Are Fuel Economy Standards Regressive?
Name
Knittel_Are Fuel Economy Standards Regressive.pdf
Description
Submitted version
Size
497.02 KB
Format
Unknown
Checksum (MD5)
ac8b74cffac32a7055fbedcc44b688cf
Author(s)
Davis, Lucas W.
Knittel, Christopher R.
Date Issued
January 2019
Journal
Journal of the Association of Environmental and Resource Economists
Publisher
University of Chicago Press
Version
Original manuscript
Abstract
© 2018 by The Association of Environmental and Resource Economists. Despite widespread agreement that a carbon tax would be more efficient, many countries use fuel economy standards to reduce transportation-related carbon dioxide emissions. We pair a simple model of the automakers’ profit maximization problem with unusually rich nationally representative data on vehicle registrations to estimate the distributional impact of US fuel economy standards. The key insight from the model is that fuel economy standards impose a constraint on automakers that creates an implicit subsidy for fuel-efficient vehicles and an implicit tax for fuel-inefficient vehicles. Moreover, when these obligations are tradable, permit prices make it possible to quantify the exact magnitude of these implicit subsidies and taxes. We use the model to determine which vehicles are most subsidized and taxed, and we compare the pattern of ownership of these vehicles between high-and low-income census tracts. Finally, we compare these distributional impacts with existing estimates in the literature for a carbon tax.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1086/701187
