EPA rule hobbles economy, hurts consumer choice

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Article Highlights

  • The last thing we need is stringent government regulation on fuel efficiency that will raise the cost of vehicles.

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  • The Obama admin has mandated Corporate Average Fuel Economy standards that require automakers to make expensive redesigns on new vehicles.

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  • By 2016, the fuel efficiency of the America's new vehicle fleet will have to average at least 34.1 miles per gallon.

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At a time when many people have put off buying a new car until the economy improves, the last thing we need is a stringent government regulation on fuel efficiency that will raise the cost of vehicles and make matters even more difficult for consumers.

The Obama administration has mandated Corporate Average Fuel Economy standards that require automakers to make expensive redesigns on new vehicles.

By 2016, the fuel efficiency of the America's new vehicle fleet will have to average at least 34.1 miles per gallon. By 2025, compared to 2012 models, automakers will have to nearly double fuel economy to 54.5 miles per gallon.

The administration approved the CAFE standards to reduce carbon-dioxide emissions from vehicle tailpipes. It was done without full public discussion and debate, without considering the burden on consumers, or the impact on the automobile industry and working people.

We must recognize that doubling fuel economy is no small step. Henry Payne, auto critic for The Detroit News, says it forces automakers to make huge capital investments that cost billions of dollars and require the retooling of factories.

Nevertheless, automakers are making serious efforts to comply with the fuel-economy rules. New-model cars will be lighter, safer, more fuel efficient - and more expensive.

How much more expensive? Some estimates say between $1,800 and $3,000 per vehicle to comply with the EPA rules, and others say as much as $12,000.

President Obama, as part of his strategy to reduce America's carbon footprint, set a goal to put 1 billion all-electric vehicles on the road by 2015. Yet today plug-in hybrids and battery-powered electric vehicles account for only 3 percent of U.S. car sales.

Let's be realistic. A recent Gallup poll indicated that 57 percent of Americans say they won't buy an all-electric car regardless of how high gasoline prices go.

Americans prefer not to be shoehorned into a one-size-fits-all option. We value the option to exercise individual choices about what types of cars we want to own. Many of us recognize that the innovation essential to create new technologies comes from the private sector, and cannot be mandated from politicians and government bureaucrats.

Besides, the United States is not the world's biggest carbon emitter. China has surpassed us, as a result of the exploding automobile ownership from economic growth. It's very likely that additional carbon-dioxide emissions from China, Brazil, India and other rapidly-growing economies will overwhelm any reductions realized by the United States.

Instead of imposing carbon limits on the auto industry, an alternative market-based approach would stand a better chance of succeeding. Window stickers with mileage information on new cars are sufficient to allow consumers to make informed decisions about fuel economy.

It's important to realize that steps can be taken now that will help boost fuel efficiency and reduce carbon emissions from cars: Drive at moderate speeds, keep tires properly inflated and use low-resistance tires. Others steps are to keep cars well-tuned, reduce idling time, and use window coatings to reduce heat during the summer months.

In response to consumer demand for greater fuel-efficiency, manufacturers are already switching from six-cylinder to four-cylinder engines equipped with a turbo or super-charger to improve fuel economy.

At least one company is investing in nine-speed transmissions and diesel engines, while another is shifting from steel to lighter weight aluminum for body panels.

In the end, a judgment has to be made whether the potential benefits of the CAFE standards outweigh the costs. There will be an interim assessment by the EPA and the National Highway Traffic Safety Administration in 2017 to review both the cost and effectiveness of the current approach.

Before hobbling our economy with costly fuel-economy rules, the administration should explore all possible alternatives that make more sense for automakers and consumers alike. And it should keep in mind that for any carbon reduction program to succeed, other countries must participate.

Mark J. Perry is a professor of business and economics at the Flint campus of The University of Michigan and a scholar at the American Enterprise Institute.

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About the Author

 

Mark J.
Perry
  • Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan's Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

    Follow Mark Perry on Twitter.


  • Phone: 202.419.5207
    Email: mark.perry@aei.org

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