The Institute for Energy Research is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets.

About IER
Latest Analysis
April 1, 2010

EPA’s new fuel economy mandates—more job killing regulation

April 1, 2010
Info Facebook

As if disregarding the will of the American people on the health care bill wasn’t enough, the Administration today announced that Americans don’t make the “proper” choices about the cars they drive. That might sound like an April Fool’s joke, but the Administration isn’t kidding.

Instead of allowing the American people to choose the cars that best fit their safety, convenience, size, and fuel economy needs, the Obama Administration announced today that the federal government is better equipped to make those choices, and will require that new cars and light trucks get an average of 35.5 miles per gallon by 2016. As a result, each vehicle will cost over $1,100 more and more autoworkers will lose their jobs. The real joke? This policy will have zero impact on carbon emissions or climate change—its purported goal.

Why Limit American’s Automobile Choices?

For decades, Americans have had the option to purchase fuel efficient vehicles. Twenty-five years ago, Honda produced the Civic Coupe HF, which got 40 mpg in the city and 48 on the highway. But when it comes to making choices about vehicles, it turns out that fuel economy is just one of many factors Americans use to make their car purchase choices. Americans also want cars that are comfortable, safe, practical, and fun to drive.

Over time, cars have become bigger, quicker, and more comfortable, while at the same time retaining decent fuel economy. Consider the following table[1] that compares today’s cars to the same version from 25 years ago. In every case, the fuel economy is similar even though the 2010 version of each car is larger, the engines are larger, the cars have more passenger volume, and provide more luggage volume. Interestingly, the 2010 versions generally get slightly worse city fuel economy and slightly better highway fuel economy.

Fullscreen capture 412010 54840 PM

Moreover, when the government mandates fuel economy improvements, car makers are forced to make sacrifices in other areas, such as comfort, size, or power. What’s wrong with automakers building cars that the American people want? Should auto manufacturers really be forced to produce the cars the Obama Administration thinks we should have?

This mandate will increase the cost per vehicle between $1,100 and $5,000 per vehicle

It certainly is possible to build cars that meet the president’s mandate with similar features—but they will be more expensive. Automakers have the technology to build cars out of exotic materials that make them lighter and more fuel efficient, but those materials are very costly. In a best-case scenario, the Obama Administration says that its regulation will increase the price of a car by $1,100 per vehicle. [2] Other estimates are much higher—a study by Global Insight found that this kind of regulation would increase power-train costs by $1,000 for small cars and $5,000 for larger vehicles. [3]

This mandate will likely destroy 50,000 jobs in the auto industry

During the Bush Administration, the National Highway Transportation Administration estimated that imposing a mandate similar to Obama’s would destroy 50,000 jobs in the automotive industry.[4] The reason is simple—if cars are more expensive, people will hold on to the cars they already have longer. That means, overall, car companies will sell fewer new cars.

This mandate will likely result in more deaths in traffic accidents

In addition to killing American jobs, this mandate will come at a cost of American lives. A 2002 study from the National Research Council found that the federal government’s Corporate Average Fuel Economy mandate contributed to 2,000 deaths per year.

This may sound shocking, but the fact is this: there is a tradeoff between fuel economy and safety. Smaller, lighter cars are generally more fuel efficient than larger, heavier cars. Cars have become safer, but today’s small, fuel efficient cars are still more dangerous than other cars in two-car frontal offset collisions, even against medium sized cars.

To meet President Obama’s fuel economy regulations, automakers will likely make their cars smaller, and, in turn, less safe. As Adrian Lund, president of the Insurance Institute for Highway Safety told USA Today, “leave the automakers the option of downsizing, clearly we’re going to have some safety consequences,” Lund says. “Smaller vehicles do not protect their occupants as well as large ones.”

President Obama didn’t have to choose between safety and fuel economy when it came to his 8-mile-per gallon Presidential limo. Just the same, he shouldn’t force the American people to drive small, more fuel efficient and less-safe cars.

According to EPA, this mandate will have no impact on global warming—the supposed reason EPA needed to regulate GHG emissions from vehicles

The Environmental Protection Agency is breaking new ground with this regulation. Technically, they are regulating the greenhouse gas emissions from vehicles. This is because in 2007, the Supreme Court ruled in Massachusetts v. EPA, that EPA had the authority to regulate greenhouse gases from cars due to what they perceived as a dire threat from global warming and increased sea level rise. On the surface, it seems reasonable to believe that these regulations would have an impact on global warming. But when we dig a little deeper, it is clear that this regulation is not based on reason.

According to EPA, the regulations will have—at the most—minimal impacts on global warming. EPA itself states that their regulations will lead to a reduction in global temperature by “0.006 to 0.0015 °C by 2100” and “sea-level rise is projected to be reduced by approximately 0.06cm-0.14cm by 2100.”[5]

In sum, the Obama Administration is forcing people to pay at least $1,100 more for their vehicles to avoid an immeasurable temperature change—90 years from now.

This regulation unleashes a regulatory cascade that will not stop until Congress intervenes to protect the American people

It would be bad enough for the Administration to force the price of cars to rise with little to no positive benefits. But, sadly, vehicle regulation is just the beginning. The structure of the Clean Air Act will allow EPA to regulate carbon dioxide emissions from many other sources, including hospitals, farms, manufacturing operations, nursing homes, churches, hotels, and office buildings. EPA will also regulate carbon dioxide emissions from power plants, which will finally allow President Obama to meet his goal of making electricity prices from coal-fired power plants “necessarily skyrocket.”

Conclusion

The Obama Administration thinks it can do a better job choosing cars for families than the families themselves. The cars the Administration chose are significantly more expensive than those currently on the market. And although the Administration is allegedly making these choices to protect us from the threat of global warming, EPA itself has admitted that its new rule will have no meaningful impact on global temperature or sea level. And even worse, this is only the beginning. EPA is going to regulate the economy in any way it can until Congress steps in and protects the American people from EPA’s bureaucratic power grab.


[1] United States Department of Energy and Environmental Protection Agency, www.fueleconomy.com. The cars included in this graph are the base model—the sedan version with the smallest available gasoline engine and manual transmission.

[2] 74 Federal Register 49343 at 49260 (Sept. 28, 2009).

[3] http://planetgore.nationalreview.com/post/?q=ZTAwZjUwYTBmZjc4ZGYyODc2NGE0MThkYWM2N2UyMmE=

[4] See National Highway Traffic Safety Administration, Average Fuel Economy Standards, Passenger Cars and Light Trucks. Model Years 2011-2015, available at http://instituteforenergyresearch.org/wp-content/uploads/2009/05/nhtsa_analysis.pdf. The NHTSA looked at six options in their report. The TC = TB option (Total Cost = Total Benefit) is a very close analogue to President Obama’s proposed plan. (See VII-2 Average Required CAFE levels, p. 608). The TC = TB option raised CAFE to 34.6 in 2015, while the Obama plan increased the average fleet fuel economy standard to 35.5 in 2016.

[5] Environmental Protection Agency, Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule, p. http://www.epa.gov/otaq/climate/regulations/ldv-ghg-final-rule.pdf.


View Comments
  • Pingback: EPA’s new fuel economy mandates—more job killing regulation – Institute for Energy Research « Snow Report Blog

  • Pingback: Big Government Intrudes in Your Life, Part II. « American Elephants

  • http://www.sundanzer.com David Bergeron

    Here is an excerpt from a 2002 AEI-Brookings Joint Center for Regulatory Studies:

    In particular, a long-run 3.0 MPG increase in the CAFE standard would impose
    social welfare losses of $5.556 billion per year and save 5.1 billion gallons of gasoline per year. This amounts to a hidden tax of $1.09 per gallon conserved. An 11 cent per gallon increase in the gasoline tax would save the same amount of fuel at a welfare cost of $275 million per year. The 3.0 MPG increase is thus 20 times more expensive than the gas tax increase. The marginal welfare costs of long-term increases in the CAFE standard amount to $1.26 per gallon and exceed by a factor of five recent estimates of the marginal societal benefits from avoided externalities. Increasing the CAFE standard is therefore neither cost-effective nor cost-beneficial.

    • livefree1200cc

      All they have to do is change the injectors – they already have the Know-how to get better mileage. Profits get in the way from doing something like that though. Our gov. makes their money from the gas tax. That would go down if we used less fuel. We wouldn’t need to fight so many wars for oil if we used less fuel. Haliburton would lose money!

  • http://www.sundanzer.com David Bergeron

    Here is an excerpt from a 2002 AEI-Brookings Joint Center for Regulatory Studies:

    In particular, a long-run 3.0 MPG increase in the CAFE standard would impose
    social welfare losses of $5.556 billion per year and save 5.1 billion gallons of gasoline per year. This amounts to a hidden tax of $1.09 per gallon conserved. An 11 cent per gallon increase in the gasoline tax would save the same amount of fuel at a welfare cost of $275 million per year. The 3.0 MPG increase is thus 20 times more expensive than the gas tax increase. The marginal welfare costs of long-term increases in the CAFE standard amount to $1.26 per gallon and exceed by a factor of five recent estimates of the marginal societal benefits from avoided externalities. Increasing the CAFE standard is therefore neither cost-effective nor cost-beneficial.

  • Pingback: Obama’s automobile hypocrisy | Life, Liberty, and Property

  • Pingback: New CAFE standards released

  • http://www.usedtransmission.org Used Transmission

    That’s the great article! I just pass ‘n read it, two thumbs up! ;)

  • Pingback: Breaking Down the EIA 2012 Annual Energy OutlookInstitute for Energy Research | Institute for Energy Research

Back to top