NCPA - National Center for Policy Analysis

CAFE Standards: Fleet-Wide Regulations Costly and Unwarranted

December 5, 2011

Automakers would be required to double current fleet-wide fuel economy by 2025 under regulations proposed last week by the Obama administration.  Whether the standard is achievable remains to be seen, but the effort would cost tens of billions of dollars, untold numbers of manufacturing jobs, and the loss of lives, says Diane Katz, a research fellow at the Heritage Foundation.

  • The official proposal unveiled last week calls for a fleet-wide fuel economy average of 54.5 miles per gallon by 2025, dwarfing the current standard of 27.3 miles per gallon.
  • The government pegs the average cost of compliance at $8.5 billion annually, translating into a spike in sticker prices of at least $2,000 to $2,800 per vehicle.
  • This government burden will come at a time when auto sales are still shallow in their recovery: auto sales declined 41 percent from an annual rate of 15.72 million in December 2007 to a low of 9.32 million in February 2009, with auto sales for 2011 expected to total only 12.9 million.

The proposal will give disproportionate weight to electric vehicles, hybrids and cars running on natural gas.  This fits the bill of greener energy, but it ignores basic facts about the environmental costs associated with these vehicles.  Additional emissions are generated by the manufacture of vehicle components from lightweight materials such as aluminum, plastics or composites.  There are also environmental consequences to the manufacture of metal hydride batteries, as well as the electricity generated from the combustion of fossil fuels that is necessary to power electric vehicles.

Finally, the strict stringency of the standard will induce car manufacturers to reduce weight and create a smaller vehicles -- a response that many experts say will increase traffic fatalities and reduce total safety.  Thus, the proposed regulation carries costs that outweigh even the most generous of benefits calculations.

Source: Diane Katz, "CAFE Standards: Fleet-Wide Regulations Costly and Unwarranted," Heritage Foundation, November 28, 2011.

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