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Unformatted text preview: Separate standard for cars and light trucks. Current standard for cars: 26.5 mpg. 21 CAFE Standard have greatly improved fuel efficiency of cars and trucks. 23 CAFE standards complement gas tax: Gas tax mostly reduces driving. CAFE standards mostly raise fuel efficiency. 26 Gas consumption still seems to be above the socially optimal level. Many fuel-efficiency technologies exist that are cost-effective to put into vehicles. Political constraints: It seems that raising the gas tax or the CAFE standards is politically infeasible. 30 New Concept: Feebates Fees on vehicles with low fuel efficiency. Rebates on vehicles with high fuel efficiency. Example: 20 mpg gets$600 fee 25 mpg gets$100 fee 28 mpg gets$100 rebate 38 mpg gets$600 rebate 33 Advantages: Revenue neutral: not a new tax. Market approach Manufacturers and consumers share burden...
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