Circumventing the Weight-Versus-Footprint Tradeoffs in Vehicle Fuel Economy Regulation

Abstract

China, Japan, and the European Union use weight-based fuel economy standards, whereas the U.S. Department of Transportation has rejected such an approach in favor of footprint-based standards. Can these two approaches be reconciled? Weight-based standards tend to focus regulatory incentives on technology rather than downsizing, but they provide no incentive for weight reduction. Footprint-based standards, by contrast, motivate vehicle manufacturers to reduce weight without reducing footprint, but only to the extent that they are also motivated to increase footprint without increasing weight. Neither approach discriminates between beneficial and detrimental weight-changing strategies. Weight-based standards neutralize incentives for both, while footprint-based standards encourage both. However, the tradeoffs between weight and footprint can be circumvented by employing a weight-based standard, which does not create weight-changing incentives, in combination with complementary regulatory measures that would be focused specifically and exclusively on motivating beneficial weight reduction strategies. This regulatory strategy would preserve the benefits of both weight- and footprint-based standards while avoiding their drawbacks.

Keywords: Fuel economy, weight, footprint

JEL Classification: K32, L50, O38