Working Paper: NBER ID: w17724
Authors: Christopher R. Knittel
Abstract: The United States consumed more petroleum-based liquid fuel per capita than any other OECD-high-income country - 30 percent more than the second-highest country (Canada) and 40 percent more than the third-highest (Luxemburg). This paper examines the main channels through which reductions in U.S. oil consumption might take place: (a) increased fuel economy of existing vehicles, (b) increased use of non-petroleum-based low-carbon fuels, (c) alternatives to the internal combustion engine, and (d) reduced vehicles miles travelled. I then discuss how the policies for reducing petroleum consumption used in the US compare with the standard economics prescription for using a Pigouvian tax to deal with externalities. Taking into account that energy taxes are a political hot button in the United States, and also considering some evidence that consumers may not correctly value fuel economy, I offer some thoughts about the margins on which policy aimed at reducing petroleum consumption would have the largest impact on economic efficiency.
Keywords: No keywords provided
JEL Codes: H2; H5; L0; L4; L5; L9; Q1; Q2; Q3; Q4; Q5; R4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increasing the fuel economy of existing vehicles (R48) | reducing oil consumption (Q38) |
| adoption of non-petroleum-based fuels (Q42) | decrease in petroleum dependency (Q38) |
| CAFE standards (J80) | increased vehicle miles traveled (R48) |
| biofuels and alternative fuels (Q42) | complex net impact on greenhouse gas emissions (F64) |