Debating Fuel Economy Standards

Due to the recent Supreme Court ruling that it is part of the job of the EPA (Environmental Protection Agency) to regulate carbon emissions as well as a Democratic majority in both houses of Congress, some type of increase in fuel economy standards seems to be in the future for the American automobile industry.

(See here) where MSNBC reports the automobile industry wants their voices heard on the decisions that will be made. I will note that the industry's voice up till now has been the loudest screaming against ANY increase in standards under ANY form. In the past they were unwilling to compromise and provide some input on the form of the compromise, however NOW they want their voices heard.

Personally I am favor of a graduated increase of standards over time. George Dubyah Bush proposed something similar in this year's State of the Union address, so it would seem such a gradual, yet significant increase is possible.

What do we do about the problem of computing the impact of vehicles that are "capable" (not required) to run on alternative fuels such as E85? (The MSNBC piece brings this subject up.) Well one only needs to factor in the total amount of E85 consumed and then divvy up the savings in carbon emissions amongst each E85 capable vehicle sold.

Now if the automobile industry does not want a mandated increase in fuel economy from the average of the fleet of vehicles they actually sell (they scream that consumers do not want high fuel mileage vehicles) then the government can help manage demand for them through imposing a tax on low fuel mileage vehicles with the lowest fuel mileage vehicles getting the greatest tax. Proceeds from the tax could be used to subsidize (in the form of tax credits) those consumers who buy higher fuel mileage vehicles with the amount of the tax credit determined by how much the vehicle exceeds the standard set.

Now some will scream that the above proposal would just generate additional government bureaucracy and be inefficient. These screamers would actually have a strong point in their argument. So lets trust the automobile industry to "efficiently" do all the tweaking required for them to meet the standards. "We the people", through Congress, set the standards that must be met and then count on General Motors and Ford to adjust the prices of what they offer so as to balance the demand with gas guzzlers against the need to sell enough fuel efficient vehicles so that the overall "fleet average" of vehicles sold complies with the mandated fuel economy standards. What would be the result? General Motors might have to raise the price of a large Cadillac by a couple (perhaps several) thousand dollars, generating additional profits per gas guzzler sold, so as to decrease and possibly even sell at a loss the number of fuel efficient vehicles required to comply with the standards. Vehicle prices could be adjusted monthly, weekly, or even daily by the industry in a rapid manner to manage demand. Government attempting to regulate demand through taxes and tax credits would not stand a chance of matching the quickness of response possible in a free market.

The automobile industry screams that they only manufacture what the consumer wants, which are gas guzzlers. Well I for one reply that the industry should raise the prices on gas guzzlers to dampen demand. If demand does not dampen with increased prices, use the profits to give away if need be enough fuel efficient vehicles so overall sales meet the demands.

If anyone attempts to scream they have a "right" to drive a gas guzzler, I am going to reply that there is no such "right". If you want an example of a precedence look at what society has done to when it comes to "smokers' rights"! When it comes to smoking, each smoker who takes up the habit benefits society in the long run (as long as none smokers' rights are also respected) where there is NO benefit to society from someone driving a gas guzzler when no need for the guzzling exists. In most areas of our nation, tobacco taxes are at ridiculous rates without justification. Smokers save society money without even factoring in the costs of the ludicrous taxes they pay. Meanwhile drivers of gas guzzlers cost me, while driving my fuel efficient vehicle, more money by raising the price of gasoline through increased demands for the limited supply of crude oil available.

Raise the prices on gas guzzlers to dampen demand. General Motors and Ford would almost have an unfair market advantage. They're loaded with gas guzzlers the consumer still wants to buy even at the increased price they would be available at. Meanwhile they could use the increased profits from the new "status symbol" gas guzzlers to subsidize the purchases of their fuel efficient product offerings by those who are motivated by price. Buyers will be willing to stand in line for the new Chevy Cobalt if the price is right.

Set new standards for the industry. If General Motors and Ford can't adjust I will argue that the only cure to what ails them is that they need a new CEO. Of course, if past performance is any indication, indicators are that GM and Ford needed different CEOs long ago, but that is a different argument. We're stuck with the present, and an increase in fuel economy standards needs not signal the demise of GM and Ford. The best thing America can do to help our auto industry is adopt national health care. An increase in fuel standard requirements should not threaten them in the least. A wise CEO, one with a little vision, could navigate and even exploit that storm.

If any politician really wanted to express real concern for GM and Ford, they would be in favor of national health care and would bat away complaints about increasing fuel economy standards.


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