Fuel economy standards for new light-duty passenger vehicles have recently been adopted or tightened in many nations. Using a global computable general equilibrium (CGE) model, we analyse the combined effect of existing and accelerated national and regional fuel economy standards on demand for petroleum-based fuels, CO2 emissions, and economic cost, and compare the results to a carbon pricing scenario with identical emissions reductions. We find that fuel economy standards are less cost-effective than a carbon price, with year-on-year consumption loss rising to 10 per cent of global GDP in 2050 under fuel economy standards, compared with 6 per cent under carbon pricing.

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