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Regulations Don't Affect Gasoline Consumption

Daily Policy Digest

Regulatory Issues

Thursday, December 06, 2001

Economists who have examined the Corporate Average Fuel Economy program, or CAFE, say it does not do a particularly good job of cutting fuel consumption. And that goal itself is questionable.

Under the complex CAFE system, the federal government sets a minimum average mileage requirement for each manufacturer's fleet. As a conservation measure, says Pietro S. Nivola, a Brookings Institution economist, CAFE standards have not worked well because the requirements were "aimed at the vehicles, not the consumer."

  • Regulating new-vehicle mileage has little effect on gasoline consumption in part because any increase in fuel-efficiency requirements takes a long time to make a difference on the road.
  • The delay is extended when CAFE mandates increase car prices, leading consumers to hold on to their old gas guzzlers.
  • Also, better gas mileage encourages people to drive more or to purchase larger cars and get the same mileage.
  • The way to reduce emissions, Nivola says, "is through less driving, rather than more efficient vehicles that people can drive much more."
Instead of regulatory mandates, economists generally prefer higher gasoline taxes -- perhaps coupled with income or payroll tax cuts.

Perhaps the real question is not what policy would more efficiently encourage conservation, but whether government policy should say anything at all about fuel economy, as opposed to emissions.

Source: Virginia Postrel (Reason Magazine), "Economic Scene: Setting Fuel Efficiency Targets for Vehicle Fleets Makes Little Sense," New York Times, December 6, 2001.

For text (requires free registration)
http://www.nytimes.com/2001/
12/06/business/06SCEN.html

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