Corporate Average Fuel Economy, Essay Example

According to the article “Should Corporate Average Fuel Economy (CAFE) Standards Be Tightened? “ CAFE is mandated to reduce the consumption of energy through escalating fuel economy in cars as well as light trucks. The premise of this article is development of analytical model for estimation of the welfare effects that are associated the CAFÉ standards in as far as passenger vehicles are concerned. The author makes use of a wide array of fuel-related and driving-related externalities, diverse assumptions on fuel saving techniques valuation by consumers, taxes associated with fuel and fleet composition. Analysis implementation is based on development of estimates of local pollution attributed to CAFÉ, traffic accidents as well as nationwide congestion. The article attributes achievement of welfare gains and welfare losses to increased fuel economy standards based on the perception of technologies of fuel economy by the consumers as well as opportunity cost (Ian, Carolyn & Winston, 2004).

The advantages of carbon emission reduction, the dependence of the economy on the oil market that is associated with high degrees of volatility and the withdrawal of US from the Kyoto protocol are all linked to tightening the CAFÉ standards. In addition the average economy of fuel that is applicable in passenger vehicles has been on a decline as a result of escalation of light-duty trucks share (Ian, Carolyn & Winston, 2004). I support the article author’s positions because it is crucial to develop as well as implement an effective analytical framework that plays the role of appraising the effects attributed to social welfare and empowering the CAFÉ standards while considering several crucial factors. The factors included carbon emissions, oil dependency, congestion, accidents and local air pollution (Evans, 2004). Imposition of carbon taxes and oil taxes has been considered as cost effective approaches as compared to CAFÉ because they decrease the use of oil as well as carbon emission.

References

Evans, L., (2004). Traffic Safety. Bloomfield Hills, Michigan, United States of America: Science Serving Society

Ian W.H. P., Carolyn, F. & Winston, H, (2004).  Should Corporate Average Fuel Economy (CAFE) Standards Be Tightened?