Using the empathetic backdrop of Earth Day, the Department of Transportation yesterday rolled out new car and truck fuel efficiency standards that it says will draw down America’s foreign oil dependence and carbon footprint. But they could also draw blood from already-wounded American auto manufacturers.
The proposed standard—which “improves” upon the one already passed by Congress in December’s Energy Independence and Security Act, of you-must-fade-out-incandescent-light-bulbs fame—would bump up the corporate average fuel economy, or CAFE, from 27.5 mpg to 35.7 mpg by 2015 for cars and from 23.5 mpg to 28.6 mpg by 2015 for trucks. (Congress nonetheless has to approve these changes, which incidentally still allow, as the current system does, manufacturers to pay a penalty for vehicles that don’t confirm to CAFE standards or to accumulate and apply credits to offset them.)
“All told, the proposal will save nearly 55 billion gallons of fuel and a reduction in carbon dioxide emissions estimated at 521 million metric tons,” Transportation Secretary Mary Peters said in a statement. “The plan will save America’s drivers over $100 billion in fuel costs over the lifetime of the vehicles covered by the rule.”
Wall Street Journal business columnist Holman Jenkins isn’t convinced and calls it an “Earth Day hoax” that only suckers would think “amounts to a hill of biofuel soybeans.” Given the complexity of anything that must snake its way past Congress, as any new CAFE standards must by 2009, and given the recurrent fight this has reawakened over who actually has authority to set fuel efficiency standards, it isn’t likely to amount to anything before the current administration leaves, at least.
Critics argue its effects would be disastrous on the manufacturers. “On average, engine efficiencies have advanced by 1.5 percent per year for the last 20 years, with most of that gain going to size and horsepower—as demanded by consumers,” writes Henry Payne at National Review’s Planet Gore blog. “As a result, fuel mileage averages have been flat.” He argues that the industry, by executive-department fiat, would be forced to prize fuel efficiency over the customer. And in order to meet federal standards by 2015, Payne adds, “automakers will have to increase engine efficiencies by 4.6 percent per year”—effectively tripling manufacturers’ current gains at an additional cost of $2,500 to $8,000 per vehicle. (The government’s unsurprisingly more conservative guess is about $1,000, though, as Payne point out, Toyota’s TV ads trumpeting the fuel efficiency of its smallest non-hybrid—the Corolla, which gets only 30.5 mpg—pretty well encapsulates the challenge the mandate presents.)
The refrain is becoming familiar: As more Americans take up the banner of environmental sustainability, the more problematic and double-edged proposed solutions turn out to be, especially in the arena of fuels. Yesterday, ironically, the average price of gas broke $3.50 per gallon, and oil pushed past $120 per barrel. Consequently, 2008 could be the first year since 1991 to record a drop in gas consumption—in some respects, good news—but also leading presidential candidates to contradict themselves by “prattl[ing] on about the need to fight global warming while also complaining about the high price of gasoline,” ex-Reason editor Virginia Postrel writes. The candidates, she says, treat CO2 emissions “as a social issue like gay marriage, with no economic ramifications. In the real world . . . reducing carbon dioxide emissions means consuming less energy and that means raising prices a lot, either directly with a tax or indirectly with a cap-and-trade permitting system.”