Environmental Policy and Vehicle Safety: The Impact of Gasoline Taxes

I. INTRODUCTION Public policy to address the environmental externalities associated with automobile use will likely lead to substantial changes in the composition of the U.S. passenger vehicle fleet. While many economists suggest Pigovian taxation as the best approach to this problem (Anderson et al. 2011), the main policy instrument in the United States has been the Corporate Average Fuel Economy (CAFE) standards, which have recently been dramatically increased (Environmental Protection Agency and Department of Transportation 2012). While most of the improvement in fuel economy will necessarily come from technological improvements, an inexpensive way to improve fuel economy is simply to lower vehicle weights. Indeed, the text of the new regulations states that "we expect manufacturers to reduce vehicle mass" as a compliance strategy (p. 62741). The reduction in vehicle weight that occurred in response to the oil price shocks of the 1970s and the initial CAFE standards was estimated by Crandall and Graham (1989) to substantially increase automobile accident fatalities. The passenger vehicle fleet has changed greatly since 1989, with one of the most notable features being the increase in the prevalence of light trucks, a category that includes minivans, pickup trucks, and sport utility vehicles (SUVs). Several authors have suggested that the external impacts on the safety of occupants of other vehicles may exceed the protective benefit afforded to light truck owners so that the now heavier vehicle fleet might actually be detrimental to overall safety (see especially Gayer 2004, White 2004, and Anderson 2008). The negative safety and environmental externalities associated with vehicle weight could potentially be addressed simultaneously via Pigovian taxation, further strengthening the argument for taxation over fuel economy standards. An important problem that must be addressed in interpreting automobile accident data is to disentangle vehicle fatality rates into a vehicle safety component (treatment effect) and a driver safety component (selection effect). This paper presents a novel model that allows simultaneous estimation of the relationship of vehicle weight with the safety of the "own" vehicle occupants (internal impacts) and that of "other" vehicle occupants (external impacts) conditional upon an accident occurring. These estimates can then be used to estimate the relative riskiness of drivers of different types of vehicles. The model is estimated using maximum likelihood techniques and data from the Fatality Analysis Reporting System (FARS), which includes data on every fatal accident that occurs in the United States, but excludes all non-fatal accidents. The main empirical finding of the paper is that the protective effects of weight on own occupants are diminishing while the destructive external effects on other vehicle occupants are increasing. For marginal vehicle weight changes above approximately 3,800 pounds, the external costs outweigh the internal benefits in two-vehicle crashes. While the protective effect of vehicle weight in single-vehicle crashes partly compensates for this, a substantial fraction of the vehicle fleet is above the weight where net safety costs exceed benefits. The safety externalities associated with these heaviest vehicles substantially exceed the environmental externalities associated with carbon emissions. The nature of the model lends itself to simulating the potential impact of relatively arbitrary changes to the vehicle fleet composition. Simulations of hypothetical changes in the vehicle weight distribution establish that reducing vehicle weight can either increase or decrease automobile accident fatalities, depending upon whether the reductions are concentrated at the lower or higher end of the current weight distribution. Recent empirical changes to the weight distribution of cars sold in the United States are incorporated into the simulation model, which predicts little impact on accident fatalities. …