Tuesday, January 03, 2006

Why the Government's CAFE Standards for Fuel Efficiency Should Be Repealed, not Increased

I think that the above link has such good information, I am not sure if I can add to this study, but will try.
HOW CAFE INCREASES RISKS TO MOTORISTS
A 1999 USA TODAY analysis of crash data and estimates from the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety found that, in the years since CAFE standards were mandated under the Energy Policy and Conservation Act of 1975, about 46,000 people have died in crashes that they would have survived if they had been traveling in bigger, heavier cars. This translates into 7,700 deaths for every mile per gallon gained by the standards.

Being an economist, I may be cold but no matter what level of protection is provided there is always a payoff in lives vs. costs. The only question is if these costs outweigh any benefit derived from CAFE standards.
So based on the standard of:
The standard for passenger cars is currently 27.5 miles per gallon; for light trucks, it is 20.7 mpg.

the incentive is to produce lighter trucks and SUV's than larger cars that would be more fuel efficient but still have better gas mileage and be safer. So:
according to Graham, government studies have found that making small cars heavier has seven times the safety benefit than making light trucks lighter.


WHY CAFE FAILS TO REDUCE CONSUMPTION
As the author of The Wall Street Journal article notes, "[s]ince 1970, the United States has made cars almost 50% more efficient; in that period of time, the average number of miles a person drives has doubled."

The article refers to the "rebound effect" as the effect that after a short period of time, that lower costs of one factor will lead to increasing the use of that factor of production. In economic terms it is the Marginal Productivity of Capital(MPC) equals the MP of Labor.

The budget effect of changes in the costs of budget items will also alter consumption patterns. Of course not all people will change behaviors like what I describe but enough to make a difference in the level of consumption. The theory would be that households allocate a certain amount in their budgets to transportation, food, housing, entertainment, etc. As one budget line gets either more or less expensive then households adjust the amount of the consumption level rather than reallocate and adjust the budget lines. For example, when transportation costs are lowered then households would consume more units of this budget line, and when costs rose households will try to adjust other budget lines in the short run but would want to adjust consumption down in that budget line to reflect higher costs.

WHY CAFE STANDARDS DO NOT IMPROVE THE ENVIRONMENT
If the above assumptions are true then this statement is true just on the fact of increased consumption. And by switching to lighter materials will lead to higher amounts of some pollutants.
Nor will increasing CAFE standards halt the alleged problem of "global warming." Cars and light trucks subject to fuel economy standards make up only 1.5 percent of all global man-made greenhouse gas emissions. According to data published in 1991 by the Office of Technology Assessment,
A 40 percent increase in fuel economy standards would reduce greenhouse emissions by only about 0.5 percent, even under the most optimistic assumptions.


Another good link: These People Need Slapping.
People who want a big vehicle (for whatever reason) cannot get a large one built on a car frame, only on a truck frame, for in this manner the manufacturers can meet the limits for the fleet they sell. But something built on a truck chassis is less efficient in its fuel consumption than one built on a car chassis.

CAFE actually decreases the fuel efficiency of the American vehicle fleet by pushing people into buying the inherently less efficient truck based machines.

One small market that I have watched is the station wagon market and how after CAFE standards no manufacturer wanted to sell these.
CARS VERSUS LIGHT TRUCKS
Many of these units, however, were minivans—which are classified as light trucks—that replaced station wagons for family transportation.


And this is really funny: Inexpensive Program Killed Because it Threatened Country Squire
This:

Was threatened by:
In those days, Carrousel was a $67 million dollar program. Petty cash to a big car company like GM or Ford or Chrysler. But Carrousel was never to see the light of day. It died when Ford's research showed it would cannibalize heavily from the Country Squire station wagon then a Ford family jewel. Threatening the Country Squire was verboten and Carrousel (and MiniMax - not so much of a threat) was shelved only to be seen a decade later behind Ford's Truck Engineering building resting on four flat tires with its paint peeling.


There are also all the mandated pollution control technologies.....Honda has a lean burn engine that meets the emission standards without any further modification, no feeding exhaust back into the engine and so on. But because the use of such technology is mandated, that engine must have them, reducing the fuel efficiency. As, of course, such technology reduces the fuel efficiency of all American cars and trucks.

This is interesting since if the greatest threat to mankind is greenhouse gases then we should scrap the pollution control measures (except for specific areas) and go for energy efficiency at all costs. Including if we pollute the air with smog, this will cause a cooling effect on the earth by blocking the sunlight.

And Tim sums it up pretty well:
The real answer is to scrap the CAFE standards, scrap the mandated technology solutions, allow any technology that meets emissions standards to be used and whack $1 on the federal gasoline tax.


PS (4-7-06): CAFE rule: sound and fury, signifying nothing
Through the UCS “Extreme Auto Makeover” campaign, and other alerts from our colleague organizations, over 100,000 Americans took the time out to weigh in on the administration’s proposed rule and ask for real improvements that would have genuinely addressed America’s “oil addiction” problem to which the President himself admitted. The result: even with the projected steep and sustained increase in oil prices from the Energy Information Administration, NHTSA found a way to tweak their own assumptions in order to keep the final rule an almost exact carbon copy of their flawed proposal.

Of course, the administration is pushing this squandered opportunity as an historic achievement. It is vital that Congress realizes that the public is not buying the President’s spin, and understands the depth of disappointment Americans have for this side-stepping of responsibility at such a crucial time. The expectation for Congress must now be clear—step up and fill the oil security void left by the administration’s rule, or be complicit with Bush’s tough talk--no action approach. If you want to vent your spleen to your Senators and Representative, click here to send them a letter.

Simple enough, there is no need for government regulation if all consumers choose the most fuel efficient vehicles for their needs. There is an SUV hybrid. It is much easier to scream at politicians than to tell yourself to consume less gas. In the end misery loves company. If others should not consume gas, then as long as regulation keeps us all miserable then they will feel better.

Links:
Why the Government's CAFE Standards for Fuel Efficiency Should Be Repealed, not Increased

These People Need Slapping.

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