Compliance by Design: Influence of Acceleration Trade-offs on CO2 Emissions and Costs of Fuel Economy and Greenhouse Gas Regulations

The ability of automakers to improve the fuel economy of vehicles using engineering design modifications that compromise other performance attributes, such as acceleration, is not currently considered when setting fuel economy and greenhouse-gas emission standards for passenger cars and light trucks. We examine the role of these design tradeoffs by simulating automaker responses to recently reformed vehicle standards with and without the ability to adjust acceleration performance. Results indicate that acceleration tradeoffs can be important in two respects: (1) they can reduce the compliance costs of the standards, and (2) they can significantly reduce emissions associated with a particular level of the standards by mitigating incentives to shift sales toward larger vehicles and light trucks relative to passenger cars. We contrast simulation-based results with observed changes in vehicle attributes under the reformed standards. We find evidence that is consistent with firms using acceleration tradeoffs t...