Fuel Taxes vs Fuel Economy: Are Stricter Fuel Economy Standards a Good Idea?
According to news reports, the Obama administration is talking to automakers about raising the Corporate Average Fuel Economy standard for passenger cars to 56.2 miles per gallon by 2025, more than double the 27.5 MPG in force for the 20 years up to 2010. Economists, even those like myself who favor policies to reduce fuel use, have argued that CAFE standards are a bad idea. Has anything changed to make stricter fuel economy standards look better now than in the past?
The fundamental problem with CAFE standards is that they attack the negative externalities of motor fuel use (pollution, national security