There is another proposal to raise minimum mileage limits for passenger vehicles in the US. The specific target of this legislation is the SUV, which has been essentially taking advantage of a “small truck” loophole since original CAFE limits were adopted.
This always seems to be pared down to a “wacky environmentailsts vs. cold-hearted corporate drones” debate. I was hoping I could find something more enlightned here.
I believe that some sort of government intervention is needed here because GM and Ford, as publicly traded companies, are incentivized to take a short-term viewpoint. This is not shameful or wrong, just a fact of business life. However, their actions to satisfy consumer demand have other effects on the economic and environmental landscape. These are the sort of situations where regulation can do some good.
In lieu of genuine interest on the part of the car-buying public, should the gvt. step in here? If tighter CAFE regulation isn’t the answer, how about a tax credit for clean/high MPG vehicles?
If the end goal is a reduced dependance on internal combustion engines, (And I guess I’m not convinced it should be), isn’t the government going to have to get majorly involved at some point in the creation of infrastructure, etc?
This is one of those issues where just about everyone from rabid free-marketeers to foaming at the mouth statists can agree - the loophole should be closed.
Both the pollution caused by gas-guzzling SUVs and the excess consumption of oil fall within the “tragedy of the commons” - no one involved, either the SUV buyers or the car companies, has an incentive (at least short-term) to reduce the public harm, and indeed both parties would be harmed if they voluntarily took steps, thus losing a competitive advantage (or, in the case of car buyers, being forced to drive Geo Metros).
It seems painfully obvious, as Sua pointed out, that this loophole should be closed. IIRC the US has actually been decreasing the average MPG ratings averaged across all vehicles the last few years.
I think the real question is does anyone see the current energy company friendly, big business friendly current administration as having any motivation whatsoever to fix this?
If the CAFE standards are changed than the automakers will then make smaller and lighter cars. These type of cars are not as safe as larger cars. This will lead to more traffic fatalities. So the government will have to decide how many more deaths are acceptable. Also there will be other unintended consequences which are not foreseen. Remember the previous attempts at regulation have led to the current SUV craze. It would seem that CAFE regulations are inefficient and expensive ways to reduce pollution.
Safe to who? Certainly it is safer being in a Ford Expedition when it runs over a Ford Escort but it’s not so good fro the people in the Escort. Have two Ford Expeditions collide and I imagine you’re about in the same boat as two Escorts colliding.
Add to that the SUV’s penchant for rollovers.
All-in-all I don’t think reducing the numbers of SUVs on the road will kill more people.
The link between automobile weight and traffic fatalities is pretty well established. The NHTSA estimates that for every hundred pounds less the average car weighs 302 more people die in auto accidents. According to the Insurance Institure for Highway Safety in the first 25 years of CAFE standards they have accounted for an extra 46,000 fatalities.
Also if fuel efficiency goes higher then gas will be cheaper and the incentives for alternative fuel development is reduced. This is just one of the unitended consequences that could end up hurting the enviroment.
I’m sorry but I need a cite for that. Totally apart from automobile size cars have accrued a bunch of safety devices that didn’t exist 25 years ago. Antilock brakes, crumple zones, air bags, safety glass and so on. In addition fuel efficiency hasn’t come exclusively at the cost of car size. Engines are far advanced of where they were 25 years ago (fuel injection and so on).
I am not arguing that I’d rather be in a Yugo than and SUV in an accident. However, the size disparity between SUVs and cars is such that SUV drivers may be safer but the people in the car that just collided with them are at far greater risk of injury. It is not necessarily that the car has gotten smaller but that the SUV has gotten so much bigger.
Also, SUVs are much more prone to rollovers causing the occupants greater harm than if they had been in a vehicle which likely would not have rolled over. SUVs are so prone to this attempts have been made to have them (or at least some models) declared unsafe and be recalled. Needless to say the automotive industry sent an army of lobbyists to Washington and such a move was never made.
Finally, note that the CAFE rules being discussed here are not targeted at cars but at SUVs which are undisputed gas guzzlers. To suggest that lower gas prices are somehow a bad thing and this ultimately hurts the environment seems disingenuous and only something a Big Three lobbyist could think up.
If people want to drive gas-guzzling cars, I’m okay with that. However, at the current moment the government subsidises oil rather heavily. If we removed those subsidies, gasoline would be a LOT more expensive. And people might begin to realize how expensive it really is to drive a car that gets 12 mpg.
In any event, I’m in favor of tax credits (or some kind of significant financial incentive) for people who drive fuel efficient cars. And the higher your MPG, the more tax break you should get. This will favor both high-MPG and alternative fuel cars . Partly I’m environmentalist, and partly I’m just looking out for my own interests - I drive a 35+ MPG Honda Civic.
I see the CAFE standards as almost a red herring in the debate. CAFE seems to be feel-good legislation to me. It only requires that the fleet-wide average be X MPG. Hence, a few models can get 3 MPG, as long as they have a few that get 50 MPG. Overall gas consumption isn’t really changed, and it does nothing to provide incentives for technological innovation or conservation.
Let’s make people pay the REAL cost of the gasoline they consume (some say it would be as much as DOUBLE current prices)… and then see if they’re so eager to own SUVs. Weren’t all those SUV owners freaked by a 35 cent price hike during the Gulf War? Let’s see how they like a permamant doubling of gas prices…
-Ben
Here is a link to the article about the 46,000 deaths: http://www.serve.com/commonpurpose/news/cafeusatoday.html
If the objective is to lower the total amount of gasoline used, more fuel efficient cars will lead to lower prices on gas. Lower gas prices will lead to more gas being used until equilibrium is found again. Lower gas prices will also hurt efforts to develop alternative fuels. That is, unless the laws of supply and demand have been repealed.
You say that the government subsidizes gas. I have never really seen a good explanation about how this occurs. Do you have any cites that discuss this issue?
According to this article, gasoline is taxed at a significantly lower rate than other US consumer goods, and the oil industry has lobbied itself huge tax breaks:
I cannot vouch for the veracity of their claims here. I am particularly dubious about the $232 billion “environmental costs” number. But the first two items seems quite reasonable to me, and a pretty good argument that gasoline should be significantly more expensive than it is - if we were actually paying what it really cost to produce it. Which we aren’t because of government subsidies to the oil industry.
-Ben
Sua
The article I linked to explains that crashes involving SUV are responsible for 1% of fatalities from small car accidents.
I don’t think the laws of supply and demand are as difficult to understand as you make them out to be.
BTW it was nice to see the congress make an intelligent decision about this this topic.
Um, Puddleglum, let’s say that the average MPG of the American fleet went up 30%, and the cost of gasoline went down a corresponding 30% (it would actually go down less - there are other uses for oil and gasoline, and therefore demand would not drop 30%, but anyway). Gasoline consumption is not perfectly elastic - while the gas is 30% cheaper, demand will not increase 30% (thus pushing the price back up) because the gas must be used. If the average person drives 12,000 miles in a year, they will not have the incentive to drive an additional 3,600 miles in a year simply because the gas is cheaper - they have to have somewhere to go. Most driving is static - you commute to work, drop off the kids at school, etc. So, unless car drivers are going to buy gasoline at start small fires with the excess they don’t need for their normal driving, gas consumption will go down if CAFE is raised, regardless of any drop in the price.
Besides, if this really is a concern, there is a simple answer - increase the tax on gasoline (though I’d prefer a broader “carbon tax”)
As for alternative fuels, I didn’t intend to pooh-pooh that - I quoted too much of your post. My bad. Yes, there will be less economic incentive for the development of alternative fuels if gas consumption lessens. I have no problem with that - if less gasoline is being consumed, the environmental need for alternative fuels is also lessened - less damage is being done to the environment.
Good God, puddleglum…It is you who is making this unnecessarily complicated. If you don’t believe Sua’s latest explanation, think of it this way: Draw your standard supply and demand graph (quantity on the x-axis, price on the y-axis with a supply curve with positive slope crossing a demand curve with negative slope). Now, simulate a reduction in demand by shifting the demand curve to the left (or down, depending on how you want to view it). What happens to the intersection point? It goes down and to the left which means a lower price and less gas being used.
Now, admittedly, this picture may be an oversimplification as there are different demand curves for different people and some people who do not shift to more energy-efficient cars may buy more gas in response to the gas prices falling due to redued demand by their brethran, but you ain’t going to get more gas usage in aggregate (at least not with any standard economic assumptions).
Also note that in much of Western Europe, where they seem to be more intelligent on these matters, gas is taxed up to the price of roughly $4.00 per gallon. Given the pressures of gas consumers and industries in those countries, it seems rather unlikely to me that they are overcorrecting…I.e., the real cost is still probably higher.
And, tracer, I think that paying low taxes relative to everyone else is in fact a form of government subsidy. I agree that one has to take all the costs into account to really decide what the effective subsidy is, and that is what the studies in the link I quoted attempt to do.
Just to complete our little tutorial on supply and demand graphs, it has occurred to me that what we might call the “Puddleglum effect” of the resulting decrease in demand and gas usage causing a drop in price which then increases gas usage has a graphical interpretation on the supply-and-demand curve:
If you draw a horizontal line on the graph which intersects the original demand curve and supply curve at their intersection point, then the point where this line intersects the new demand curve shows the amount of gas that would be used if the price did not drop in response to the decrease in demand. The difference between the amount of gas used at this point and the amount used at the actual intersection of the supply curve and the new demand curve then represents the “puddleglum effect”.
How big a fraction of the “original drop” (i.e., at constant price) in gas usage is made up for by the increase in gas usage as a result of the drop in price depends on the relative elasticity of the supply and demand curves. Since the demand curve for gasoline is probably fairly inelastic (and the supply curve rather more elastic…although I’m winging it a bit more with this one), my guess is that this fraction is rather small.
When I used the word equlibrium I was not trying to imply that the equilbrium price and demand before CAFE would be the same as after CAFE. Gas price elasticity for long term passenger car use is about .7 which is fairly inelastic.
If the goal is to reduce the amount of gas used in passenger cars then there are many ways to do this that will not result in thousands more people dying in auto accidents. A carbon tax is an example of this, though whether that is a good idea is a different debate.
Someone else posted about the real cost of gasoline being much higher than we pay for it.
Why do people here figure that ‘we pay less taxes than some other countries’ is a subsidy?
Excuse me for being boorish, but I really don’t think that the government not imposing a 1000% tax on something they ‘just don’t think I ought to use so much of’ is any kind of a favor.
Does this come from the same place as the idea that if the rich aren’t paying at least a 50% income tax, they’re getting an unfair advantage?
