NCPA - National Center for Policy Analysis

Higher Fuel Standards Could Increase Congestion

March 8, 2004

A federally mandated increase in corporate average fuel economy (CAFE) standards for cars and light trucks would raise average vehicle prices $228, costing consumers an extra $2.4 billion a year and the auto industry another $1.2 billion, according to Congressional Budget Office (CBO) estimates.

The CBO modeled a hypothetical increase in CAFE standards -- about 31.3 mpg for cars and 24.5 mpg for light trucks -- that it estimated would be needed to reduce fuel consumption by 10 percent. Currently, car makers must ensure their 2005 automobile fleets get 27.5 miles per gallon. Light trucks must average 21 miles per gallon.

According to the CBO:

  • Higher CAFE standards could reduce social welfare by worsening traffic congestion and increasing the number of traffic accidents.
  • Higher CAFE standards would lower the per-mile cost of driving, providing new-vehicle owners with an incentive to drive more.

While the increase in driving associated with higher CAFE standards may be relatively small, the CBO concluded, some studies suggest that the resulting costs of the increased congestion and traffic accidents may nevertheless be large.

The CBO report came just two weeks after the U.S. Department of Transportation's National Highway Traffic Safety Administration (NHTSA) announced plans to restrict the range of mileage options on light trucks and similar vehicles by tying fuel economy standards to vehicle weight. The proposed changes, according to the Wall Street Journal, would represent the biggest regulatory rewrite in the 25-year history of the fuel-economy program.

Source: James M. Taylor, "CBO Hangs Price Tag on Tougher Fuel Economy Standards," Environment and Climate News, February 2004, Heartland Institute.


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