Achieving Vehicle Fuel Efficiency: The CAFE Standards and Beyond

As a series of political objectives converge and call for enhanced domestic automobile fuel efficiency, it is time to reassess the United States Corporate Average Fuel Economy (CAFE) standards and compare future options for limiting gasoline consumption. Unlike the situation in 1975 when CAFE standards were first imposed to limit America’s oil dependence, now the greatest motive is to curb greenhouse gas emissions. Because climate change is necessarily a global issue, the developing world must work with the United States to enhance automobile fuel efficiency as part of a greater effort to promote sustainable development. This paper uses China to demonstrate the challenges faced by developing countries and also studies the particular opportunities China represents as the world’s fastest growing automobile market. The paper concludes with four main recommendations for the United States and China: rework minimum fuel efficiency standards, raise the gasoline tax, implement a feebate system and create a binding bilateral agreement between the United States and China to achieve these policies. Ben Steiner Professor Denise L. Mauzerall May 10, 2006 Achieving Vehicle Fuel Efficiency: The CAFE Standards and Beyond