Driving a vehicle produces several negative externalities, or costs that drivers impose on others. They include things such as traffic congestion, air pollution, traffic accidents and even geopolitical risks from foreign oil dependence. Figuring out the precise costs of these externalities is difficult, but researchers have generated estimates. These should be taken into consideration when assessing the overall effectiveness of CAFE standards.
The National Research Council estimates that environmental and oil dependence externalities — costs associated with carbon dioxide emissions, oil refinery pollution and geopolitical risks from oil dependence — amount to 26 cents per gallon of gasoline.[73] Adjusted for inflation, Mark Jacobsen has a similar estimate: 33 cents per gallon in 2014 dollars.[74] Resources for the Future economists Ian Parry, Margaret Walls and Winston Harrington estimate the externality associated with traffic accidents to be 3 cents per mile, or 63 cents per gallon of gasoline. This is not due to accidents resulting from CAFE standards influencing vehicle size — that is discussed in the next subsection.[75] This is instead the cost of accidents that result from each additional mile of driving. The authors estimate congestion externalities to be 5 cents per mile, or $1.05 per gallon of gasoline. Of course, the size of this latter externality depends on where the driving takes place. Congestion externalities might be higher in major cities and close to zero in rural areas. In sum, Parry, Walls and Harrington estimate all the externalities collectively to be 10 cents per mile, or $2.10 per gallon of gasoline.[76]
As the discussion of the rebound effect explained, by forcing new vehicles to be more fuel-efficient and reducing the cost to drive a mile, CAFE standards create incentives for Americans to drive more. This means that the standards increase the impact of these negative externalities through the rebound effect. This reduces the net benefit of the program. Andrew Kliet estimates that the CAFE standards program causes a $2.24 billion increase in the negative externalities associated with driving.[77] Paul Portney, Howard Gruenspecht and Winston Harrington estimate that the increased accidents and congestion stemming from the rebound effect offset 95% of the benefits of the CAFE standards program.[78] These estimates call into question whether the net impact of the program is positive or negative.