CAFE: Serving Up A Killing Of A Deal Since 1975

The July 2013 issue (hot off the ether-presses) of American Economic Journal: Applied Economics includes a study by Mark Jacobsen on the safety effects of corporate average fuel economy (CAFE) regulatory standards. (The paper was originally distributed as a National Bureau of Economic Research working paper in April 2012.)

CAFE standards were first introduced by the Energy Policy and Conservation Act of 1975 with the goal of reducing fuel (gasoline) consumption. The standards require auto manufacturers to meet certain fuel economy thresholds in each model year’s sales fleet, with different standards for cars and light-duty trucks and for “domestic” versus imported fleet vehicles. While innovations in engine technology and auto design contribute to fuel economy improvements, auto manufacturers have long achieved the biggest gains by producing smaller, lighter vehicles which are arguably less safe in the event of a collision. In fact, a 2002 National Academy of Sciences report concluded that downsizing related to fuel economy improvements between 1975 and 1993 resulted in roughly 2,000 additional fatalities in 1993, between 13,000 and 16,000 additional debilitating injuries, and between 97,000 and 195,000 total injuries.

Calculating the safety impact of CAFE is a little tricky because the composition of vehicles on the road plays a large role; a small car colliding with another small car has less risk of fatality than a small car colliding with a large car or truck. A significant contribution of Jacobsen’s analysis is that he takes into account both US fleet composition and unobserved driving behavior and vehicle selection (certain kinds of drivers choose certain kinds of vehicles for a reason, and different vehicles have different fatality effects). Continue reading “CAFE: Serving Up A Killing Of A Deal Since 1975”