Friday, February 20, 2004

CAFE Standards vs. Fuel Savings
Earlier this week, a NY Times editorial written jointly by representatives of the Sierra Club and United Auto Workers union argued against an administration proposal to revise the Corporate Average Fuel Economy (CAFE) standards governing the auto makers' average vehicle miles per gallon. Not surprisingly, their main arguments focused on the environmental and employment consequences of the proposed change, which would break down MPG limits by weight categories, with heavier vehicles allowed higher fuel consumption.

We have traveled far afield from the original intent of the CAFEs, which were imposed in the wake of the 1970s oil shocks. They were designed specifically to reduce imports of foreign oil, and they were initially very successful at this. Oil imports in the 1980s declined as more efficient cars entered the national fleet, and this trend remained more or less stable until the SUV explosion of the 1990s.

Without rehashing the pros and cons of SUVs, it is clear that the present CAFE standards are stalled in a confluence of trade and industrial policy, regional politics, and consumer behavior. The simple truth is that even at $2.00/gallon, the price of fuel is only a small and declining fraction of total vehicle operating costs, and at best a minor factor in car selection for most Americans.

Ultimately, even the fuel economy improvements inherent in new technology such as hybrid cars and "mild hybrids" (conventional cars with starters capable of shutting off the engine at traffic lights and restarting it instantly, without the driver noticing) seem likely to be swamped by the steady growth in annual vehicle miles driven, and thus unable to stem the growth in overall fuel consumption and imports.

So we are left with another 1970s stopgap program (see my Wednesday comments on the Strategic Petroleum Reserve) that should be rethought from first principles, not just tweaked. While any changes to CAFE would carry environmental and employment consequences, as the Sierra Club and UAW assert, we must be clear about what is driving our desire to manage fuel consumption. If it is still meaningful to be concerned about growing dependence on imported oil, at a time when we produce only 37% of the oil we consume, then perhaps it is time to consider new approaches that would address when, where and why we drive, and not just how.

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