According to the Centre for CLimate and Energy Solutions
http://www.c2es.org/federal/executive/vehicle-standards#undervalue
Consumers don't tend to make the correct decisions with regard to choosing for fuel economy, and need "society" who values economy more to decide for them...
Quote:
Why Consumers Undervalue Fuel Economy
U.S. fuel economy and greenhouse gas standards exist because individual drivers tend to value savings from fuel economy much less than society as a whole, which leads to more oil consumption than would occur if soceital benefits were taken into account. The benefits to society of higher fuel economy include, but are not limited to, reduced impacts on global climate, improved energy security, and overall consumer savings. But those benefits are not top of mind when a consumer buys a car.
In addition, when making purchasing decisions, most people assume a dollar today is worth more than a dollar in the future since the dollar today can be invested and grow in value over time. The value people assign to a dollar in the future compared to a dollar today is known as the discount rate, or the interest rate they would expect on a dollar invested today. For example, a discount rate of 20 percent means consumers assume they will make 20 percent interest annually on money invested today, which is unlikely. Thus, the higher the discount rate a consumer uses, the more likely a consumer is to invest that money instead of spending it on a product. Consumers can exhibit different discount rates depending on the product.
For passenger cars, David Greene from Oak Ridge National Laboratory found that the value consumers place on fuel economy savings varies widely, but empirical research reveals a discount rate between 4 and 40 percent. The discount rate that society put on fuel savings is much closer to 4 percent, meaning consumers often substantially undervalue fuel economy compared to society.
http://www.c2es.org/federal/executive/vehicle-standards#undervalue
Consumers don't tend to make the correct decisions with regard to choosing for fuel economy, and need "society" who values economy more to decide for them...
Quote:
Why Consumers Undervalue Fuel Economy
U.S. fuel economy and greenhouse gas standards exist because individual drivers tend to value savings from fuel economy much less than society as a whole, which leads to more oil consumption than would occur if soceital benefits were taken into account. The benefits to society of higher fuel economy include, but are not limited to, reduced impacts on global climate, improved energy security, and overall consumer savings. But those benefits are not top of mind when a consumer buys a car.
In addition, when making purchasing decisions, most people assume a dollar today is worth more than a dollar in the future since the dollar today can be invested and grow in value over time. The value people assign to a dollar in the future compared to a dollar today is known as the discount rate, or the interest rate they would expect on a dollar invested today. For example, a discount rate of 20 percent means consumers assume they will make 20 percent interest annually on money invested today, which is unlikely. Thus, the higher the discount rate a consumer uses, the more likely a consumer is to invest that money instead of spending it on a product. Consumers can exhibit different discount rates depending on the product.
For passenger cars, David Greene from Oak Ridge National Laboratory found that the value consumers place on fuel economy savings varies widely, but empirical research reveals a discount rate between 4 and 40 percent. The discount rate that society put on fuel savings is much closer to 4 percent, meaning consumers often substantially undervalue fuel economy compared to society.
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