I believe mandating fuel efficiency standards for cars is silly.

Great Debates
1

With record high gas prices and lots of talk about climate change of late, I have heard lots of claims that the government should tighten fuel efficiency standards for auto makers.

If the goal of the policy makers is to reduce CO2 emissions and/or reduce fuel demand, mandated fuel efficiency standards are the wrong way to go about it. Gasoline taxes would work quicker, be easier to implement, and accomplish the underlying goal more effectively.

First, a tax could be implemented immediately and reduce gasoline demand right away. Fuel efficiency talk has at least a lead time of several years. And a tax is easily adjustable.

Second, it has been proven that actors will seek efficiency when it is in their economic interest. Thin as hospital soup margins in the airline industry has caused airlines to demand more efficient planes. The engine and plane industries responded to deliver much more efficient aircraft without any government meddling. A tax on gasoline, if high enough, would cause car consumers to demand the same thing. There seems to be a big interest in efficient vehicles due to high fuel prices these days, not because of government regulation.

Third, a tax would not directly constrain the automotive products available to consumers. People could decide for themselves how efficient of a car they really wanted. Sure, rich people would probably drive less efficient cars than the poor, but poor people weren’t going to buy many Hummers and Lamborghinis any way. The total fuel demand is what’s important.

Fourth, standards encourage auto makers to do the bare minimum. In the long run, I believe this stifles innovation. Predicting future technology is notoriously difficult.

Fifth, more efficiency doesn’t necessarily mean less demand. A car is much more efficient than a horse, for example. When cars replaced horses, people didn’t just use the new cars to make the same trips they once did on horseback. They found lots of other fun places to go.

Do you agree with me? If so, why do you believe so many policy types love standards so much? If you disagree, why?

2

I agree with you in many ways. This ties into some other debates we had that most people don’t think about. The gasoline we have readily available in world supply is going to be used one way or another whether it is here in the U.S. or in even larger emerging markets like China and India. One theory is that individual countries, even the U.S., can’t do much to control gasoline demand worldwide even in the near term. It may be better to let our demand find its place naturally and our high use may keep the price high enough to discourage emerging economies from being too dependent on it like way are.

3

You have good points; I think the biggest problem is the American tendency to equate taxes with evil, at least among many of the more politically active Americans.

4

I agree with Der Trihs. It would be much harder (i.e., much more resistance) implementing a gas tax hike, than it would better fuel efficiency standards.

OTOH, increasing the gas taxes could be seen as “sticking it to the people” rather than “sticking it to the car manufacturers”. I realize that the former should drive the latter - but do you think that could actually happen?
LilShieste

5

The problem I see with this is that although you may reduce fuel demand, it may reduce the demand in other markets. Sure, this method may force people to consider what kind of trips to take, but on the whole, most people use their vehicles to commute to work or run their business. And nobody is going to quit work because fuel costs go up, people still need income. If they have to pay more to travel to work, they may have to adjust their budgets for other things that help fuel the economy in other ways. Yeah yeah, in Europe they pay 3 or 4 times as we do for a gallon of fuel, but their distances to work may not be as high as it is here. There’s the suburban sprawl issue here where many travel 1+ hours one way to work… but what do people expect, everyone from the suburbs to live together as one in a big city? The crowds would be a bit much. You may also expect everyone to buy a Prius, but many that have bought their vehicles in the last few years and now, expect to keep them for some time. Doesn’t really make much sense to spring for a $20,000+ vehicle to offset fuel prices after having already bought a recent vehicle.

So yeah, there are issues to face.

6

On second thought, you know what would really help the cost of fuel? Allow more people to work from home. Less real estate for business to manage, less fuel consumption. Win win? In this technological age, I don’t see why not. You couldn’t do this for some business. But at places like where I work, I could easily do this from home, as well as the other 60,000+ employees I work with as well.

7

Economists agree that gasoline taxes are the best approach to improving automotive fuel efficiency. Politicians agree that nontrivial increases in gas taxes are hazardous to their careers. So that pretty much settles that.

Fleet fuel economy standards are the next best thing in terms of promoting fuel efficiency. They’ve been quite successful in the past. And they’re politically feasible.

What’s ‘silly’ about the best solution you can get? What’s silly is saying that because there’s a pony out there that would be better if only we could have that pony, the realistic solution is silly, when there’s no way we’re going to get the damned pony.

8

I’m not so sure. Increasing gas taxes will be a great increase in the tax on the lower working classes, this could and might very well cause a recession, which would slow down the buying of new more fuel efficient cars.

9

Right, so you have to make it revenue-neutral. Raise $X billion in petrol tax,and either reduce income tax on low income earners, or increase social security / welfare payments by $X billion.

10

WELFARE STATE!!! NANNY STATE!!! You want to take my money and give it to people who didn’t have the sense to avoid being a teacher?

(just preparing you for the upcoming responses)

-Joe

11

The real problem is: we (in the USA) have brought about a major crisis by our own inaction. If we had higher fuel taxes from the 1970’s on, we would have developed high MPG cars. But because gasoline was so cheap, detroit responded by giving us the “SUV”. Now we have millions of these things, which consume huge amounts of fuel-and Detroit is in trouble.
So I would have to agree-as gasoline heads for $5.00, we are going to see major troubles-and the sad fact is, it could have been avoided. I wonder how much the insurance companies will take (when all of those huge SUVs are reported “stolen”), before they raise insurance rates drastically!

12

One of the problems with an increase in gasoline taxes would be the effect on the price of food, clothing, and other consumer goods. Things need to be shipped, which is often accomplished using gasoline. If prices of necessities rose in response to the tax, it would more directly hurt people with lower incomes.

13

Ironically, Ralph is exactly wrong here. The SUV came about because of a CAFE loophole: it qualified as a light truck rather than a car, and therefore could get along with lower MPG ratings.

14

Well, I both agree with you and disagree at the same time. Yes, a hefty tax on gasoline would probably bring about an increased demand for more fuel efficient cars in the medium and long term. Short term it would simply put more burden on people who have less efficient cars, as buying a new car is a pretty big capital investment. The rich, of course, can afford to go out and buy a new, more efficient car (or to NOT buy one and just take the hit on the fuel bill)…while the middle class and the poor would have to wait until they could afford to trade up for a new vehicle. In addition, transport costs would go up for things like food and other shipped goods…which, again, would put the burden on the middle and lower classes. In addition, you have the points raised by RTFirefly about politicians and the probability of said pond scum (er, sorry…politicians I mean) actually implimenting them.
Personally I don’t think mandating fuel efficiency standards is any better of a solution either. What you will have to end up with is grandfathering all the existing cars on the road to exclude them from the standard, then attempt to make an educated guess as to WHAT fuel efficiency is practical to demand from a cost benifits stand point for the auto manufacturers…i.e. what they are actually capbable of mass producing in the time frames specified. This may work out very well…or it might divert R&D and manufacturing resources that could be better used researching alternatives…its hard to say. Whenever the gubberment puts its nose in and tries to force things its a crap shoot as to how effective it will be. You’ll have special interest groups pulling the standard one way or the other (depending on their agenda), politicians trading favors or otherwise inserting their uninformed (and often wrong or stupid) opinions into the law, and will end up with some kind of compromise that will probably be…less than optimal. And perhaps downright useless.

So, whats the answer? Well… :stuck_out_tongue: I’m all about setting up broad government guidelines and then letting the market decide. I think that, even at $3.25/gallon (what I paid for gas this morning) we are going to see a much higher demand for more fuel efficiency, and people will stop using those gas guzzlers as frequently (I know 4 couples who either don’t drive their SUV anymore, got rid of it, or only use it for special trips now).

-XT

15

Gasoline taxes, like most sales taxes, are regressive. The heaviest burden of such a new tax would fall on the working poor.

Mandated fuel standards apply only to new cars. That means that the primary burden falls on the people who buy new cars – the middle and upper classes.

If you can figure out a way to set up a gas tax that doesn’t stick it to the little guy, you might have a winner … .

16

The peverse thing is; as people abandon their SUVs, the market value of these vehicles will drop like a rock. When they are sufficiently cheap, the poor will buy them-because (despite their fuel wastefulness, they are cheap). So we will wind up with large numbers of dangerous vehicles-while people are driving priuse-like vehicles. Who will survive ina a headon collision (SUV and Prius)? It won’t be the occupants of the prius!

17

They might…but the cost to operate them is going to continue to rise. So, you will be back to only folks with real money will be able to afford one…not the capital cost, but the cost of operation will be the limiting factor.

:dubious: I doubt they will drop that far…and I doubt that the truely poor will be able to afford to operate them on any large scale. If gas is $5 or $6 a gallon, and your monster SUV takes 50 gallons to fill $250-$300), and burns through that gas every week…well, you are talking about a substantial amount of money for someone who has low income.

In addition, as more fuel efficient cars come out (and more alternatives like plug in hybrids and such), most of the older, less efficient cars will ALSO come on the market. Folks will trade up their current car that gets 20 miles per gallon for one that gets 40 or 50 miles per gallon…and it would be those 20 mile per gallon cars who’s price would drop and who would be snapped up (mostly) by the poor.

:stuck_out_tongue: This is like folks who worry about flying in an airplane while driving to work every day…or about how white their teeth are when they smoke 3 packs a day. I doubt its going to be a serious worry (statistically), Ralph. Relax.

-XT

18

I like the idea of raising fuel efficiency standards and emission controls, but even more I would like to see a graduated tax. Where vehicles that get over 40 mpg would not get an extra tax, vehicles in the 20-40 range would get an increase and vehicles below 20 mpg would see twice the increase.

The combination of both the tax and the standards would help to clean up our skies and decrease our dependency of foreign oil.

Jim {I currently drive a car that is in the 20-40 range}

19

Actually, I’d say Ralph was 100% right, you are just adding the CAFE detail which explains why our guzzlers are SUVs. Low gas prices and CAFE loopholes caused us to replace the guzzling family sedan/station wagon with an SUV that is even worse on gas. If we had gone the higher tax route instead of the CAFE route, we would not have nearly the number of SUVs on the road, and overall mileage would be better. Instead, the cars on the road look way too much like the cars of the early 70’s, only with SUVs instead of huge sedans.

You can raise CAFE standards, but people will buy the cars they want to buy. The surest way to reduce demand for gasoline is to raise the price permanently. I’d prefer a long term solution that mandates small yearly or quarterly increases in the gasoline tax over a 10 year period. The price of gas slowly goes up, we all know it’s going up, so we have the opportunity and incentive to take it into account when choosing our next car.

20

I don’t see this as being much of a problem. The rest of the world already drives much more fuel-efficient cars than we do, so they’re already being mass-produced; the only question is which ones meet our safety standards, and that can easily be tested. So unless we want to set higher standards than European, Japanese, Korean, etc. vehicles already meet, we aren’t exactly making WAGs here; we’ve got hard data on what’s do-able.