CAFE in the City – A Spatial Analysis of Fuel Economy Standards

Waldemar Marz and Frank Goetzke

No 292, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: Climate policy instruments in the transportation sector like fuel economy standards (CAFE) and fuel taxes not only affect households’ vehicle choice, but also the urban form in the long run. We introduce household level vehicle choice into the urban economic monocentric city model and run long-term climate policy scenarios to analyze the welfare effects of this urban adjustment in reaching emission goals. This goes beyond more short-term empirical analyses of the rebound effect in driving. We find that stricter CAFE standards lead to an urban expansion and considerable additional welfare costs for certain emission goals, unaccounted for in the previous literature on welfare costs of CAFE. These welfare costs can be reduced roughly by one half through the combination of CAFE with an urban growth boundary. Fuel taxes, in turn, lead to an urban contraction and additional welfare gains. We analyze the sensitivity of the results to changes in model parameters.

JEL-codes: H23 L90 Q48 R40 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg, nep-tre and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: CAFE in the city — A spatial analysis of fuel economy standards (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ifowps:_292

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