Abstract (joint with ChrisKnittel)
Despite widespread agreement that a carbon tax
would be more efficient, many countries use fuel economy standards to reduce
transportation-related carbon dioxide emissions. We pair a simple model of the
automobile manufacturers’ profit maximization problem with unusually-rich
nationally representative data on vehicle registrations to estimate the
distributional impact of U.S. fuel economy standards. The key insight from our
model is that fuel economy standards impose a constraint on manufacturers which
creates an implicit subsidy for fuel-efficient vehicles and an implicit tax for
fuel-inefficient vehicles. Moreover, when these obligations are tradable,
permit prices make it possible to quantify the exact magnitude of these
implicit subsidies and taxes. We use our model to determine which U.S. vehicles
have been most subsidized and taxed since 2012, and we compare the pattern of
ownership of these vehicles between high- and low-income Census blocks.
Finally, we compare these distributional impacts with existing estimates in the
literature on the distributional impact of a carbon tax.Short Bio:Lucas Davis is an Associate Professor at the Haas School of Business and Faculty Director at the Energy Institute at Haas. Prior to joining Haas in 2009, he was an Assistant Professor of Economics at the University of Michigan. His research focuses on energy and environmental markets, and in particular, on electricity and natural gas regulation, pricing in competitive and non-competitive markets, and the economic and business impacts of environmental policy. His work appears in leading academic journals including the American Economic Review, the RAND Journal of Economics, and the Journal of Political Economy.