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GCC: Study - attribute-based fuel economy standards less effective, more costly than flat standard with credit trading

Posted: Tue May 15, 2018 4:11 pm
by GRA

As the Trump administration weighs how to revise fuel economy standards, a new study by research fellows of the National Bureau of Economic Research (NBER) finds that attribute-based regulations—such as the footprint-based rules in the US—are less effective and more costly than a flat standard with credit trading.

At the heart of US fuel economy standards currently being evaluated by the Trump administration is one attribute: a vehicle’s footprint—measured by the rectangle formed by the four points at which a vehicle’s tires touch the ground.

The attribute-based footprint standard is used to sort vehicles into bins with different compliance targets, with larger vehicles facing more modest requirements. Some have argued that this system incentivizes automakers to produce bigger vehicles, but there has been little concrete evidence to support this beyond a general trend toward light trucks and SUVs—until now.

The new study, published in The Review of Economics and Statistics, evaluates attribute-based regulations, looking specifically at the weight-based standards used in Japan. The study finds that the standards did indeed incentivize automakers to increase the weight of their vehicles. And while the weight-based standards are more efficient than a flat standard alone, they are twice as costly as a flat standard accompanied by credit trading. . . .