IMPACT OF MANDATORY FUEL ECONOMY STANDARDS ON FUTURE AUTOMOBILE SALES AND FUEL USE

This paper provides a basis for projecting and evaluating the impact of mandatory fuel-economy standards and gasoline taxes on automobile sales nad fuel consumption. The analytical procedures are based on explicit estimates of the cost to improve the technical efficiency of new automobiles and a behavioral model of consumer choice of automobile by market class. Alternative policies are evaluated in terms of their impacts on fuel consumption, sales-weighted fuel economy, automobile sales, scrappage of vehicles, fleet composition, and vehicle kilometers of travel. Increases in gasoline prices were found to have considerable potential for reducing automotive fuel consumption but only at the exspense of creating equally sizable reductions in vehicle kilometers of travel and in the number of automobiles sold. Fuel-economy standards, such as those contained in the Energy Policy and Conservation Act of 1975, also appear to have a significant beneficial effect on fuel consumption but relatively little impact on automobile sales and travel. Early indications suggest, however, that the standards incorporated in the existing legislation may be unattainable and that revisions in both the standards and the penalty structure might produce better results. /Author/