The American Spectator

Congress is running out of floor time before the Christmas holiday, but legislators still hope to push through the mishmash energy bill. The measure, which could hit the House floor this week, likely will include increased fuel economy standards for American autos. Democratic leaders and the White House alike are backing the proposal in the name of saving energy. But these rules have proved far better at increasing automaker costs and killing drivers than reducing America’s dependence on foreign oil.

The desire to save energy seems to bring out the worst in Washington micro-management. Over the years, Uncle Sam has set the speed limit for every road and temperature in every public building in America. In 1975, Congress concocted Corporate Average Fuel Economy (CAFE) standards, which set the average fuel economy to be attained by cars sold by each automaker.

It’s a thoroughly nutty approach. First, CAFE put Detroit, America’s home auto industry, at a disadvantage because U.S. producers concentrated on the larger cars that Americans liked to drive. Japanese exporters primarily produced small cars, which more easily satisfied CAFE. The regulation is one reason stationwagons, once an American favorite, have disappeared.

Today American firms concentrate on light trucks (including SUVs), which outsell autos. The administration’s new CAFE rules for light trucks are expected to cost the three U.S. automakers about $2 billion—and their Japanese competitors nothing.

Second, CAFE is supposed to cut total energy use as people buy the same cars and do the same amount of driving. But CAFÉ actually creates an incentive to drive more, changing people’s behavior.

Increasing mileage requirements lowers the cost of driving. Raising mileage from 20 to 30 mpg would have the same effect as cutting the price of gas from $3.00 per gallon to $1.50 per gallon. The marginal cost of driving another mile would fall 50 percent. Yet many of the advocates of increasing CAFE to save energy are the same people who want to raise the gas tax to save energy.

In fact, the National Research Council reported that CAFÉ “reduces the fuel cost per mile of driving, thereby encouraging faster growth in vehicle travel than would otherwise be the case.” Economists Randall Lutter and Troy Kravitz concluded that “By lowering the costs of driving, [CAFE] increases vehicle miles traveled, thereby boosting traffic accidents and congestion. The increase in the costs of accidents and congestion fully offsets and probably outweighs the social benefits resulting from greater fuel economy.” The Department of Transportation reports that the number of miles driven by cars and light trucks more than doubled between 1975 and 2000.

Third, meeting CAFE raises automaker and consumer costs by forcing companies to make cars that people don’t want. Numerous high mileage vehicles are currently available, but many people prefer larger cars for reasons of family size, work requirements, personal comfort, or recreational preference. That has forced U.S. companies to lower prices on smaller autos (often losing money as a result), since hiking sales is the only way to meet CAFE, and increase prices on larger vehicles. Ford reportedly loses money on its cars while making $8000 per light truck sold.

CAFE’s cost to consumers is obvious. Moreover, CAFE likely puts more cars on the road, and more cars mean more driving. Again, price matters: if you reduce automobile costs, more cars will be sold and driven, particularly as second or third vehicles in a family.

But raising prices for lower-income families who need a larger car likely causes some of them to hold onto their older vehicles, which have lower gas mileage and emit more pollution. Which further undercuts the objective of reducing energy consumption.

Fourth, CAFE kills. Weight is destiny when it comes to both conservation and safety. Design modification and materials substitution can make cars lighter and safer, but doing so costs money and it is not easy to do both at the same time. The easiest way to improve mileage is to cut vehicle weight, but reducing the amount of metal surrounding drivers and passengers leaves them more vulnerable in an accident.

In 2002 the National Academy of Sciences found that CAFE kills an extra 1300 to 2600 people a year. Some CAFE advocates suggest that the problem is too many pick-ups and SUVs, which could be pushed off the road entirely with a sufficiently high standard. But there always will be trucks, buses, and other large vehicles plying the roads. Smaller cars will remain more vulnerable in an accident.

What a policy. Observes James Taylor of the Heartland Institute: “More Americans needlessly die on the roads each and every year as a result of these fuel econony standards than have died in Iraq during the entirety of both Gulf wars combined. All of this merely to ‘conserve’ a little fuel.”

But the dumber the idea in Washington, the more support it seems to have these days. And from Republicans as well as Democrats.

The administration, after doing nothing for years, now supports raising CAFE four percent annually. Earlier this year the Senate voted to hike the level to 35 pmg in 2020, up from 27.5 and 22.5 for cars and light trucks, respectively.