A Free-Market Energy Blog

The President’s New Cars (climate policy for motor vehicle transportation rears its ugly head)

By Jerry Taylor -- May 20, 2009

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.


  1. Tom Tanton  

    Yesterday’s announcement was touted as a reconciliation between CA and the feds–with California “winning” the waiver dispute–now the country gets to suffer the same pain as the state (is that a state’s right? to spread–not share–the pain?) BUT less talked about are the key details of the (Fed) 2016 targets that won’t be released until next year*. As the rules take effect, California could choose to step in if it feels the EPA isn’t enforcing the standards. In addition, California retains its right to set its own air standards, and California’s AB 1493 authorizes the air board to (still) tighten vehicle emissions in 2017 and beyond – setting up another potential battle with carmakers and the federal government. Will the Feds continue to cave?

    * since nobody knows what technologies will be used to comply, how arrogant is the EPA and President in claiming upfront costs will be paid back in three years? Looks like they’ve embraced CARB’s approach to forecasting.


  2. Marlo Lewis  

    Another problem with these standards is that they will start a regulatory chain reaction with potentially devastating economic impacts. The new standards are the regulatory counterpart to the endangerment proposal EPA issued on April 17, under Sec. 202 of the Clean Air Act.

    As I explained in a previous post, once EPA finalizes the Fuel economy/GHG emission standards, an estimated 1.2 million previously unregulated buildings and facilities will qualify as ”major stationary sources” of carbon dioxide under the Clean Air Act’s Prevention of Significant Deterioration (PSD) pre-construction permitting program. Thousands of small- to mid-size firms could be compelled to obtain PSD permits in order to build or modify such “major stationary sources” as office buildings, enclosed malls, big box stores, and commercial restaurants.

    The PSD permitting process is costly and time consuming. In 2003, the average permit cost $125,120 and 866 hours for regulated entities to obtain (not including the costs of emission control technologies PSD permits may require). No small business could operate under the PSD administrative burden. A more potent Anti-Stimulus package would be hard to imagine.


  3. Alan F.  

    The VW diesels have been at 40+ for decades and still are. Blame whomever has kept diesel off the table.


  4. oamoe  

    Where to start with Jerry Taylor? There are plenty of good reasons for the government to set mileage standards. One is to stop the enormous waste of petroleum that occurs only so fat, spoiled Americans can drive however they damn well please. There is only a finite amount in the ground and it is valouable feedstock for the chemical industry. Secondly, why wantonly burn gasoline so that we can send billions to Middle East dictators and run up a trade deficit? Thirdly, Pat Michaels notwithstanding, releasing in a very short time billions of tons of carbon that took nature eons to safely sequester underground is most definitely having an effect on our climate. Fourth, it is the right thing to do. Quit being greedy and irresponsible, Jerry, and get out and walk for a change.


  5. oamoe  

    One last thing – have the high fuel taxes in Germany and Denmark crippled their economies? Germany was only very recently surpassed by China as the number one exporter in the world. the quality of life in Denmark and Norway, for example, where the government plays a big, intrusive role, is rated to be far higher than the US. Look also at the huge government role in China vis a vis green technologies and energy – they will be the world leaders in the new economy. I have been patiently waiting for an American President to set high CAFE standards – finally!


  6. Jeff  

    Efficiency has to take into account life cycle costs. Public trianportatson is a good example. When all the costs are totalled(including running buses and trains empty to carry a few people at night) only a few systems in high population densities have real savings over automobiles.


Leave a Reply