Concerns over national security, environmental stresses, and high
fuel prices have raised interest in reducing oil consumption.
Through the Corporate Average Fuel Economy (CAFE) program, the
National Highway Traffic Safety Administration (NHTSA) requires
cars and light trucks to meet certain fuel economy standards. As
requested, the author discusses (1) how CAFE standards are designed
to reduce fuel consumption, (2) strengths and weaknesses of the
CAFE program and NHTSA's capabilities, and (3) market-based
policies that could complement or replace CAFE. This is an
excerpted and edited version.
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