Would Increases in CAFE Standards or the Gasoline Tax Produce Benefits That Outweighed Their Costs?
Increasing CAFE standards or the gasoline tax would impose costs on both producers and consumers of vehicles and gasoline–direct costs that are estimated by CBO’s modeling. Would those costs be justified by the accompanying benefits? Unless current estimates of the benefits of reducing gasoline consumption are significantly understated, increasing CAFE standards would not pass a benefit-cost test.(5) Already, the existing tax on gasoline provides consumers with a more than adequate incentive to take those benefits into account when choosing how fuel efficient a vehicle to purchase. Increasing CAFE standards would force manufacturers to increase fuel efficiency at a cost that exceeded the benefits. In contrast, increasing the gasoline tax might pass a benefit-cost test if the test included benefits in addition to those associated with reducing gasoline consumption (for instance, the benefits arising from reduced traffic congestion or fewer accidents). Estimating the value of those addi
