LAUSR

U.S.Environmental Protection Agency (EPA) set the nationwide emission standard policy, but each state in the U.S. has an option to follow the higher emission standard policy set by CARB (California Air Resources Board) in 2004. There are 14 “CARB states” that follow California’s more restrictive standards. The purpose of this paper is to examine the impact of CARB’s tailpipe emission standard policy. Using the panel dataset for 49 U.S. states over a 28-year study period (1987–2015), this paper found the long-term policy effect in reducing CO2 emission from CARB’s tailpipe standard, and its long-run effect is 5.4 times higher than the short-run effect. The equivalent policy effect of the CARB emission standard in CO2 reduction can be achieved by raising gasoline price by 145.43%. Also, if 26.0% of petroleum consumed for transportation is substituted by alternative clean fuels (natural gas or electricity), it will have a comparable policy effect in CO2 reduction. Findings in this study support to continue the collaborative efforts among the EPA, National Highway Traffic Safety Administration (NHTSA), and California in order to achieve the CO2 reduction goal set by CARB and adopted by the EPA in 2012. The packaged policy approach rooted in persistent public and political support is necessary for successful policy implementation.