The Frontal Cortex

Bush’s Silly CAFE Proposal

Over at Slate, Gregg Easterbrook argues that the President’s recent proposal to increase the Corporate Average Fuel Economy (CAFE) standard by 4 percent a year is a brilliant and bold policy that will “reverse [oil] consumption trends”. He blames the liberal media for not giving Bush the credit he deserves.

I’m skeptical. While I’m glad Bush has agreed to strengthen CAFE standards, I also think that CAFE standards are relatively useless. There are simply too many loopholes. Automakers can avoid CAFE standards by building trucks and SUV’s – Bush wants “to extend the current Light Truck Rule” – and by building so called Flex-Fuel cars, which are able to run on ethanol and gasoline. (Unfortunately, we are still years away from actually having an infrastructure capable of delivering ethanol to your local gas station.) Bush even wants to create a new loophole, which would allow bigger cars to get worse fuel mileage. (This is designed to avoid compromising vehicle safety, but it will end up encouraging manufacturers to build more Cadillacs instead of Corollas.) What all these loopholes mean is that it isn’t very hard for GM or Ford or even Toyota to resist CAFE regulations.

The sad part is that a much better policy proposal already exists: raise the gas tax. This isn’t a perfect policy – it’s a rather regressive tax – but it’s the only way to seriously increase fuel efficiency. Jane Galt says it best:

Gasoline prices rose slightly a year ago from $2 to $3 (readers in Europe are snickering, or sobbing) and the media was filled with how awful this was and what oh what was the president going to do to bring prices back down? Now that gas is cheap again, the hue and cry is about how to get people to use less. In the garbled logic of politics, where human beings are unmoved by incentives, CAFE standards offer a “have your cake and eat it to” promise — low gas prices and low gas consumption. Unfortunately, reality will assert itself and we will find low gas prices bringing high gas consumption, no matter what CAFE requires.