Unrealistic Rule Won’t Reduce Carbon, But Will Raise Car Prices Substantially
By Merrill Matthews
DALLAS (Tribune News Service/TNS) – The Obama Administration is mandating that each automaker’s lineup of cars, light trucks and SUVs have an average fuel economy of 54.5 miles per gallon (mpg) by 2025.
Like so many of the administration’s reforms, this one is imposed by executive fiat rather than approved by Congress — and the incoming Republican Congress should try to roll it back.
The stated goal for pushing the new standards — known as the Corporate Average Fuel Economy, or CAFE, standards — is to reduce U.S. dependence on oil, especially foreign oil, and improve the environment. But the mandate won’t achieve those goals.
Suppose that car manufacturers are able to reach the 54.5 mpg goal — the prior CAFE standards set by Congress required 35 mpg by 2020 — a goal that is by no means certain. Doing so makes it cheaper to drive a car.
It’s basic economics: When the cost of driving a car declines, people will likely drive more rather than take public transportation, walk or telecommute. So much for the goal of significantly reducing oil consumption.
And if people are driving more, they’re putting more carbon in the air — undermining the administration’s second goal.
Now, improving fuel efficiency is a great goal; we all like going further on a gallon of gas. But the Obama Administration is imposing a vision, whereas most people choose fuel-efficient cars so that it costs them less to do all the driving they want.
So while the new CAFE standards are unlikely to help the environment, they will certainly hurt consumers in upfront costs.
The Environmental Protection Agency concedes that the new standards will force consumers to pay about $1,800 more for a car.
The agency justifies the increased cost by boasting that consumers will save between $3,400 and $5,000 in gasoline over the life of the car. But those alleged savings will disappear if consumers drive more.
And speaking of saving money on gasoline, the recent dramatic fall in gasoline prices creates another problem for the administration’s goals: Cheaper gas means people will drive even more.
The real question is: If more-fuel-efficient cars are such a great financial deal, then why aren’t consumers demanding them? Why does the government have to mandate that manufacturers make them?
It’s an Obama Administration pattern: The government forces consumers to buy what it thinks they should buy, even if it costs them more, rather than allowing consumers to choose what to buy with their own dollars. Can you say Obamacare?
And again like health-care reform, expect a lot of gaming the system. The CAFE mileage standards allow some flexibility across a manufacturer’s fleet. And so the automakers add a few models that are very expensive to build and very few people want to buy, like electric cars.
But placating the government with some very-fuel-efficient cars allows the manufacturers to build more of what people really want, and what’s profitable: trucks and SUVs.
Finally, when Obama announced the new CAFE standards, he claimed, “These fuel standards represent the single most important step we’ve ever taken to reduce our dependence on foreign oil.” Nonsense!
The important step the country has taken to reduce its dependence on foreign oil is the adoption of new, innovative drilling techniques.
Crude-oil production is up 16 percent over 2013, and oil imports dropped 6.2 percent in August, the lowest August-import level in 18 years, according to the government’s Energy Information Administration.
And the irony is that Obama generally opposes more U.S. oil production, even as that production has helped reduce our dependence on foreign oil.
Congress has supported CAFE standards in the past, but Obama bypassed it — yet again — to get what he wanted. Congress should roll back those mandates and stop forcing consumers to buy what the administration wants.
Merrill Matthews, Ph.D., is a resident scholar with the Institute for Policy Innovation, a public-policy think tank based in Irving, Texas.
Greener Cars Are Insurance Against Risky Oil Dependence
By John D. Graham and Denvil R. Duncan
BLOOMINGTON, Indiana (Tribune News Service/TNS) – As fuel prices fall below $3 per gallon in much of the country, it is tempting to think gasoline is so plentiful that we no longer need regulations to improve the fuel efficiency of vehicles. We believe such thinking is unwise.
If the last 40 years teach nothing else, it is that the world price of oil is unpredictable and volatile.
Unforeseen developments in the Mideast could cause disruption in oil markets and a surge in gasoline prices. If the Chinese economy ramps up again, expect oil prices to rise again.
The politics of oil production in the United States are also unpredictable. Oil production is surging now due to technical advances called “fracking,” but that extraction process is vigorously opposed in many communities.
Indeed, some towns and states are passing resolutions — unwisely in our view — to prohibit oil and gas development, and such developments only complicate the future of domestic production. Greener cars are an insurance policy against our risky dependence on oil.
More-fuel-efficient cars are also good for the environment. When consumers use a car with high mileage per gallon instead of a car with low mpg, the environmental benefits include less smog and less soot as well as fewer greenhouse gases — the pollutants that contribute to global warming.
It is true that policymakers could achieve the environmental benefits by implementing alternative policies such as a tax on vehicle emissions.
Alternatively, policymakers can boost consumer demand for fuel-efficient vehicles by increasing the fuel-tax rate or implementing a mileage user-fee with rates that adjust for mpg.
Unfortunately, we are not convinced that either of these policies is likely to be implemented in the current political climate. Our safest bet, then, is the status quo.
Significant progress is being made toward the 54.5 mpg target. Ford’s Ecoboost engines are achieving large gains in fuel economy at modest cost to the consumer. German manufacturers are penetrating the U.S. market with clean diesel technology that also provides enhanced performance for the motorist.
Toyota’s commitment to conventional hybrid engines has been a significant commercial and environmental success. And both Ford and General Motors are using advanced aluminum materials to enhance the mileage ratings of pickup trucks.
Since all of these manufacturers — and their suppliers — are making major investments to enhance fuel economy, removing the regulation will simply reward automakers who won’t innovate.
Is 54.5 mpg by 2025 written in stone?
Absolutely not. Indeed, federal policymakers have already made a decision to revisit this figure — including other aspects of green-car policy — in 2017, just a few years from today.
That time can be well spent collecting data on current policies, analyzing costs and benefits, exploring possible safety impacts and making wise refinements to the current mileage program. Now is not the time for hasty deregulation.
John D. Graham is dean of the Indiana University School of Public and Environmental Affairs. Denvil R. Duncan is an assistant professor in the Indiana University School of Public and Environmental Affairs, conducting research in public economics and economic development.