The President's New Cars (climate policy for motor vehicle transportation rears its ugly head)
My op-ed in today’s USA Today is about President Obama’s proposed new fuel economy standards. Don’t like ‘em. Unfortunately, an editing snafu over at the newspaper inadvertently left out the fact that there are four models at present that meet the proposed new standard – the 2010 Honda Insight (41 mpg) and 2010 Ford Fusion Hybrid (39 mpg) were left off the list.
Space prohibited me from making an additional point. Even if there is no rebound effect, my colleague Pat Michaels finds that global temperatures will only be reduced by 0.005 degrees Celsius by 2050 and 0.0078 degrees Celsius by 2100 once you plug those emissions reductions into the computer models used by the IPCC. (These are thousandths of a degree, mind you.) Of course, proponents contend that U.S. action on fuel efficiency will lead to like action abroad. Well, good luck with that. But even if all of the signatories to the Kyoto Protocol adopted Obama’s proposed fuel economy standards, global temperatures would be reduced by only 0.038 degrees Celsius by 2050 and 0.071 degrees Celsius by 2100. If you tried to monetarize those benefits, you would be hard pressed to come up with an defensible number of consequence.
So what should be done instead? Nothing! At the risk of sounding political irrelevant, there is no good case for government to reduce U.S. gasoline consumption via fuel economy standards or fuel taxes, an argument I made at length in a study I co-authored almost two years ago with my colleague Peter Van Doren. In challenging the rationales for higher gasoline taxes, I concluded:
Oil is not disappearing, and when it becomes more expensive, market agents will substitute away from gasoline to save money. The link between oil price shocks and recessions, although real in the 1970s, has been much more benign since 1985 because of the termination of price controls. Market actors properly account for energy costs in their purchasing decisions absent government intervention. Pollution taxes, congestion fees, and automobile insurance premiums more closely related to vehicle miles traveled are better remedies for the externalities associated with automobile travel than a simple fuel tax. Gasoline consumption does not necessarily distort American foreign policy, impose military commitments, or empower Islamic terrorist organizations.
I also advocated a different approach to road-usage revenue than state and federal gasoline taxes:
State and federal gasoline taxes should be abolished. Local governments should tax gasoline only to the extent necessary to pay for roads when user charges are not feasible. If government feels compelled to more aggressively regulate vehicle tailpipe emissions or access to public roadways, pollution taxes and road user fees are better means of doing so than fuel taxes. Regardless, perfectly internalizing motor vehicle externalities would likely make the economy less efficient—not more—by inducing motorists into even more (economically) inefficient mass transit use.
Now this is quite a mouthful, but please peruse the August 2007 paper and provide your comments. I still like my arguments.