By Camille von Kaenel

Most agree American vehicles are getting bigger, undermining overall improvements in mileage. That could be partly due to the fuel economy requirements themselves.

It’s important to understand the forces shaping the size of vehicles because it’s a key factor in the Trump administration’s review of the clean car rules. Automakers have argued that people are buying heavier, larger and more gas-guzzling vehicles because of cheap gas prices and changing consumer preferences. They say that makes it difficult to meet the ambitious targets projected by the Obama administration, and they want relief from Trump.

But a new analysis suggests that there may be an additional reason behind the trend: The design of the rules actually encourages manufacturers to make larger vehicles. The Review of Economics and Statistics published the study by Koichiro Ito of the University of Chicago and James Sallee of the University of California, Berkeley, this month.

The study found that the design of fuel economy rules in Japan incentivized manufacturers to build larger vehicles to get away with lower fuel economy increases at lower cost.

That lends credence to the argument of some that consumer trends aren’t the only forces shaping the American market.

Continue Reading at E&E News…

Areas of Focus: Energy Markets
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Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Transportation
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Transportation
Mobility is central to economic activity. Yet, a lack of fuel diversity and continued demand growth have made the transportation industry a major contributor to global pollution and carbon emissions....
Climate Law & Policy
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Climate Law & Policy
As countries around the world implement policies to confront climate change, EPIC research is calculating which policies will have the most impact for the least cost.
Fuel Economy Standards
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Fuel Economy Standards
Fuel economy standards are the United States’ cornerstone transportation policy aimed at reducing both oil consumption and greenhouse gas emissions. EPIC research is exploring whether these standards are structured optimally...