Showing posts with label auto industry. Show all posts
Showing posts with label auto industry. Show all posts

Tuesday, May 26, 2009

Why Do We Have CAFE Standards?

Last week President Obama had a major press conference to announce a proposed new national fuel economy standard for vehicles. This new standard will average out to around 35 miles per gallon. This new standard implements some policies from the Bush administration years ahead of their original target date and creates a national corporate average fuel economy, or CAFE, standard.


CAFE standards started in the late 70’s and were specifically targeted at passenger cars. At the time they were created to lessen our use of foreign oil. They have failed miserably with this goal. According to the Heritage Foundation, the US has increased its foreign oil consumption from 32 percent to 52 percent of oil used since the standards were adopted. The new time lines announced last week will affect the 2016 model year cars. These standards will require that all of a particular class of vehicles sold by any manufacture average out to meet the target miles per gallon. The footprint of the vehicle is the best way to think of the different classes. If Ford sales 1,000 cars in a certain footprint, those 1000 vehicles must average out to have the target fuel efficiency. If Ford sales a lot of cars with lower efficiency, then the other cars must have a much higher efficiency in order for the 1000 vehicles to average out to the required mandate.


There are trade offs to higher fuel economy. According to the Obama administration, the new national standards may add around $1300 to the purchase price of your vehicle. This is only an estimate, and some groups claim the real price is higher. There is also only so much fuel economy you can get from an engine. The rest has to made up by making the car lighter. The National Highway Traffic Safety Administration has expressed concerns that the lighter, more fuel efficient vehicles result in more fatalities every year. CAFE standards have resulted in an estimated 1,300 to 3,900 deaths per year, depending on the year and the source. Some environmentalists would argue that these deaths are acceptable if we lower the amount of pollutants discharged each year to help solve global warming. The truth is that CAFE standards won’t solve global warming. The next time you drive to work and see a convoy of tractor trailer trucks, or pass a construction site, remember those vehicles are exempted from CAFE standards due to their size. The CAFE mandate also argues against itself. The theory is that more fuel efficient vehicles reduce our need for oil and gas. In reality, fuel efficient vehicles make driving cheaper. Cheaper driving means more vacations, more car trips, and more gas used.


Personally I don’t think the government should be telling auto makers what fuel efficiency their vehicles must achieve. The government doesn't mandate XM radio (yet), why fuel efficiency? President Obama has never run a business, and I don’t believe there are any automotive engineers in Congress. The government should try to address other problems. Perhaps after the economy is fixed, the nuclear problems of Iran and North Korea are resolved, and terrorist stop trying to kill us I will change my mind. Until then, I think the government needs to keep its eyes on the ball, and stop worrying about whether my car gets 20, 30, or 40 miles per gallon.