To CAFE or not to CAFE

The CAFE standards vs. carbon tax debate is more complicated than we imagine 19

One of the most frustrating aspects of the climate debate has to be the fact that just about every informed pundit, across the ideological spectrum, agrees that a carbon tax would be an outstanding way to reduce carbon emissions -- and yet no one considers such a tax politically feasible. One might suggest that if pundits weren't constantly qualifying their support for a carbon tax with lamentations about its political impossibility, political support might be more forthcoming.

In the meantime, however, the blogosphere has taken the debate over the best policy-that-can-never-be in a new direction: since we almost certainly can't pass a carbon tax, should we support higher fuel efficiency standards for our automobiles?

In general, smart commentators have concluded that the answer is yes, and it isn't difficult to see why. Better efficiency standards should reduce carbon emissions, so long as they don't induce too much new driving. (Because more efficient vehicles use less fuel per mile, they make driving cheaper, and thereby encourage people to do more of it.) But our best estimates tend to show that the increase in miles driven wouldn't overwhelm the per-mile reduction in carbon emitted, suggesting that an increase in efficiency should net us an overall decline in carbon output. Case closed, right?

Not exactly. There are a number of good reasons to think carefully before pursuing new CAFE rules.

First and foremost, legislation to raise efficiency standards will be subject to serious political pressure, and one of the primary goals of that pressure will be to delay or slowly phase in new standards. Couple that delay with the time it takes to roll over an appreciable percentage of the current automobile fleet, and it could be a decade or more before higher efficiency standards begin to have any effect on carbon emissions. A carbon tax -- or an increased gas tax -- would have an effect from the day it was introduced, not least of which would be to raise revenue, the better to fund other carbon reduction strategies.

Perhaps more worrisome is that fact that better fuel efficiency might make long-term strategies to reduce emissions less effective, by making consumer demand for gasoline less responsive to price shifts. Consider this: by reducing the cost of driving additional miles, more efficient engines will encourage drivers to live farther away from their places of business -- efficiency, in other words, contributes to sprawl. But a sprawling population will find it much harder to substitute away from driving to public transit, bicycling, or walking. Gas prices can increase a great deal, but people still need to get to work; if sprawl limits their transportation alternatives they'll be forced to continue driving.

What's more, by reducing the cost of driving, more efficient engines will reduce the competitiveness of current automobile alternatives. An individual purchase of an efficient automobile could actually increase overall emissions if the money saved on gas convinces the purchaser to drive rather than take transit. Given better efficiency standards, future transit subsidies would have to be higher to attract riders. A carbon tax, by contrast, would reduce the need for transit subsidies (while providing revenue to put toward transit operation).

And at some point, we may decide that it is absolutely necessary to levy a carbon tax. A number of pundits have suggested that there's no reason to suspect that higher efficiency standards and a carbon tax need be mutually exclusive -- without realizing that more efficient engines will frustrate the goals of a tax regime. If you need less fuel to travel ten miles, then it will take a much higher fuel tax rate to discourage you from traveling that distance.

Of course, at the end of the day, we might decide that new CAFE rules are better than nothing. The New York Times reported today that the citizens of the developing nations of China and India will be in the market for hundreds of millions of new automobiles over the next decade. Transferable innovations in efficiency technology, developed here as a result of higher efficiency standards, might be crucial for mitigating the impact of such an increase in vehicles in operation. But I see no reason to accept CAFE legislation as acceptable on its own. A carbon tax or increased gasoline tax passed within the next few years is likely to do much more good than new CAFE legislation today. We should do our best to make the politically difficult possible.

Ryan Avent is a freelance economics writer living in Washington, D.C. He blogs at ryanavent.com, and at The Economist’s Free Exchange.

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  1. GreyFlcn Posted 9:57 am
    12 Oct 2007

    Well it's really a question ofWell certainly I do think that different market sectors might have different regulation schemes.
    The thought of doing cap-and-trade for individual car owners would be ludicrous.
  2. Sam Wells Posted 10:38 am
    12 Oct 2007

    CAFE anyone?I like CAFE standards because they apply to manufacturers and not each person.  There was talk about extending CAFE to cover over 10,000 pound GVWR vehicles that would include sports utility vehicles, although I'm not sure if that stuck.  Then the real banking and trading is done with imports, exports, clean credits, and old stock allowances just like the EPA emission rules.  You'd ratchet down on a reasonable timeline and yes, it would have dramatic reductions for new vehicles, especially the "big fat ones" that can include some foreign makes as well.  I am opposed to any "credits" for any motorist anywhere, unless they're playing pocket poker with a credit card!

    Onward through the fog
  3. Jon Rynn's avatar

    Jon Rynn Posted 2:15 pm
    12 Oct 2007

    or what would be easier politically......you could just initiate a large-scale program of building public transit and skip the cafe and carbon tax, which would directly reduce carbon emissions, and quickly.
  4. Pangolin's avatar

    Pangolin Posted 3:00 pm
    12 Oct 2007

    Go! Lemmings, Go!So we won't institute CAFE standards because, um, it would reduce the actual emissions per vehicle mile traveled? Have you considered that it also reduces the road building revenue per vehicle mile traveled? Most importatntly it would prevent upper middle class mommys parents from doing the grocery shopping in quad-cab diesel monsters in order to impress themselves with their personal power.
    And we won't institute a carbon tax and use the revenue to fund efficiency upgrades because that would lower the overall tax base in the long run and reduce corporate profits.
    Better visit Florida now before the flood.
    Humans, as a species, are too stupid to survive.

    Put the Carbon Back
  5. Tim Hurst's avatar

    Tim Hurst Posted 7:51 pm
    12 Oct 2007

    Easier politically in some places......but in others, like much of the mountain west, the current political sphere is not the host of any sort of meaningful discussions about mass transit (although Denver is pursuing a reasonably aggressive, though long overdue, development strategy for light rail.). But the problem is that the whole front range cannot get all of their pistons firing at the same time. Counties coalesce into these regional transportation districts for taxing purposes, while others opt out. Unfortunately this can create a patchworks of transportation that essentially go to communities that feels like the want to spend their money on them. As a result, it kills me that I still can't take a southbound train from Ft Collins down to denver, colorado springs,pueblo,etc., especially considering the exponential growth of these areas. You can't even get any rail from the airport (although this is under construction).
    Sorry for the rant

    Timothy B. Hurst

    ecopolitology.blogspot.com
  6. justlou Posted 9:18 pm
    12 Oct 2007

    If Hansen's Ten Year Unitreally means anything we are screwed. Very likely CO2 emissions will continue to rise rapidly over the next 10 years.  Overcoming the climate skeptics was the easy part.  Now it is starving the beast and the beast is going to roar!  
    As long as AutoNacional can weasel out of CAFE by mythologizing that they are providing the vehicles we are demanding they will get their way with Congress.  And as long as the public gains their sense of identity from pounding pavement with big/powerful/safe/cool/sexy then Congress will be safe in continuing to perpetuate the myth.
    Don't give us real, long lasting liberty but give us ten more years of borrowed and bridled liberty.  
    We have a destiny with Reckoning which grows  with each missed and muddled opportunity.  The Big Suck is fast approaching.  How many Hansen units will pass before we finally get it?    
  7. Sam Wells Posted 1:08 am
    13 Oct 2007

    Market already doing it?Maybe this is a "twisted hope" but isn't the market already causing US Big Auto to choke and go out of business?  Isn't the rising price of crude oil causing an effect on lowering VMT?  
    The top five percent of US wage earners will probably always buy "urban assault vehicles" although I do see some going green.  But for "Joe Sixpack" the rising costs have to limit travel at some time or other.  
    Living in a seaside resort community I can vouch that we've seen a substantial reduction in travel from outside the metro area.  High gas prices have not only limited vehicle traffic outside 200 miles but curtailed recreational boating as well.
    The question is whether this market signal will keep squeezing vehicle activity and limit those "urban assault vehicles."  Both people and the petroleum markets are extremely fickle ... but one prediction could be that eventually we'll have to have rationing (yipes!) so the DOD can get their hands on all that transportation fuel to fight overseas wars.  Freakin' nightmare, man.  

    Onward through the fog
  8. justlou Posted 3:03 am
    13 Oct 2007

    Market Ain't Doing ItRight now, SUVs outsell hybrids by about 20 to 1.  If that was reversed, you could say the market was doing it.  
    Many of the "hybrids" on the market today are not much greener than their nonhybrid precursors so the ratio is actually worse than the numbers tell.
    Even the auto maker leading the hybrid revolution, Toyota, is pumping umpteen Tundra pickups into the US market and fighting CAFE standards alongside their US competitors.  Go figure.  
     
  9. Jon Rynn's avatar

    Jon Rynn Posted 3:31 am
    13 Oct 2007

    Pangolin --You had a very nice list of ways to mitigate global warming in a previous comment, why don't you concentrate on that, it was better than cafe/carbon taxes, if I remember correctly.
    Justlou, I think you hit the nail on the head, defeating deniers will be nothing to starving the beast.  
    Tim, I feel your pain, we're near Chicago which used to be the hub of the national railway system -- now the hub of the airline system -- and to go by train to seattle or sf takes 18 hours, and even to a nearby city is long and expensive.  Maybe from small light rail beginnings can come some bigger interurban steps.
  10. GreyFlcn Posted 5:53 am
    13 Oct 2007

    What would make this whole mess a LOT simplerYou know what would make this whole mess a LOT simpler.
    A mandatory dashboard gauge showing your realtime mileage. In all newly manufactured automobiles.
    Part of the biggest problem with energy consumption is that it's practically intangible.
    Much like trying to tell time, without a clock.
  11. Sam Wells Posted 2:18 am
    14 Oct 2007

    Actually, might be difficultI can see how fuel economy gauges in MPH or KPH would work for all-gasoline vehicles or maybe straight (100% ULSD) diesel engines.  
    After that it gets rather complicated.  All-electric vehicles having a battery only really measure discharge rate, not kW-hours (although I suppose one could, taking into consideration regenerative braking).  Not all fuels have the same inherent brake specific fuel consumption (BSFC), which would make bio-diesel and ethanol flex-fuel metering difficult at best.  
    But maybe a micro-processor can actually figure power and energy as well as CO2 equivalents.  
    Beyond that, I suppose there could be some "avoidance" when you test drive a car before you buy one, but after the first couple of cranks you'll see the same numbers over and over again.  For example, you'd might see 40 MPG on the highway and 32 on non-highway roads.  I suppose one could check the numbers after a year when maintenance is performed to see if the numbers improve, but basically you get what you get.
    That's why EPA and others have rating programs such as the green car programs.  Some programs award one to five stars based on how green a vehicle or engine is.  

    Onward through the fog
  12. Pangolin's avatar

    Pangolin Posted 3:21 am
    14 Oct 2007

    MPG gages are a tiny stepin the right direction, but no more likely to get compliance from the big automakers than CAFE compliance.
    As to the technological challenge, Volvo has been making cars with MPG readings as part of the computerized dash options.

    It reads in either second-by-second update, or a running average. As most cars now have engine management computers this isn't a problem of information but display.



    Put the Carbon Back
  13. GreyFlcn Posted 3:31 am
    14 Oct 2007

    Fine thenRequire it for all Diesel and Gasoline Vehicles ;D
    _
    The whole point though is that if MPG was in your face, that the public would be far more aware of it.
    And that alone would be a perfect wedge to cause change to happen.

  14. Sean Casten's avatar

    Sean Casten Posted 4:32 am
    14 Oct 2007

    I don't buy itThe idea that higher fuel economy will make people live farther away just doesn't pencil - for the same reason that a carbon tax won't really affect transportation fuel use.
    The fuel costs of a car are a tiny fraction of the ownership costs of a car, for the simple reason that most of the time you own a car, you aren't driving it.  Thinking that lower fuel costs (whether through tax policy or better fuel economy) will encourage more driving simply doesn't pencil out economically, for the same reason that our recent $2 increase in gasoline prices hasn't caused people to drive less.  Really inelastic demand.
    Consider: if the average American drives 15,000 miles/year and gets 30 mpg (just to keep our math easy), that means she uses 500 gallons of gasoline.  At $3/gallon, that's $1500/year.  A 30% increase in fuel economy is worth $500/year, or less than $10/week.  That simply isn't going to shift behavior nearly as much as policy shifts to affect the price of the vehicle (for example, the tax breaks provided to HEV owners) or mandated fuel efficiency, a la CAFE.  These aren't the only two options of course, but the critical point is that if you want to material impact transportation fuel use, you have to focus efforts at the vehicle, rather than fuel level.
  15. Sam Wells Posted 5:04 am
    14 Oct 2007

    There ya go!How about a VMT tax weighted for MPG, then?  Just wondering.

    Onward through the fog
  16. Biodiversivist's avatar

    Biodiversivist Posted 2:19 pm
    14 Oct 2007

    Well, I doubt that this rebound effect is trueThere is no way anyone is going to drive a Prius twenty thousand miles a year instead of ten just because it gets twice the gas mileage of the Subaru Outback it replaced.

    In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
  17. justlou Posted 9:51 pm
    14 Oct 2007

    BioD"There is no way anyone is going to drive a Prius twenty thousand miles a year instead of ten just because it gets twice the gas mileage of the Subaru Outback it replaced." BioD.
    I'd agree with overall, total miles driven, the higher mileage vehicle will probably not double mileage driven.  
    But, for long, several hundred mile journeys, where you have second thoughts about driving the Subaru, you would be less inclined to have second thoughts about starting the journey in a Prius.  
    How many people have any hesitation about driving anywhere?  
  18. idealist4sale Posted 5:23 am
    15 Oct 2007

    interestingThanks for a great article, Ryan. I'm currently reading Suburban Nation, which documents the rise of sprawl,  but I'd never considered the potential impact that more efficient vehicles could have on the proliferation of sprawl. It would definitely be better to get people spending less time in their cars rather than spending more time in a more efficient one. CAFE standards could turn out to be yet another way of making our society even more automobile-dependent. I agree that it's probably best to go ahead and increase them since our political climate is not prepared for more extreme measures, but I'm glad you pointed out the negative impacts it might have.

    http://blogspot.idealist4sale.com
  19. mmcconne Posted 8:19 am
    30 Oct 2007

    The taxI believe Mr. Avent misses the point of the carbon tax.  The tax changes the market by associating a cost to the individual with the social cost of emitting carbon.  That money should then be used to pay to "fix" the damage done by the emission.  Eventually, as emissions decrease, the marginal cost of emitting could hopefully  become insignificant as natural systems will take care of a certain amount to carbon in the atmosphere.  The point is that we must regain an equilibrium.
    The creation of a tax in no way takes away from the value of other programs such as CAFE.  I absolutely agree that this must happen, especially in our current political climate.

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