This report organizes and discusses empirical estimates of the effects of fuel prices and fuel
emission standards on consumer and firm behaviour. I touch only briefly on model-free estimates. The
focus is on results based on explicit models, taken mostly from the industrial organization literature.
First, I review studies that identify the willingness to pay for fuel efficiency using static and dynamic
models of vehicle demand. Next, I take explicitly into account that firms will adjust their product
portfolios and the characteristics of the vehicles they offer. These decisions will have an impact on the
choice set from which consumer demand is estimated and on the trade-off that consumers face
between fuel efficiency and other desirable characteristics. Finally, I discuss models where firms
choose to invest in innovations to achieve fuel efficiency gains without sacrificing characteristics.
