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Abstract

The Cafe Standards were introduced in 1975 following the Oil Embargo. The goals of this program were simple. To reduce co2 emissions in vehicles by increasing a mandatory average mpg level for car manufacturers in the United States. Recently, in 2012, the Obama Administration set new Cafe Standard requirements for car manufacturers. By 2025, all new cars on the road in the United States must average 54.5 miles per gallon, which would double the current 27 mpg average in place right now. While the intentions of this policy are to reduce co2 emissions while at the same time increasing savings from increased mile per gallon efficiency. However, a Fuel Tax could potentially achieve this same outcome and avoid several risky costs associated with the Cafe Standards. The overall goal of this paper is to perform a Cost-Benefit Analysis of both these policies and determine which policy will be more efficient and cost-effective, while at the same time reducing co2 emissions greatly.

 

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