AFSCME 3357-HOF'S BLOG

Senate Passes Craptastic Fuel Economy Bill

The United States Senate passed a bill that mandates average fuel economy for each automaker at 35 mpg by 2020. Unfortunately, to get the deal to go through, so many compromises were made that there may be very little effect on US energy consumption. The bill retains separate standards for trucks and cars. This provision in the current law contributed to the rise of SUVs as substitutes for station wagons. It also resulted in cars like the PT Cruiser being classified as "trucks" to subsidize gas guzzlers in the product line. The bill also retained credits for flex-fuel capable vehicles even if those vehicles never run on alternative fuels.

An earlier version of the bill included $25-35 billion in loan guarantees for automakers to use to revamp and retool older factories to manufacture greener cars. This was stripped from the version that passed at the demand of Republican senators.

The energy bill is expected to go to the House and pass in that chamber. President Bush threatened to veto an earlier version, a version that included alternative fuel credits and taxes on windfall oil company profits. Those provisions have been stripped, and the President might just sign this one. For more on the bill, here's a link to the Detroit Free Press article.

Personally, I think there is a place for CAFE type fuel economy mandates, but that such mandates should not be the core of energy policy. If you want to reduce total fuel consumption, the efficient way to do it is to tax fuel or actually ration fuel. Rationing can be economically efficient if rations can be freely traded. CAFE standards that simply increase miles per gallon do not necessarily decrease gasoline usage. A person who switches from a 20-mpg car to a 25-mpg car saves money that he/she might decide to use by driving 25% more. In fact, collectively, the miles we drive per year has been going up far faster than the rate at which our vehicles have been improving their MPG. Unless driving (or heating your house etc.) is made more expensive, the economic incentive for conservation will be watered down.