Results show that vehicle characteristics are the most significant factors in the expenditure allocation process. Mean and standard deviation of price, expenditure and Allen substitution elasticities are calculated across households. Own-price elasticities for all vehicles are close to 1. Allen substitution elasticities indicate that all vehicle pairs are substitutes, and only vehicle 1 is found to be expenditure inelastic. The approach taken in this study enables a disentangling of vehicle allocation/substitution effects from aggregate household vehicle use behavior. This will be useful in the analysis of efficiency and distributional effects of policies affecting household transportation.




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