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GOAL!

References

Fischer, C., Hoffmann, S. & Yoshino, Y. (2002). Multilateral Trade Agreements and Market-Based Environmental Policies. Resources for the Future. Retrieved from http://rff.org/RFF/Documents/RFF-DP-02-28.pdf

Goldberg, P. (1996). The Effects of the Corporate Average Fuel Efficiency Standards. National Bureau of Economic Research. Retrieved from http://www.nber.org/papers/w5673.pdf

National Highway Traffic Safety Administration(NHTSA). (n.d.). CAFE - Fuel Economy. Retrieved from http://www.nhtsa.gov/fuel-economy

Perry, M. (2014). EPA Rule Hobbles Economy, Hurts Consumer Choice. American Enterprise Institute. Retrieved from http://www.aei.org/article/energy-and-the-environment/epa-rule-hobbles-economy-hurts-consumer-choice/

Thank You!

Questions?

CAFE-Non Tariff Trade Barrier

In the 1990's, European automakers lodged a dispute with the World Trade Organization (WTO), claiming that CAFE disproportionately effected them, since they usually imported only large, luxury brand automobiles that were not CAFE compliant.

The WTO agreed that European automakers were being disproportionately effected, but also said that, in this case, the environmental aims of the regulation outweighed the trade problems it was causing.

US Corporate Average Fuel Economy (CAFE)

CAFE also increases the cost of cars, and the price increase will become more dramatic over time

Chevy Cruze 33.4 '12MPG 56 '25MPG

60% increase in fuel efficiency in only 13 years!

In order to meet this standard, automakers estimate the additional cost to consumers to be between $1,800 and $3,000 per vehicle, and some estimates range as high as $12,000 per vehicle

So, how is CAFE creating a Non-Tariff Trade Barrier? (NTB)

Due to these fuel efficiency requirements, automakers must make different versions of the same automobile for different markets

CAFE Standards: Examples

Compact Car '12 MPG '25 MPG Goal

Chevy Cruze 33.4 56

Midsize Car

Toyota Camry 32.3 53.8

Large Truck

Ford F-150 22.3 30.2

Group Two

CAFE- History and Purpose

- Law enacted by Congress in 1975

- Purpose is to reduce energy consumption by increasing the fuel economy of cars and light trucks

- Fuel economy standards are set using a complex mathematical formula taking into account vehicle type and size (weight)

- Failure to comply with standards results in fines for manufacturers

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