At the Speed of CAFE Standards

Brian Beutler speaks up for CAFE as opposed to a gas tax:

When gas prices go up, but not way up, people keep driving. It has, as we've seen, a marginal impact. If, on the other hand, you double CAFE standards, which I think most Democrats would like to see happen, then ceteris paribus you something like halve auto emissions. What actually happens is more complicated, but one it's certainly true that you undo some of the incentives people had to drive less to save money. As we've seen, though, unless the price of gas is really very high, those incentives aren't all that effetive.

I think there's a double-standard here that you see all-too-frequently. It's true, of course, that increases in gasoline prices don't have much short term impact on fuel consumption. That's because the main things one could do to reduce one's fuel consumption are things like "buy a more fuel efficient car" or "live someplace else" that are hard to alter. But in the short-term, doubling CAFE standards doesn't "something like halve auto emissions." Instead it does . . . almost nothing. The new regulations don't make the cars already on the road any more fuel efficient, and they don't create incentives for people to buy new cars.

That's not to say it's a bad policy -- the relevant horizon is the long run. But then that's the standard against which taxes should be judged as well. Under either scenario, you can make the desired long-run outcome occur sooner by offering people financial incentives to trade in older, less efficient cars for newer, more efficient ones. That, though, requires revenue. And a gas tax provides revenue, which CAFE doesn't.

Comments

Why isn't the feebate system ever discussed at all? You build the gas tax into the price of the auto (which is what people pay attention to anyway), and you give automakers a credit (which they will probably pass to the consumer) for fuel-efficient cars. You can either make it revenue neutral or revenue positive.

Posted by Nicholas Beaudrot | October 12, 2007 4:54 PM

Matt, like I said on Brian's blog, and like I said here yesterday, CAFE is a laughably inefficient way to curb this problem. I applaud you for recognizing this fact.

Brian suggests that doubling CAFE standards will decrease CO2 emissions (does he really mean halve?). But that would only apply to new cars. What about the millions of vehicles already on the road? Or factories, boats, trains or power plants?

I do some work with the Auto Alliance, so I'm admittedly against a swift and painful hike (I support American workers), but CAFE is simply archaic. It's junk science that's politically expedient. Let's phase in CAFE, and figure out smart, clean technology.

Matt, what do you think?

Posted by Muskie | October 12, 2007 4:56 PM

Matt, like I said on Brian's blog, and like I said here yesterday, CAFE is a laughably inefficient way to curb this problem. I applaud you for recognizing this fact.

Brian suggests that doubling CAFE standards will decrease CO2 emissions (does he really mean halve?). But that would only apply to new cars. What about the millions of vehicles already on the road? Or factories, boats, trains or power plants?

I do some work with the Auto Alliance, so I'm admittedly against a swift and painful hike (I support American workers), but CAFE is simply archaic. It's junk science that's politically expedient. Let's phase in CAFE, and figure out smart, clean technology.

Matt, what do you think?

Posted by Muskie | October 12, 2007 4:57 PM

How about we look at 1979? Prices went way up, thanks to Ayatollah Khomeini, and Carter was able to push an increase in CAFE standards through Congress.

Prices eventually came down with a big thud in 1986, but the CAFE increases were still there. As a result, it took until 1993 for U.S. petroleum consumption to reach 1979 levels again.

So bring on the hikes in the CAFE standards. They work. Bring on a gas tax too, if you can pass it.

But frankly, I like Beaudrot's "feebate" suggestion even better. This is the first I'd ever heard of it, but I'm pissed at myself for not thinking of it on my own.

Posted by low-tech cyclist | October 12, 2007 5:34 PM

What creates incentive to buy new cars is old cars sucking and breaking down and become more trouble and cost than they're worth, so Matt's correct that the time horizon of CAFE increases is years off (though it does have an effect eventually, especially if the SUV loopholes are closed). But the point is that you're never going to pass a gas tax that's high enough to actually deter the behavior and make people assume other huge costs out of nowhere without having budgeted for them (buying new cars and/or moving houses). The only solution is to do both, plus spend a lot more on public transportation, plus provide lots of subsidies for cleaner technologies to be price competitive a la the hybird deductions and city/state green building incentives, solar and wind breaks, etc., etc. It's not one or the other, it's all the above.

Posted by MSB | October 12, 2007 5:56 PM

When gas prices go up, people still have to get to work, to school, to the store -- except in the few places where there is readily available and convenient public transit, higher gas price won't have much effect on how much people drive. But it will reduce our disposable income. So we won't drive less, but we'll eat out less, and go to the movies less.

Posted by DHN | October 12, 2007 6:21 PM

Re: But then that's the standard against which taxes should be judged as well.

And the long term future for carbon taxes is nill: there is none. Because any serious carbon tax will result in the public voting the GOP and the radical right back into office, so that not only will those carbon taxes be repealed but nothing else will be done about global warming the USA and a whole lot of awful policies will be followed in everything else as well. Get over the damn carbon taxes! They're a ticket to political catastrophe or this country at jus tghen moment when we might actually be able to undo some of the hurt that's been done in the last six years and even make real progress on global warming.

Posted by Jonf | October 12, 2007 6:46 PM

Increasing CAFE standards are not the only answer to global warming but they are an important part. Doubling CAFE standards would take a few years, it would have to be done in steps, and for that to have its full impact on the US fleet would also take a few years, but not that long. The average life of a US car is, what 5 years? 8 possibly? So the effects on gas consumption will be small but noticeable quickly, and large complete in

Compare that with the decades it takes to, say plan and build a new mass transit system, or to have a meaningful impact on our suburban sprawl lifestyle. I support carbon taxes also, to provide revenue for research and price supports for alternate fuels, but CAFE clearly makes sense as well.

Posted by Jeff S. | October 12, 2007 7:32 PM

CAFE standards don't address the big problem -- people drive more miles than ever. A progressive fuel consumption tax works much better and would pay immediate results. Tax car mileage at vehicle inspection time each year - X amount for the first 200 gallons of gas, Y for 201-400, Z for 400+. You could take a reading vehicle odometers at an annual safety inspection and assess the gas tax there rather than at the pump.

That way Americans are free to buy whatever fire breathing V8 monster they want and are judged based on their behavior, not their taste in cars.

There is nothing intrinsicly green about somebody who puts 30,000 miles per year on their 45 mpg Prius and a lot right about Grandma is putting 3,000 miles per year on her Crown Victoria. CAFE standards prevent Grandma from driving what she wants to drive but do nothing to prevent her granddaughter from driving all over creation with her friends.

Posted by joejoejoe | October 12, 2007 8:24 PM

Based on this quote, Brian seems to assume miles driven is a constant, not a variable impacted by the marginal cost of each mile.

While raising the CAFE standard isn't a bad idea, the gas tax is a better, more effective one.

Posted by DM | October 12, 2007 8:32 PM

People can decrease the number of miles driven, the vehicle size or increase efficiency, and perhaps it is most efficient to (a) leave the decision to them, (b) provide incentives in the right directions.

Incentives should have two forms: penalties, or "Pigovian taxes", and incentives, e.g. subsidies for the most efficient vehicles, especially for lower income people. Government could also do something to accelerate the adoption of new promising technologies. For example, it was alleged that a 125 mph car is quite possible (a German start-up company promises exactly that).

I would fouble the price of gasoline and at least triple the price of coal with a combination of carbon tax and hydrocarbon tax, but do it gradually over, say, 10 years. People could adjust their purchases and investments accordingly.

Posted by piotr | October 12, 2007 8:49 PM

Brian seems to assume miles driven is a constant, not a variable impacted by the marginal cost of each mile.

First of all, the point is that the number of miles driven does not very to any large degree. It's not like, whoopie! gas is down a quarter, now I'll drive to the end of my driveway to get the paper! Most people have no other choice but drive to where they need to go. Other than that, they get two weeks vacation a year. Demand is inelastic.

Secondly, talk about inefficient, using tax policy to regulate behavior is about as inefficient as it gets.

Third, Matt doesn't even drive. Therefore he doesn't pay for gas. Therefore he is advocating for a tax he will not have to pay. This is hardly someone who should demand hard choices be made in this area.

Fourth, the lag time of CAFE standards is unfortunate, but not problematic. The urgency of preventing climate change (sorry "catastrophic" climate change) is way overblown. What is the average lifespan of a car 5 to 10 years? Raise the standards high enough to compensate for the lag and set a schedule for continued escalation in the future.

Posted by Just Karl | October 12, 2007 9:14 PM

Just Karl - 'miles driven does not very to any large degree.'

That's not accurate. The average number of vehicle miles traveled per household is up more than 17% since 1990 (21,252 in '01 vs. 18,181 in '90). Miles traveled also varies greatly between income levels. Higher income households with multiple cars drive many more miles on average. Getting your kid a Prius for their 16th birthday may seem like a good thing for the environment but it's far worse than just sharing Mom's and Dad's car. There is A LOT that can be done to reduce miles travelled per household even if you grant X miles for a work commute.

http://nhts.ornl.gov/2001/presentations/vehicleMiles/index.shtml

Posted by joejoejoe | October 13, 2007 3:36 AM

Posted by low-tech cyclist | October 12, 2007 5:34 PM:

But frankly, I like Beaudrot's "feebate" suggestion even better. This is the first I'd ever heard of it, but I'm pissed at myself for not thinking of it on my own.

... which underlines Beaudrot's query why feebates are not included.

After all, while gas taxes have regressive impacts, people at the bottom end of the income ladder tend to be restricted to the pool of choices made by people higher up the income ladder in years past. So given a likelihood of higher gas prices in the future, a feebate program on new car sales that will increase the supply of more fuel efficient cars will have a progressive impact.

Posted by BruceMcF | October 13, 2007 8:37 AM

joe,

Excuse me, I thought you were claiming that miles driven varies in response to gas prices. I see now that you mean total miles per household varies greatly based on number of vehicles. Why do you think income level plays a role in greater total miles traveled? Do they live farther from work? Have more leisure time to travel? I'd guess that income level also correlates with greater air travel and boat travel. Another problem with gas taxes, aside from not being very effective at changing behavior, is that it's a regressive tax. The solution to raising tax revenue to be used on greener technologies should involve progressive taxation.

Posted by Just Karl | October 13, 2007 9:05 AM

This is a fascinating discussion. I don't think that a gas tax will be as effective as CAFE in reducing overall fuel consumption. Frankly, people will still need to drive the same distance - it will just cost us way more money. In most places in the U.S., public transportation simply sucks.

Unless, as Joe said, the gas tax is progressive and is used to subsidize green technologies (as opposed to subsidizing conflicts in the Middle East), the only solution to reducing fuel consumption, in addition to pollution and greenhouse gas emmissions is better fuel efficiency in vehicles. I fully support putting the onus on manufacturers to do so, rather than burden average, hard-working Americans.

Sure, CAFE will affect new vehicles in the short term, but over time, there will be more and more fuel efficient cars on the road than gas guzzlers.

I believe that the New Energy Bill that is being discussed between the House and the Senate right now needs to include an uncompromised CAFE standard of 35 mpg by 2020 - at least.

If you support that too, here's a petition you can sign: Energy Bill 2007

Posted by Lorna | October 18, 2007 1:41 AM