Autonomous vehicle (AV) technology offers the possibility of fundamentally changing transportation. Equipping cars and light vehicles with this technology will likely reduce crashes, energy consumption, and pollution—and reduce the costs of congestion.


Autonomous vehicle (AV) technology offers the possibility of fundamentally changing transportation. Equipping cars and light vehicles with this technology will likely reduce crashes, energy consumption, and pollution—and reduce the costs of congestion.

The technology that supports the operation of an autonomous vehicle is complex and multi-faceted. Simply put, fully autonomous vehicles process map and sensor information in order to ascertain their specific location, and then apply that information (using predictive software) to determine their course.

This technology is most easily conceptualized using a five-part continuum suggested by the National Highway Traffic Safety Administration (NHTSA), with different benefits of the technology realized at different levels of automation:

Level 0: The human driver is in complete control of all functions of the car.

No automation: The driver has complete control of the vehicle’s main controls (brakes, steering, throttle, and motive power) at all times and is solely responsible for monitoring the roadway and for safe operation of all vehicle controls.Vehicles that have certain driver support/convenience systems, but do not have control authority over steering, braking, or throttle are still considered “level 0” vehicles.

Level 1: One function is automated.

Function-specific automation: Automates one or more specific control functions; if multiple functions are automated, they operate independently from each other. Essentially, the driver has overall control and is solely responsible for safe operation – but he or she can choose to hand over limited authority of a primary control (as in adaptive cruise control); the vehicle can automatically take limited authority over a primary control (as in electronic stability control); or the automated system can provide added control to help the driver in certain normal driving situations or situations where a crash is likely (e.g., dynamic brake support in emergencies).

Level 2: More than one function is automated at the same time (e.g., steering and acceleration), but the driver must remain constantly attentive

Combined-function automation: Automates at least two primary control functions designed to work together (such as adaptive cruise control and lane centering). These vehicles can share authority when the driver hands over primary control in certain limited driving situations. The driver is still responsible for monitoring the roadway and safely operating the vehicle at all times and on short notice.

Level 3: The driving functions are sufficiently automated that the driver can safely engage in other activities.

Limited self-driving automation: The driver gives up full control of all safety functions under certain traffic or environmental conditions and the vehicle lets the driver know when to take back control. The driver is available for occasional control.

Level 4: The car can drive itself without a human driver.

Full self-driving automation: By design, the vehicle itself safely drives and monitors roadway conditions for an entire trip.The driver provides destination or navigation input, but does not control the vehicle at any time during the trip, for both occupied and unoccupied vehicles.

Careful policymaking will be necessary to maximize the social benefits that this technology will enable, while minimizing the disadvantages.Yet policymakers are only beginning to think about the challenges and opportunities this technology poses. The goal of this report is to assist policymakers at the state and federal levels to make wise policy decisions in this rapidly evolving area.

Promise and Perils of Autonomous Vehicle Technology

AV technology has the potential to substantially affect safety, congestion, energy use, and, ultimately, land use.

Conventional driving imposes not only costs borne by the driver (e.g., fuel, depreciation, insurance), but also substantial external costs, or “negative externalities,” on other people. For example, every additional driver increases congestion for all other drivers and increases the chance that another driver will have an accident. These externalities have been estimated at approximately 13 cents per mile. If a hypothetical driver drives 10,000 miles, she imposes $1,300 worth of costs on others, in addition to the costs she bears herself. AV technology has the potential to substantially reduce both the costs borne by the driver and these negative externalities, as we discuss below.

Effect on Crashes

While the frequency of crashes has been gradually declining in the United States, such incidents remain a major public health problem. There were more than 5.3 million automobile crashes in the United States in 2011, resulting in more than 2.2 million injuries and 32,000 fatalities, as well as billions of dollars in private and social costs. Worldwide, the figures are much higher.

AV technology can dramatically reduce the frequency of crashes. The Insurance Institute for Highway Safety (IIHS) estimated that if all vehicles had forward collision and lane departure warning systems, sideview (blind spot) assist, and adaptive headlights, nearly a third of crashes and fatalities could be prevented (IIHS, 2010). Automatic braking when the car detects an obstacle will also likely reduce a significant number of rear-end collisions. Technologies that permit the car to be primarily responsible for driving (Level 4) will likely further reduce crash statistics because driver error is responsible for a large proportion of crashes. This is particularly true given that 39 percent of the crash fatalities in 2011 involved alcohol use by one of the drivers. The overall social welfare benefits of vehicles that crash less frequently are significant, both for the United States and globally, and many of these benefits will go to those other purchasers of the autonomous vehicles.

Effect on Mobility

AV technology will also increase mobility for those who are currently unable or unwilling to drive. Level 4 AV technology, when the vehicle does not require a human driver, would enable transportation for the blind, disabled, or those too young to drive. The benefits for these groups would include independence, reduction in social isolation, and access to essential services. Some of these services are currently provided by mass transit or paratransit agencies, but each of these alternatives has significant disadvantages. Mass transit generally requires fixed routes that may not serve people where they live and work. Paratransit services are expensive because they require a trained, salaried, human driver. Since these costs are generally borne by taxpayers, substituting less expensive AVs for paratransit services has the potential to improve social welfare.

Effect on Traffic Congestion and Its Costs

AV technology of Level 3 or higher is likely to substantially reduce the cost of congestion, since occupants of vehicles could undertake other activities. These reductions to the costs of congestion will benefit individual AV operators. On the other hand, reductions or increases in congestion itself are externalities that will affect all road users. A decreased cost of driving may lead to an increase in overall vehicle miles traveled (VMT), potentially increasing actual congestion, but the technology can also enable increased throughput on roads because of more-efficient vehicle operation and reduced delays from crashes. Thus, the overall effect of AV technology on congestion is uncertain.

Land Use

As already noted, AV technology of Level 3 or above will likely decrease the cost of time in a car because the driver will be able to engage in alternative activities. Another effect of this may be to increase commuter willingness to travel longer distances to and from work. This might cause people to locate further from the urban core. Just as the rise of the automobile led to the emergence of suburbs and exurbs, so the introduction of AVs could lead to more dispersed and low-density patterns of land use surrounding metropolitan regions.

In metropolitan areas, however, it may lead to increased density as a result of the decreased need for proximate parking. One recent estimate concluded that approximately 31 percent of space in the central business districts of 41 major cities was devoted to parking (Shoup, 2005). At Level 4, an AV could simply drop its passenger off and drive away to satellite parking areas. Another consideration is that AVsharing programs may decrease the rate of car ownership. In either event, fewer parking spaces would be necessary and would permit greater development of cities.

AV technology may have different effects on land use in the developing world. Countries with limited existing vehicle infrastructure could “leapfrog” to AV technology. Just as mobile phones allowed developing countries to skip the development of expensive landline infrastructure, AV technology might permit countries to skip some aspects of conventional, human-driver centered travel infrastructure.

Effect on Energy and Emissions

The overall effect of AV technology on energy use and pollution is uncertain, but seems likely to decrease both.

First, AV technology can improve fuel economy, improving it by 4–10 percent by accelerating and decelerating more smoothly than a human driver. Further improvements could be had from reducing distance between vehicles and increasing roadway capacity. A platoon of closely spaced AVs that stops or slows down less often resembles a train, enabling lower peak speeds (improving fuel economy) but higher effective speeds (improving travel time). Over time, as the frequency of crashes is reduced, cars and trucks could be made much lighter. This would increase fuel economy even more.

AVs might reduce pollution by enabling the use of alternative fuels. If the decrease in frequency of crashes allows lighter vehicles, many of the range issues that have limited the use of electric and other alternative vehicles are diminished. At Level 4, when human drivers become unnecessary, the vehicle could drop its owners off at a destination and then recharge or refuel on its own. One of the disadvantages of vehicles powered by electricity or fuel cells is the lack of a refueling/ recharging infrastructure. The ability of Level 4 AVs to drive and refuel themselves would permit a viable system with fewer refueling stations than would otherwise be required.

On the other hand, decreases in the cost of driving, and additions to the pool of vehicle users (e.g., elderly, disabled, and those under 16) are likely to result in an increase in overall VMT. While it seems likely that the decline in fuel consumption and emissions would outweigh any such increase, it is uncertain.


While AV technology offers the potential of substantial benefits, there are also important costs. Ironically, many of the costs of AV technology stem in part from its benefits.

For example, since AV technology is likely to decrease the cost of congestion and increase fuel economy, it will also likely decrease the private cost of driving that a particular user incurs. Because of this decline (and because of the increase in mobility that AVs offer to the elderly or disabled), AV technology may increase total VMT, which in turn may lead to increases in the negative externalities of driving, including congestion and an increase in overall fuel consumption.

AV technologies may also disrupt existing institutions. By making proximate parking unnecessary, Level 4 AV technology may undermine the parking revenues that are an important and reliable source of funding to many cities. By providing a new level of mobility to some users, it may siphon riders (and support) from public transit systems. Currently, one of the key attractions of public transit is riders’ ability to undertake other tasks in transit. Autonomous vehicle technology may erode this comparative advantage.

Further, many jobs could be lost once drivers become unnecessary. Taxi, truck, and bus drivers may lose their livelihoods and professions. If crashes decline in frequency, an entire “crash economy” of insurance companies, body shops, chiropractors, and others will be disrupted.

Overall, we think the benefits of AV technology—including decreased crashes, increased mobility, and increases in fuel economy— outweigh the likely disadvantages and costs. However, further research would be useful, to more precisely estimate these costs and benefits and whether they accrue to the individual operator of the AV or the public more generally. Such research would also be helpful in determining the optimal mixture of subsidies and taxes to help align the private and public costs and benefits of this technology.

Current State Law

A number of states, including Nevada, Florida, Michigan, and California (as well as Washington, D.C.), have passed varying legislation regulating the use of AV technology. Measures have also been proposed in a number of other states.

The disadvantage of this approach is that it may create a patchwork of conflicting regulatory requirements. It is also unclear whether such measures are necessary, given the absence of commercially available vehicles with this technology and the absence of reported problems to date with the use of this technology on public roads. On the other hand, these proposals begin the conversations among the legislature,the public, and state regulatory agencies about this important and coming change in transportation.

Consumer Concerns

Autonomous vehicles will create and communicate substantial amounts of information on position, location, speed and destination – some of it personal, raising significant privacy and cybersecurity issues.

Consumer perception of data security is also a key issue. In an age in which privacy and cybersecurity are top-of-mind concerns for most consumers, the advent of the autonomous vehicle poses a particular challenge. Autonomous vehicles rely on their ability to communicate with GPS satellites, software providers, and other devices. Each communication becomes a data point or multiple data points and may include information about a vehicle’s occupants. Such data needs to be secure, along with access to and control over the vehicle’s autonomous systems.

Cost is another precursor to consumer acceptance. A 2014 U.S. telephone survey by, indicated that 75 percent of licensed drivers would at least consider buying a self-driving car, rising to 86 percent if car insurance were cheaper.16 Considering the technologies required, it is very unlikely autonomous vehicles will be cheaper than traditional vehicles, at least at the outset.

Consumers are unlikely to readily accept autonomous technologies of any kind – if they are perceived to have the potential to fail or not perform as expected and essentially put human lives at risk. However, if autonomous vehicles are rolled out incrementally – building on the initial introduction of simpler technologies (such as self-parking) with progressively more complex technologies and, ultimately, launching the fully autonomous car – the public may well develop greater faith and confidence in them. Public education will be critical. Some of that is taking place now in terms of general awareness, whenever Google and Tesla’s autonomous vehicles make the news.

Market Demand

Cost and perceived utility are two factors that tie into the broader subject of market failure – the differences in the market between supply and demand. Manufacturing capacity, the availability of insurance, and a favourable regulatory environment are others. Government may step in to play a role if it believes the value to consumers and society warrants the investment, for example, by offering various forms of subsidies.


Even now, in 2016, just less than two years away from when some predict fully autonomous vehicles will be a reality, significant technological challenges exist. Serious injuries or fatalities, such as the recent tragic Tesla Autopilot incident will significantly hinder adoption. The risks are substantial. This is not an area that will tolerate much in the way of technology failures. The systems must work each and every time. There are a myriad of technical challenges and just as many proposed solutions, as evidenced by the high level of patent activity for related technologies.

 Some commentators argue that the problem facing autonomous vehicles is not technology, but rather the question of accountability: who will be held responsible once there is no one inside the vehicle? That raises the twin questions of regulatory oversight and legal liability – the answers to which hold a particular interest for lawyers.

Increased safety, comfort and efficiency are the main goals of piloted driving. Government support to create enabling infrastructure and legal frameworks (including behavioural laws) are essential to support this evolution beyond conventional driver assistance systems.


The 1968 Vienna Convention on Road Traffic requires a human driver to be present and have control over the vehicle at all times. The UN Economic Commission for Europe has formed a Working Party on Road Traffic Safety to draft amendments to the Vienna Convention. This will address the main international hurdle to many ADAS technologies.  Moving to autonomous vehicles, however, requires making more basic amendments to the Vienna Convention. At a country level, it is not only the technologies that raise regulatory questions, but also the perceptions and assessments of their social impacts by consumers and governments. That said, the primary regulatory assessment is likely to address the how question: Under what circumstances and conditions will autonomous vehicles be allowed and to what extent?

This question is of particular interest to car and car part manufacturers and technology companies currently involved in vehicle automation. Many governments have already implemented legislation allowing testing, or are working on it. In Germany, for example, the Federal Ministry of Transportation just announced that they are working on a draft law which will allow autonomous vehicles (SAE levels 3 and 4) on the road in serial operation. The plan is to have this legislation come into force at the latest by mid-2017. Compared to other countries, the German draft currently represents the most progressive and technology-enabling legislation. Similarly, the National Highway Traffic Safety Administration of the United States (NHTSA) is set to issue revised guidelines at any moment. Currently, the U.S. operates under NHTSA's Preliminary Statement of Policy Concerning Automated Vehicles, which was issued in June of 2013.

As fully autonomous vehicles did not yet exist and the technical specifications for semi-automated systems were still in flux, NHTSA focused on testing regulations. It suggests, for example, those states which allow manufacturers to test self-driving Consumer perception of security is also a key concern – both data and physical security. vehicles should, at the very least, require drivers to:

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