Econ 131 lecture 12

Econ 131 lecture 12 - Schedule Today Finish transportation...

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Schedule To d ay Finish transportation policy examples Thursday: Sustainability and Limits to Growth Read Chapter 11 in Keohane and Olmstead TA session Wednesday (problem set 4): 6:30pm in Warren Lecture Hall 2005 Review from Last Class Global patterns in new car sales, highway building Externalities from gasoline use (pollution, congestion and accidents, national security/recessions) Gasoline taxes (as an ef±cient Pigouvian tax) High in other countries Not in the U.S. (politics, incidence across income groups)
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Alternatives to a Gas Tax? Standards or subsidies to incentivize high-MPG cars The U.S. has used a fuel economy standard for 40 years, and is increasing it dramatically: Current fuel economy is 25 MPG (Feet average) 2016 => 35 MPG required 2025 => 56 MPG required “MPG Illusion” Which saves more gasoline (assume the vehicles are driven the same amount per year): Improving the Prius from 45 to 55 MPG Improving the Tundra from 15 to 16 MPG
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Corporate Average Fuel Economy (CAFE) Standards Each corporation (i.e. car companies) must meet an average standard for their car and truck ±eets 2010 cars: Had to average 27.5 miles-per-gallon (MPG) 2010 trucks/SUV’s: Had to average 23.1 MPG The car standard was ²xed at 27.5 MPG for 20 model years (1990-2009) The truck/SUV standard has increased slowly by about 2 MPG over the same period CAFE Incentives: Three Types of Firms 1. Constrained: Ford, GM, Chrysler -- expend effort to comply 2. Unconstrained: Honda, Toyota, etc. -- sell so many ef²cient cars already the regulation doesn’t affect them 3. Violating: BMW, Mercedes, etc. -- sell high-priced cars and so don’t mind paying the ²ne for violations (about $300 of the typical BMW’s price)
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CAFE Incentives Four main ways to comply for Ford and GM: Improve technology Make fewer large cars and more small cars Make more trucks/SUV’s and fewer cars (since
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This note was uploaded on 01/30/2012 for the course ECON 131 taught by Professor Groves during the Spring '09 term at UCSD.

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Econ 131 lecture 12 - Schedule Today Finish transportation...

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