Auto makers are lobbying the federal government to rethink its mandate to raise average fuel economy to 54.5 mpg by 2025. The new rules are set to go into effect in 2018. The companies have several concerns about the tighter standards, but it all comes down to selling cars. They worry that consumers will not like the changes meeting the new rules will require and that will hurt sales. The car industry is hugely important to the US economy. A decline in sales could have a ripple effect that would take some of the steam out of an economy that is just showing signs of life after the debacle of 2008.
The debate about what to do with fuel economy standards dates back to the 70’s. Before that, gas was 60 cents a gallon, global warming was something only Al Gore worried about, and people were content to lumber around in big cars powered by V-8 engines. 4 cylinder cars were for wimps and losers. Then OPEC was formed and America went into cardiac arrest, economically speaking. CAFE, or Corporate Average Fuel Economy ratings, were orignally designed to help America break free of imported oil.
We went along with the plan because it was our patriotic duty. 4 cylinder cars were suddenly cool. Models like the original Volkswagen Rabbit GTI proved that being fuel efficient didn’t have to mean driving dull cars. Since then, the size of the vehicles Americans prefer has gone up and down in lockstep with fuel prices. Soon gas was cheap again. General Motors brought out its Hummer lineup, featuring thirsty ground pounders that looked like military assault vehicles. Ford countered with the F250 based Excursion. People couldn’t get enough of them.
Then 9/11 happened, followed closely by the collapse of the global economy engineered by the robber barons of Wall Street. Gas shot up to over $4.00 a gallon and Americans decided they really wanted small cars after all…for awhile. In late 2014, oil prices plummeted and gas was selling for under 2 bucks a gallon. The demand for larger, thirstier vehicles returned with a vengeance.
First CARB then the EPA stopped using fuel economy standards as a way to reduce dependence on foreign oil. Instead, they changed it into a tool for addressing the carbon emissions being emitted by the transportation sector. In fact, fuel economy is a poor way of addressing emissions. The European Union takes a much more direct and honest approach with regulations that target emissions rather than mpg. The two are related, or course, but using fuel economy as a measuring stick only complicates the process.
The CAFE system has become grossly distorted over the years. For one thing, CAFE numbers are different for different categories of vehicles. The smaller the car, the higher the standard. The larger the vehicle, the lower its fuel economy can be and still comply with EPA targets. The upshot of that piece of bureaucratic brilliance is that Fiat Chrysler has decided to stop making smaller sedans with good fuel economy so it can concentrate on making large trucks and SUV with an outsize appetite for gasoline. The regulations end up encouraging manufacturers to make vehicles that pollute more rather than less. How stupid is that?
For another thing, CAFE numbers are calculated using the old formula. It was discarded years ago as the way to calculate the numbers you see on the window stickers of new cars because it had absolutely no relationship to real world mileage. If CAFE regulations used the more realistic method, the target would be about 20% less — 43.6 mpg instead of 54.5. Building cars that get 43.6 mpg seems fairly doable in a day when many passenger cars already get 35 mpg or better. After all, we are talking about 8 years from now. Surely car companies could find a way to wring 43.6 mpg out of their cars by then?
John Bozzella, CEO of the Association of Global Automakers, told the EPA and CARB recently he wants the upcoming analysis to review assumptions about fuel prices, consumer preferences, and technologies to see whether the targets are still feasible. He says ideas like start-stop systems and hybridization will be required to meet the higher standard. Customers will notice and that may hurt sales. “When we think about the really challenging standards out to 2025 … we’re talking about investments and strategies that are no longer invisible to customers,” Bozzella said.
Bozella also would like EPA, NHTSA, and CARB to harmonize their regulations, so automakers would have one clear goal, not three. That part makes eminently good sense, so much so that we can be sure the regulators will ignore it entirely. Common sense is rarely a component of the regulatory process.
The point this debate misses is that we need to reduce or eliminate carbon emissions from passenger vehicles. The car companies are really looking at the world through the wrong end of the telescope. It’s not about selling more and bigger cars that spew more pollution. It is about changing the driving habits of Americans. The lunatic fringe on the right screams about honest businessmen trying to make a living but being balked by heavy handed regulations. That’s not what this is about at all.
What is is about is avoiding a climatic catastrophe that will imperil the lives of billions of people.We have to stop dumping the effluent of civilization into our skies, our oceans, and our land. We have to stop injecting billions of gallons of contaminated water into the earth to release a few more molecules of natural gas. We have to stop burning coal. We have to stop selling cars with internal combustion engines. There is no other way.
Trying to accomplish all those things using CAFE as the main policy tool is just ridiculous. The only way for it happen is to make the cost of fossil fuels higher than the alternative. Then people will demand non-polluting cars without the need for regulations. Its time to stop fooling around with policies that don’t work and start devising mechanisms that do. Create the right economic incentives, then get out of the way and let the great unseen hand of the marketplace work its magic.
Source: Scientific American via Climatewire
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