Changes in corporate average fuel economy (CAFE) standards have not been made due, in part, to concerns over their negative impact on the economy and jobs. This paper simulates the effects of enhanced CAFE standards through 2030 and finds that such changes could increase GDP and create 300,000 jobs distributed widely across states, industries, and occupations. In addition, enhanced CAFE standards could, each year, reduce US oil consumption by 30 billion gallons, save drivers $40 billion, and reduce US greenhouse gas emissions by 100 million tons. However, there is no free lunch. There would be widespread job displacement within many industries, occupations, and states, and increased CAFE standards require that fuel economy be given priority over other vehicle improvements, increase the purchase price of vehicles, require manufacturers to produce vehicles that they otherwise would not, and require consumers to purchase vehicles that would not exist except for CAFE. (C) 2003 Elsevier Ltd. All rights reserved.