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Is More CAFE Good for Us?

Some say yes, some say no.  For an impartial and thoughtful answer to this question, Congress turned to the National Academy of Sciences and it just recently responded with its report on July 31, 2001.  Despite its plain black and white cover, and dry technical format, the Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards offers some very informative, and even captivating reading.  I highly recommend it for anyone with a serious, thoughtful interest in learning more about this energy policy issue.  If you can¹t find the time, let me offer you the following highlights.

Should Congress mandate an increase in the fuel economy of our cars, pick-up trucks, mini-vans and SUVs?  The CAFE program has been controversial since the start.  You and I as consumers may say, sure why not, if it doesn¹t increase the vehicle price, or reduce the performance and features we like such as roomy interiors for many passengers, storage space, towing capacity, good outward visibility, and a sense of safety and security.  And we also know that not many good things in life come for free and are suspicious that there may be drawbacks.  

The average fuel economy requirements for new vehicles are currently 27.5 miles per gallon (mpg) for passenger cars and 20.7 mpg for light trucks.  The actual average miles per gallon for all passenger cars in use - both old and new- increased from 13.9 mpg in 1975 to 21.4 mpg in 1999, a 54% gain.  The actual average fuel economy of light trucks improved from 10.5 to 17.1 mpg over the same period, an even better 63% gain.  Combined, the average fuel economy of all light-duty vehicles on the road increased from 13.2 mpg in 1975 to 19.6 mpg in 1999.

No Clear Benefit, but a High Cost

The National Academy of Sciences committee could not determine whether the improvements in actual fuel economy were the result of the significant gasoline price increases from 1970 to 1982, of the efforts by car makers to take weight out of cars as a cost saving measure, of the Gas Guzzler Tax, or of the CAFE requirements.  The benefit they could ascribe to CAFE standards was that they served more as a floor for foreign manufacturers towards which their fuel economy descended in the 1990s.  The long term trend has been for domestic manufacturers to begin from a low point and continue to improve their fuel economy, while imports started with high fuel economy and have dropped as their cars have gotten bigger.

However, the committee did find that the improvements in the fuel economy of the nation¹s light duty vehicles have had very real costs.   They have resulted in an additional 1,300 to 2,600 traffic deaths annually.  They are also responsible for an additional 13,000 to 26,000 incapacitating injuries and 97,000 to 195,000 total injuries each year.  These are not insignificant numbers that can be callously dismissed.  The problem for motor vehicle safety is that mass and size vary inversely not only with fuel economy, but also with risk of crash injuries.  When a heavy vehicle strikes an object, the occupants decelerate less rapidly and are less likely to be injured.  Larger interiors also mean more space for restraint systems to effectively prevent hard contact between the occupants¹ bodies and the structures of the vehicle.

So why Care about Fuel Economy at All?

It is critically important to be clear about the reasons for considering improved fuel economy.  It is tempting to say that improvements in vehicle fuel economy will save money for us in reduced expenditures for gasoline.  Yet a strong argument can be made that these savings are not a sufficient basis for public policy intervention.  Consumers already have a wide variety of opportunities if there are interested in better gas mileage.  There are many makes and models, all readily available, that get much better than average fuel economy.  The differences in fuel economy between vehicles are relatively clear to new car buyers.  Fuel economy is prominently displayed on a sticker on the side of each new car sold.  It is easy to see that while improved fuel economy saves consumers money, they are quite likely to be aware of this fact and in a good position to exercise their preference for a more fuel efficient vehicle if that is important to them.  But what consumers know is that increases in fuel economy have sharply diminishing returns.  Boosting the fuel efficiency of a car from 25 to 30 miles per gallon saves $150 a year.  Boosting it another 5 mpg saves only another $100.  Note how small these savings are relative to other costs such as insurance, vehicle registration, and parking.

At first blush, it might also appear that fuel economy is important to reduce the air pollutants that cause smog.  However, automakers are required to meet emissions standards that are defined in terms of grams of pollutant per mile traveled.  It makes no difference whether a car burns one gallon to go 20 miles or 10 gallons - the emissions must be the same.  The committee observed instead that the CAFE provision creating extra credits for multi-fuel vehicles have had a negative effect on fuel economy, petroleum consumption, green house gas emissions, and cost.  It also noted that the Tier 2 emission standards established by the EPA, and the California low emission vehicle standards are an impediment to fuel economy gains that could be made with lean-burn gasoline and diesel engines.

There may be, however, other reasons to increase fuel economy.   Are reduced emissions of carbon dioxide, and reduced dependence on foreign oil worth the reduced safety costs?  U.S. cars and trucks are responsible for only five percent of the world¹s annual emissions of carbon dioxide.  Other sectors, particularly electricity, have far more potential for reducing CO2 emissions economically and focusing on transportation alone would accomplish little.  Reducing our nation¹s oil imports would have favorable effects, but is that the true concern of those who advocate CAFE increases when they are against domestic oil exploration in Alaska, in much of the West, off of our Atlantic and Pacific Coasts, and in the eastern Gulf of Mexico?

The National Academy of Sciences report proves that calls for CAFE increases are simply political grandstanding with little scientific support or public benefit.  If we want to truly do something helpful we should evaluate an approach with fuel economy targets that are dependent on vehicle attributes, such as passenger and cargo capacity.  We should eliminate the CAFE credits for dual-fuel vehicles, and we should re evaluate the EPA Tier II emission limits that are a barrier to advanced technologies such as lean-burn gasoline and diesel engines, which are already benefiting Europe.