An analysis of alternative fuel credit provisions of US automotive fuel economy standards

In the United States, alternative fuel vehicles are treated favorably in th e calculations that are used to determine compliance with automotive fuel e fficiency standards. We estimate that this favorable treatment is worth app roximately $550-$1100 per alternative fuel vehicle in terms of avoided pena lties. We use a dynamic simulation model to examine the implications of thi s favorable treatment of alternative fuel vehicles for the goals of oil dis placement contained in the United States Energy Policy Act. Welfare analysi s shows that the favorable treatment of alternative fuel vehicles costs $66 million or about 84 cents per gallon of gasoline displaced in the base cas e. Policy scenarios show greater costs. Whether this money is well spent de pends on one's views of the need to build alternative fuel and vehicle infr astructure anti the goal of oil displacement. (C) 2000 Elsevier Science Ltd . All rights reserved.