Corporate Average Fuel Economy ( Cafe ) Standards Proposed For Vehicles

1812 Words Jul 20th, 2015 8 Pages
Introduction
Corporate Average Fuel Economy (CAFÉ) standards proposed for vehicles produced between 2017 and 2025 were promulgated through the joint efforts of the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) utilizing regulatory powers granted in their charters allowing them to regulate carbon dioxide emissions from vehicles and other greenhouse gas producing sources. (Nichols, 2012) The essence of the proposal was that by 2025 vehicle manufactures would be offering for sale cars and light trucks that averaged almost 50mpg. This level of fuel economy would result in a projected reduction in national dependencies on almost 4 billion barrels of oil and close to 2 billion tons of greenhouse gases namely carbon dioxide over the life of the new more efficient vehicles. (Nichols, 2012) Cost analysis of the proposal focused on fuel savings to the consumer and moderate environmental benefits offsetting the industries technologic costs of meeting the standards at an overwhelming 4:1 ratio netting over 323 billion dollars of consumer savings over the life of the regulated vehicles.
Economic Analysis
The variables in this analysis include the consumers with their demand for vehicles and their demand elasticity when it comes to both the cost of fuel and the cost of vehicles shaping their demand, the suppliers and their ability to navigate the legislation to maximize their investor returns, the oil producer’s ability to maintain…
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