Why CAFE worked

The 1975 Energy Policy and Conservation Act established mandatory fuel economy standards for passenger cars and light trucks sold in the US. Since that time the Corporate Average Fuel Economy (CAFE) standards have often been criticized as costly, inefficient, and even unsafe, despite the general absence of direct empirical evidence to support such claims. This paper reviews empirical evidence on the impacts of the CAFE standards and explains why properly designed and executed fuel economy regulations may be preferable to other policies for reducing petroleum dependence and carbon emissions. It appears that the standards substantially achieved their objective of restraining US oil consumption without producing significant negative side-effects because they were set at levels that could be achieved by cost-effective or nearly cost-effective technological innovations.

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