The Alternative Motor Fuels Act, alternative-fuel vehicles, and greenhouse gas emissions

The corporate average fuel economy (CAFE) standard is the major policy tool to improve the fleet average miles per gallon of automobile manufacturers in the US. The Alternative Motor Fuels Act (AMFA) provides special treatment in calculating the fuel economy of alternative-fuel vehicles to give manufacturers CAFE incentives to produce more alternative-fuel vehicles. AMFA has as its goals an increase in the production of alternative-fuel vehicles and a decrease in gasoline consumption and greenhouse gas emissions. This paper examines theoretically the effects of the program set up under AMFA. It finds that, under some conditions, this program may actually increase the production of fuel-inefficient gasoline vehicles, gasoline consumption and greenhouse gas emissions.