Full Title: Feebates, rebates and gas-guzzler taxes: a study ofincentives for
increased fuel economy
Kainotes:
Has an interesting bit about consumer behaviour wrt consideration of mpg by consumers. Supposedly, the average new car buyer only considers the first three years of fuel saving in the purchase of a new vehicle. I'll look at those papers briefly and pull out any interesting tidbits for you. This paper looks at a policy that involves a mpg pivot point beyond which producers get rebates and before which they get fined. Sounds cool.
Canada connection: guess they do this "feebate" thing in Ontario.
ABSTRACT: US fuel economy standards have not been changed significantly in 20 years. Feebates are a market-based alternative in which vehicles with fuel consumption rates above a ‘‘pivot point’’ are charged fees while vehicles below receive rebates. By choice of pivot points, feebate systems can be made revenue neutral. Feebates have been analyzed before. This study re-examines feebates using recent data, assesses how the undervaluing of fuel economy by consumers might affect their efficacy, tests sensitivity to the cost of fuel economy technology and price elasticities of vehicle demand, and adds assessments of gas-guzzler taxes or rebates alone. A feebate rate of $500 per 0.01 gallon per mile (GPM) produces a 16 percent increase in fuel economy, while a $1000 per 0.01GPM results in a 29 percent increase, even ifconsumers count only the first 3 years off uel savings. Unit sales decline by about 0.5 percent but sales revenues increase because the added value off uel economy technologies outweighs the decrease in sales. In all cases, the vast majority of fuel economy increase is due to adoption of fuel economy technologies rather than shifts in sales.
AUTHORs: David L. Greene, Philip D. Patterson, Margaret Singh, Jia Li
Friday, March 13, 2009
Friday, March 6, 2009
The Effects of the corporate average Fuel Efficiency Standards in the US
Combines a disaggregate model of automobile demand and utilization with an aggregate oligopoly and product differentiation model.
Author: Pinelopi Koujianou Goldberg
ABSTRACT: This paper examines the effects of the CAFE on auto sales, prices and fuel consumption. First a discrete choice modle of automobile demand and a continuous model of vehicle utilization are estimated using micro data from the Comsumer Expenditure Survey for 1984-1990. Next the demand side model is combined with a model of oligopoly and product differentiation on the supply side. With these elements in place, the effects of the CAFE regulation are assessed through simulations, and compared to the effects of alternative policy instruments such as an increase in gasoline taxes.
Kailer's Comments: A sophisticated partial equilibrium model is built and much of it sailed clear over my head. The author never once mentioned the different regulation standards for vehicle types. She concluded with a weak endorsement of the current policy. This may have been one of the most boring papers I have ever read.
Relevence: Moderate
Wednesday, March 4, 2009
When Adding a Fuel Efficient Car Increases an Automaker’s CAFÉ Penalty
Authors: Tenn and Yun FTC (2004)
Abstract: We derive the conditions that cause an automaker’s CAFÉ fine to increase when it sells an additional, fuel efficient car. Raising CAFÉ standards would broaden the range of fuel economies that produce this effect.
Relevence:Mild
Method: They model CAFE fine structure to find the marginal cost of adding a fuel efficient car to a fleet
Abstract: We derive the conditions that cause an automaker’s CAFÉ fine to increase when it sells an additional, fuel efficient car. Raising CAFÉ standards would broaden the range of fuel economies that produce this effect.
Relevence:Mild
Method: They model CAFE fine structure to find the marginal cost of adding a fuel efficient car to a fleet
The Regulation of Fuel Economy and The Demand for Light Trucks
The Regulation of Fuel Economy and The Demand for Light Trucks
Abstract:
The Corporate Average Fuel Economy Standard mandates fleet-average milesper-gallon minimums for passenger vehicles sold in the United States. Among other things, the standard is intended to induce consumers to substitute small cars for large cars. While the standard has reduced the average weight of cars, it has also stimulated the demand for an increasingly popular class of vehicles known as light trucks. The substitution to light trucks has mitigated, but not eliminated, the deleterious effects of the standard on vehicle safety. The effect of the standard on car weights and light-truck sales provides an opportunity to observe a novel manifestation of Sam Peltzman’s ‘‘offsetting-behavior’’ hypothesis. That effect and others are analyzed here in the context of the political economy of the Corporate Average Fuel Economy Standard.
Notable Quotables
“Such studies may overstate the effect of CAFE on safety not because those studies are wrong about the relationships between CAFE, car weight, and car safety but because they ignore the switch by consumers to an increasingly popular class of vehicles known as light trucks. Since the imposition of CAFE, the share of passenger vehicles accounted for by light trucks has doubled and is now approximately 40 percent. The data analyzed here indicate that CAFE has played a substantial role in that increasing popularity.”
“By these estimates, approximately one-half of the increase in the light-truck share between 1975 and 1995 is attributable to CAFÉ.”
Key difference: This fella is attributing the surge in truck sales to consumers preference for safety. CAFÉ made cars smaller to meet standards and small cars are less safe. He says CAFÉ is motivated by protectionism to stop car dealers from importing efficient foreign cars to meet CAFÉ.
Relevence: high
Method: ARMA
Available online: http://www.journals.uchicago.edu/doi/pdf/10.1086/467381
Abstract:
The Corporate Average Fuel Economy Standard mandates fleet-average milesper-gallon minimums for passenger vehicles sold in the United States. Among other things, the standard is intended to induce consumers to substitute small cars for large cars. While the standard has reduced the average weight of cars, it has also stimulated the demand for an increasingly popular class of vehicles known as light trucks. The substitution to light trucks has mitigated, but not eliminated, the deleterious effects of the standard on vehicle safety. The effect of the standard on car weights and light-truck sales provides an opportunity to observe a novel manifestation of Sam Peltzman’s ‘‘offsetting-behavior’’ hypothesis. That effect and others are analyzed here in the context of the political economy of the Corporate Average Fuel Economy Standard.
Notable Quotables
“Such studies may overstate the effect of CAFE on safety not because those studies are wrong about the relationships between CAFE, car weight, and car safety but because they ignore the switch by consumers to an increasingly popular class of vehicles known as light trucks. Since the imposition of CAFE, the share of passenger vehicles accounted for by light trucks has doubled and is now approximately 40 percent. The data analyzed here indicate that CAFE has played a substantial role in that increasing popularity.”
“By these estimates, approximately one-half of the increase in the light-truck share between 1975 and 1995 is attributable to CAFÉ.”
Key difference: This fella is attributing the surge in truck sales to consumers preference for safety. CAFÉ made cars smaller to meet standards and small cars are less safe. He says CAFÉ is motivated by protectionism to stop car dealers from importing efficient foreign cars to meet CAFÉ.
Relevence: high
Method: ARMA
Available online: http://www.journals.uchicago.edu/doi/pdf/10.1086/467381
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