Fuel Economy Regulations and Efficiency Technology Improvements in U . S . Cars Since 1975

Light-duty vehicles account for 43% of petroleum consumption and 23% of greenhouse gas emissions in the United States. Corporate Average Fuel Economy (CAFE) standards are the primary policy tool addressing petroleum consumption in the U.S., and are set to tighten substantially through 2025. In this dissertation, I address several interconnected questions on the technical, policy, and market aspects of fuel consumption reduction. I begin by quantifying historic improvements in fuel efficiency technologies since the 1970s. First, I develop a linear regression model of acceleration performance conditional on power, weight, powertrain, and body characteristics, showing that vehicles today accelerate 20-30% faster than vehicles with similar specifications in the 1970s. Second, I find that growing use of alternative materials and a switch to more weight-efficient vehicle architectures since 1975 have cut the weight of today’s new cars by approximately 790 kg (46%). Integrating these results with model-level specification data, I estimate that the average fuel economy of new cars could have tripled from 1975–2009, if not for changes in performance, size, and features over this period. The pace of improvements was not uniform, averaging 5% annually from 1975–1990, but only 2% annually since then. I conclude that the 2025 standards can be met through improvements in efficiency technology, if we can return to 1980s rates of improvement, and growth in acceleration performance and feature content is curtailed. I next test the hypotheses that higher fuel prices and more stringent CAFE standards cause automotive firms to deploy efficiency technologies more rapidly. I find some evidence that higher fuel prices cause more rapid changes in technology, but little to no evidence that tighter CAFE standards increase rates of technology change. I conclude that standards alone, without continued high gasoline prices, may not drive technology improvements at rates needed to meet the 2025 CAFE standards. Finally, I discuss the political economy of state and federal fuel economy standards. I develop a simple model of automotive manufacturers’ responses to alternative systems of fuel economy regulation, using it to demonstrate the importance of several