Economic Analysis of Social Issues 1st Edition by Alan Grant

Exercise 8

[Related to Application 8.1 on page 166] Read Application 8.1 carefully. One widely proclaimed government goal is to encourage the development and mainstream use of alternative-energy vehicles such as hydrogen fuel cell cars and electric cars. Moving toward these alternative fuel sources is viewed as a means to achieving long-term reductions in carbon emissions. Which of the policies discussed in the application-CAFE standards or gasoline taxes is more likely to encourage consumers and producers to develop these alternative energy sources? Why?