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Mandated Mischief: Obama’s 54.5 MPG Standard

More deaths, less choice, pricier cars. And of course, no upside.

by
Marlo Lewis

Bio

July 29, 2011 - 11:33 am
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We’re often assured that the reformed CAFE program established via the 2007 Energy Independence and Security Act (EISA) fixed the problem (often by the same folks who denied there was a trade-off between fuel economy and safety under the original CAFE program). However, even under the reformed program, which supposedly constrains down-sizing in favor of technological innovation, EPA and the National Highway Traffic Safety Administration (NHTSA) estimate that achieving fuel economy standards of 47 to 62 mpg will require weight reductions of 15% to 30% (Interim Joint Technical Report, p. 3-8).

Automakers will undoubtedly incorporate new technology to meet the 54.5 mpg standard. Nonetheless, Kazman explains, “No matter what fuel-saving technologies we put into the car of the future, adding weight to the car will both lower its fuel efficiency and increase its safety.” Inevitably, fuel economy standards prevent people from buying all the vehicle safety they’re willing to pay for.

Why did automakers agree to the deal? “Government Motors” has to be careful about defying a White House that props them up financially. Auto companies also feared ending up with something even worse: a 62 mpg standard enforced via a “patchwork” of state-by-state fuel economy regimes spearheaded by the California Air Resources Board (CARB).

Auto industry analyst Henry Payne notes another reason:

“We’ll agree to anything that’s 15 years out,” a highly-placed auto industry insider told me today about the fairy tale 54.5 mpg-by-2025 mandate for America’s auto fleet that Barack Obama and Big Auto execs  finally — officially — announced Friday in Washington.

The rule has no grounding in reality. An engineering rule of thumb is that gas engine efficiency improves by 1.5 percent a year (a gain that, in the cheap gas U.S. market, has traditionally gone to power upgrades rather than mpg improvements). The EPA’s rule will mandate that light trucks gain 3.5 percent a year and cars, 5 percent. Really.

Environmental groups claim there’s no problem because automakers could comply even with a 56 mpg standard just by selling lots of hybrids. But according to the Center for Automotive Research (CAR), the market share for hybrids would have to increase from less than 3% in 2011 to 76% by 2025 — almost eight times higher than the projected market share. And mass reductions of at least 15% would also be required, reducing vehicle safety in crashes.

CAR estimates that a 56 mpg standard would impose on consumers a net loss (sticker price increase minus fuel savings) of $2,858 over five years if gasoline prices average $3.50/gallon. The 62 mpg that CARB, green groups, and (very likely) Obama preferred would impose a net loss of $6,525. Without regulatory coercion limiting our options, most consumers would avoid this “bargain.”

Fuel economy standards compel automakers to please government planners rather than satisfy consumers. That’s a recipe for an auto industry with lower sales, reduced profits, and fewer jobs.

Team Obama and their green allies undoubtedly think it is great fun to gamble with other people’s assets and livelihoods, even if it means imposing safety risks on motorists. If we were living under a constitution of liberty, that sort of mischief would not be allowed.

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Marlo Lewis is a senior fellow in environmental policy at the Competitive Enterprise Institute
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