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The Energy Paradox and the Future of Fuel Economy Regulation

Are the benefits of raising the fuel efficiency of America’s auto fleet greater than the costs? The answer may depend on whether or not there is an energy paradox.

The failure of the private market to take certain actions, which appear to be in their own private interest, is referred to as an “energy efciency paradox” and some believe that an energy paradox exists when it comes to fuel economy.

Whether or not an energy paradox exists in the market for fuel economy is the subject of considerable debate. This paper discusses the importance of this debate to the evaluation of fuel economy regulations, to describe the state of knowledge in the research community, and highlight research needs that could aid policy decisions going forward.