The ol’ CAFE standards debate is floating around the blogosphere again thanks to new higher rates on the way. Instead of writing anything substantive about it I want to point to an excellent post from Ed Dolan that says pretty much everything that needs to be said on the issue.

For example, he reports on a newer study that shows price elasticities once proclaimed to have fallen are now on their way back up, and in the range -0.4 to -0.8.

His post also nicely presents some externality based arguments against  CAFE standards:

The tendency of more fuel-efficient vehicles to induce additional driving is known as the “rebound effect.”… [T]he rebound effect causes an absolute increase in those externalities that are proportional to miles driven, including road congestion and traffic accidents. It also increases the cost of road maintenance, because the wear and tear from more miles driven is only partly offset by the lower average weight of high-mileage vehicles.

Note that these externalities are ones that in other contexts are frequently (and rightly) appealed to by the same people who argue for CAFE standards.

In addition, Dolan draws our attention to this graph showing how fuel cost is related to consumption across OECD countries:

As he says, there is a convincingly tight relationship between price and quantity… go figure!

For some good analysis of the new fuel economy standards for big rigs I recommend Megan McArdle’s take.

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