Are standards effective in improving automobile fuel economy? An international panel analysis
Date Issued
2007
Author(s)
Abstract
There is an intense debate over whether fuel economy standards or fuel taxation is the more
appropriate policy instrument to raise fuel economy and reduce CO2 emissions of cars. The
aim of this paper is to analyze the impact of standards and fuel prices in new car fuel
economy with the aid of cross-section time series analysis of data from 18 countries. We
employ a dynamic specification of new car fuel consumption as a function of fuel prices,
standards and per capita income. Results are used to address policy questions that are
currently in the center of discussions worldwide: to what extent the implementation of fuel
economy standards has yielded fuel savings; how much fuel prices should rise in order to
increase fuel economy without tightening standards; and whether autonomous fuel economy
improvements should be expected in the absence of regulations or fiscal policy instruments.
appropriate policy instrument to raise fuel economy and reduce CO2 emissions of cars. The
aim of this paper is to analyze the impact of standards and fuel prices in new car fuel
economy with the aid of cross-section time series analysis of data from 18 countries. We
employ a dynamic specification of new car fuel consumption as a function of fuel prices,
standards and per capita income. Results are used to address policy questions that are
currently in the center of discussions worldwide: to what extent the implementation of fuel
economy standards has yielded fuel savings; how much fuel prices should rise in order to
increase fuel economy without tightening standards; and whether autonomous fuel economy
improvements should be expected in the absence of regulations or fiscal policy instruments.
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