Two New Reports and a Blog on Vehicle Issues

WASHINGTON, DC—Resources for the Future (RFF) today posted two new studies and a blog that take up pertinent issues affecting vehicles and energy.

The first study is Pass-Through and Welfare Effects of Regulations That Affect Product Attributes. Its authors are Benjamin Leard (RFF), Joshua Linn (RFF and University of Maryland), and Katalin Springel (Georgetown University). The Trump administration's proposal to weaken US fuel economy and greenhouse gas (GHG) standards is motivated partly out of concern about claims by vehicle manufacturers that they cannot fully pass through cost increases to consumers, and that tighter standards reduce their profits. In this paper, the authors show that high-income consumers value fuel economy improvements more than do low-income consumers. High-income consumers tend to benefit more from the standards, as do manufacturers that sell vehicles to those consumers. The results suggest that regulatory agencies should account for these effects when evaluating their standards.

Also posting today is a new blog: How Do Fuel Economy Standards Affect Consumer Welfare and Manufacturer Profits? The authors are Leard, Linn, and Springel. In the next few months, the National Highway Traffic and Safety Administration and the Environmental Protection Agency may finalize a rollback of the Corporate Average Fuel Economy (CAFE) and GHG standards for light-duty vehicles. The two agencies recently published a preliminary regulatory impact analysis (PRIA) of the rollback proposal, the results of which found that the rollback increases social welfare. A recent study, however, highlights several problems with the PRIA, including severe modeling flaws that undermine the integrity of the results . . . In this RFF working paper, the authors present a new analysis of the standards, which incorporates some of these features, and we use it to analyze changes to CAFE and GHG standards.

Finally, the study What Does An Electric Vehicle Replace? posted earlier this month. The authors are Leard, Jianwei Xing (Peking University), and Shanjun Li (Cornell University). In this paper, the authors evaluate the emissions reductions from electric vehicles (EVs) by identifying which vehicles would have been purchased had EVs not been available. Their results suggest that vehicles that EVs replace are relatively fuel-efficient. They also find that about 70 percent of the state and federal credits were obtained by households that would have bought an EV without the credits. By simulating alternative subsidy designs, the authors find that a subsidy designed to provide greater incentives to low-income households would have been more cost-effective and less regressive.