With gas at $4.00 a gallon, there is, once again, much talk of tightening CAFE standards for automobile mileage that have been around since 1975, when there were gas lines that were blocks long. The acronym stands for Corporate Average Fuel Efficiency. According to Wikipedia it is “the sales-weighted harmonic mean fuel economy, expressed in miles per gallon . . . of a manufacturer’s fleet of current model year passenger cars or light trucks.”
Translating that into English, it means that the “fleet” of cars and light trucks manufactured by an automobile company has to meet a certain average standard of miles per gallon. The trouble, of course, is that people don’t buy fleets, they buy individual vehicles, which ones depending on their individual needs, predilections, and pocketbooks. So if too many people opt for low-mileage vehicles, the company, in theory, would have to raise the prices on those vehicles and/or lower the price on high-mileage cars in order to get customers to buy the right mix of cars and thus sustain the average fuel efficiency required by the law.
To paraphrase George Orwell, this is a method of raising average vehicle gas mileage so idiotic that only a politician could have conceived it. It has been singularly ineffective (European and Japanese car fleets average twice the gas mileage of American cars and SUV’s). It is subject to endless lobbying. What, after all, is a “light truck”? Write the definition one way and–presto!–millions of vehicles are exempt from CAFE standards.
If Congress were serious about improving the average miles per gallon of the American automobile fleet, here’s how to do it cheaply, efficiently, and very effectively. 1) Set a standard for miles per gallon, say 25 MPG at first. 2) Pass an excise tax of, say, $500, for every mile per gallon a model falls below the standard. 3) Give people a tax credit of, say, $500 for every mile per gallon the vehicle they buy is rated above 25 MPG. 5) Raise the standard one MPG per year until it reached, say, 40 MPG.
Under this system a car that got only 20 MPG would cost a whacking $5000 more than its competitor that got 30 MPG, a huge incentive to buy an efficient car instead of a speedy/sexy/humongous one, while leaving people free to buy the car they want if they’re willing to pay for it. More, it would unleash a torrent of innovation from the automobile companies that would increase fuel efficiency in ways that minimally impacted other desirable traits. Instead of spending their energies lobbying, they would spend them designing better, and much more fuel efficient, cars. No new bureaucracy would be needed to implement the policy.
This would be a perfect example of the power of the law of self interest–“make it in people’s self interest to do something and they will do it”–to effectuate good policy. Don’t hold your breath, however. The self-interests of politicians always come first.
