|
|
One way that governments can encourage greater efficiency in energy usage is by setting fuel economy standards. These mandate the number of miles/kilometers a vehicle must be able to travel for every gallon/liter of fuel it consumes. Fuel economy is not to be confused with fuel efficiency, which technically relates to engine performance, though the terms are often used interchangeably.
Corporate Fuel Efficiency Standards
Fuel economy standards have been used to improve energy efficiency in many places, most notably in the United States. The first Corporate Average Fuel Economy (CAFE) standards, as they are known, were created in 1975 by the National Highway Traffic Safety Administration (NHTSA) and the EPA.1 Between 1978 and 1987, CAFE standards improved on-the-road fuel economy in U.S. vehicles by 40 percent.2 But then standards languished at 1987 levels for almost 20 years, with economy hovering at 27.5 miles per gallon (mpg) for passenger cars and 20-22 mpg for light trucks and sport-utility vehicles (SUVs).3 According to current standards, cars and light trucks are considered separately and are held to different standards. As of the beginning of 2009, the ‘car average’ has to exceed 27.5 mpg, and the average for light trucks must exceed 20.7 mpg. By 2016 though, there will be CAFE average of 35.5 mpg and, by 2025, the CAFE for vehicle fleets will be 54.5 mpg.4
Because these standards remained the same for so long, manufacturers focused on size and performance at the expense of efficiency. Over the last two decades, vehicles became 20 percent heavier and 25 percent faster.5 These developments on their own may have increased greenhouse gas emissions in the United States by up to five percent. Though the tides may be changing, reporters who attended the 20212 Detroit Auto Show reflected that automakers are now shifting to smaller and lighter cars to boost gas mileage. Fuel economy has the potential to increase 50 percent with some of the newer designs that use lighter steel.6
Many fault the federal government for allowing carmakers to discount the importance of efficiency: “If 2005 model vehicles, with their better technology, had the performance and size of those in 1987, they would use only 80 percent of the gasoline they do today.…That alone would get the country halfway to the goal[s outlined by President Bush].7
Picture: Sports Utility Vehicle,Source: Motor Trend (accessed May 2006)
| THE SUV EXCEPTION
Many critics of American fuel efficiency standards have complained that the standards for light trucks and sports utility vehicles are not rigorous enough. In the 1980s, these two classes of vehicles were far less common than they are today. The exemption of light trucks and SUVs from the strict standards required of passenger cars can be traced back to the origins of their use as farming vehicles in rural areas.8 As sales of these vehicles skyrocketed, manufacturers began to make them heavier and faster to attract new buyers. Over the next 20 years, fuel economy performance for these classes actually decreased.9 Recent revisions to the CAFE standards in early 2006 sought to bring economy standards for light trucks and SUVs in line with the stricter car requirement. But even so, Daniel Becker of the Sierra Club, says, “This new standard is like telling a two pack-a-day smoker to cut out one cigarette.”10 The potential efficiency gains from fuel economy standards like CAFE are substantial, but many feel they have not been pursued aggressively enough. The Union of Concerned Scientists, for example, is not alone in suggesting that economy rates of 40 miles per gallon could be attainable by 2015.11 Within the last few years, the increased gas prices have led to a decrease in SUV purchases within the United States. Nissan, much like General Motors, Ford and Toyota has announced that it will downsize production of SUVs and trucks in favor of fuel-efficient cars. According to Automotive News Europe, this trend can also be witnessed in the European market. The increasing fuel prices in combination with CO2-based taxes applied by various governments has led to a decrease in SUV sales in Europe. |
Standards vs. Taxes
Standards are, however, only one economic tool at the disposal of governments for the regulation of fuel usage. The other is taxes (see the section on “Government Policy” above). Many economists feel that standards are a relatively blunt tool compared to taxes because they alter price levels only indirectly. Similarly, critics of the CAFE standards complain that:
Bizarrely for the banner carrier of capitalism, Washington declines to use the price mechanism of tax in favour of an administrative system of fuel efficiency standards that would do credit to Soviet-era Gosplanners, who would at least have imposed such norms more effectively on Detroit than have U.S. bureaucrats.12
Critics of fuel economy standards also cite the Jevons Paradox in advocating higher taxes on gasoline. According to Jerry Taylor of the Cato Institute:
CAFE standards actually decrease the marginal cost of using energy…you’ve made it cheaper for me to drive, and so I’ll drive more. If your idea is to reduce consumption, the only way you’re going to get people to use less energy is to make it more expensive for them to use it.13
Ideally, fuel economy standards and proper levels of taxation would be combined in an effective energy policy. Both elements will be very important to large developing countries such as China as their increasingly wealthy populations take to the roads in greater numbers than the world has ever seen before.
7 Cooper, “Energy and Environment,” 174
9 “Vehicles & Equipment;” Johnson and Simon
12 Cooper, “Energy Security,” 8
Next: Climate Change