Fuel Efficiency and the Economy
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Abstract:
One result of the 1973 oil embargo was the Energy Policy and
Conservation Act of 1975, which established corporate-average fuel
economy (CAFE) standards for vehicles sold in the United States. As
a result of this law, the fuel efficiency of a typical car rose from
roughly 15 miles per gallon to about 28 miles per gallon in little
more than a decade. Although technology continued to improve, since
the late 1980s automakers have chosen to increase vehicle weight and
improve performance, letting the fuel efficiency of their vehicles
remain static. Still, average fuel efficiency has slowly declined
over the past 15 years, because manufacturers and consumers have
grown increasingly fond of light trucks, which are treated more
leniently under the law. Imposing stricter fuel-efficiency standards
would certainly help combat America’s dependency on foreign
oil, but would it cost jobs, as many automakers contend? The
authors' economic modeling suggests that tougher standards would, in
fact, give the economy a boost.