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44 Harv. Envtl. L. Rev. 1 (2020)

handle is hein.journals/helr44 and id is 1 raw text is: 














                             FUEL ECONOMY 2.0


                 Michael   Greenstone,  Cass  R. Sunstein   &  Sam   Ori*

         Motor  vehicle fuel-economy standards have long been a cornerstone of U.S. policy to
     reduce fuel consumption in the light-duty vehicle fleet. In 2010 and 2012, these standards
     were significantly expanded in an effort to achieve steep reductions in oil demand and green-
     house gas (GHG) emissions through 2025. In 2018, following a review of the standards, the
     Environmental Protection Agency and National Highway Traffic Safety Administration pro-
     posed instead to freeze the standards at 2020 levels, citing high program costs (and potential
     safety issues).
         The current debate over the future of U.S. fuel economy standards provides an opportu-
     nity to consider whether the existing approach could be improved to achieve environmental
     and other goals at a lower cost. The current policy prescribes standards that focus on fuel
     economy alone, as opposed to lfetime consumption, and treats vehicle categories df'rentially,
     meaning that it imposes unnecessarily high costs and does not deliver guaranteed GHG
     savings.
         On  the basis of a commitment to cost-benefit analysis, which has defined U.S. regulatory
    policy for more than thirty years, we propose novel reforms with three main features: (1) the
    direct regulation of expected fuel consumption and GHG emissions without consideration of
    the type or size of the vehicle; (2) use of existing data to assign lfetime fuel consumption and
    GHG emissions   to each model; and (3) creation of a robust cap-and-trade market for
    automakers to reduce compliance costs. We show that these reforms would reduce fuel consump-
    tion and GHG  emissions in transportation with greater certainty and do so at afar lower cost
    per ton of GHG   emissions avoided. We also show that the the Environmental Protection
    Agency and the Department of Transportation could implement such an approach within their
    existing statutory authority.


                                TABLE OF CONTENTS


Introduction  .......................................................                    2
I.    Fuel  Economy Regulation: Form       and  Function   ...................           8
      A.   A  Critique  of the National   Program   .........................           11
            1.   The National   Program Regulates Fuel Economy, Not
                 Consumption or Emissions .............................                 12
           2.    The National   Program Has Structural Loopholes .......... .           14
                a.    Credits and  Bonuses  ...............................             14
                b.   Dual   Treatment   for Cars  and  Light   Trucks  .......... .     16
                c.   Footprint-Based Standards .........................                18
           3.    The National   Program Misses Opportunities to Reduce
                 Compliance   Costs  .....................................              19
       B.  Lack   of Guaranteed   Improvements ..........................              21
            1.   The Fleet  ............................................               21


*    The  authors thank  Cody Westphal,  Andrew   Heinrich, Harshil Sahai, Patrick Schwarz,
     Robin  Smith, Catherine Che, and Nathan  Bishop for excellent research assistance. We are
     also grateful to Ron Minsk, Pete Ogden, and Kate Whitefoot  for their helpful comments.
     An  earlier version of this Article was prepared as a working paper for the Hamilton Project,
     to which we  are grateful for comments and financial support.

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