Fuel Efficiency Rules – No
This question should be addressed in two parts. First, should government being encouraging efficient use of resources? And second, if it is, how should government carry out this task?
To the first question, the job of Government is to keep us safe without curtailing our freedom to live the way we want. This is why we accept regulations related to vehicle safety and tailpipe emissions: they make life better for all of us. So will raising fuel efficiency improve our quality of life?
It's not obvious that it will, for reasons I'll discuss below. However, if we accept that we need to import less oil and reduce greenhouse gas emissions, a case can be made that consumption should be reduced. The current thrust of public policy is to require the manufacturers to build more efficient vehicles. Let's explore whether this actually serves the goal of reducing consumption.
First, we must recognize that CAFE (Corporate Average Fuel Economy) laws take decades to have a measurable impact. How so? Here in the US we buy around 16 million cars and light trucks a year, but we only scrap 12 million. This means the vehicle population, currently over 240 million, continues to grow. So if, in 5 years time, new cars are 10% more efficient than at present, we will still have some 260 million less efficient cars. With the average car lasting 10 years, it will take 15 years to shift the average fuel efficiency of the total car population up by just 5%.
Second, is there any evidence that increased efficiency equates to reduced consumption? According to the Bureau of Transportation Statistics, vehicle-miles-traveled increased nearly 40% between 1992 and 2005. Cheap gas has allowed us to drive further, and our lifestyles have altered accordingly. We live in sprawling subdivisions far from where we work, and think nothing of driving 50 or even 100 miles per day. So increased efficiency may be good for our pocketbook, but it will have no impact on our habits. In fact, by keeping the cost of driving low, improved efficiency may actually increase our consumption of gas.
Now let's turn to the "free market" argument. Car companies are "for-profit" businesses: they exist to make money for their stockholders, and they do this by selling what people want to buy. Those that don't go out of business.
In recent years people wanted to buy SUV's, and the car companies responded to that demand with Explorers, Yukons, and Land Cruisers. That's the way our capitalist system works. Right now, with gas at $4.00 a gallon, the car companies are scrambling to meet the demand for fuel-efficient vehicles. Those that can do so will prosper.
So what does this mean for our desire to reduce consumption? First, CAFE laws work too slowly. Second, increased efficiency doesn't translate to reduced consumption. Third, free markets work. And the conclusion? Brace yourself, because this is going to hurt. The best way to reduce consumption is for gas to cost more. That's right, taxes on gasoline should rise.
