fuel economy

Spitzer, Seoul, and Wall Street

by Brian McGraw on November 16, 2010

in Economy, International, Labor, Trade

Eliot Spitzer, who occasionally publishes over at Slate, wrote yesterday about President Obama’s “disastrous Asia trip” and decried America’s fall from grace as a world leader. The culprit? Wall Street. Pretend you’re shocked.

First, he writes that South Korea rejected a “reasonably standard and straightforward trade pact.” That isn’t quite what happened. Rather than Korea, the U.S. [has, for a few years now] rejected a reasonably standard and straightforward trade pact by failing to approve an already negotiated trade agreement. Obama went to Korea on behalf of the domestic auto industry in an attempt to negotiate increased access to the South Korean auto market on behalf of the UAW, etc. Here is a good summary on why Koreans are unlikely to be buying many American automobiles, and why the KORUS-FTA is a very good deal for the United States.

Ironically, one complaint from the auto industry was that Korean regulatory requirements for auto emissions and fuel economy were too restrictive. Normally the standard union opposition to free trade is that they don’t want to hurt the little guy in foreign countries where labor and environmental standards are often lower. One might think in this case that they’d be thrilled that Korea has more stringent environmental regulations for their automobiles than the United States does. Except that they weren’t thrilled, and Obama still attempted to renegotiate the agreement despite South Korea making it very clear that there would be no more negotiations.

This would seem to dispel any illusion that unions, etc. actually care about the little guy. They care about the American “little guy” (e.g., their dues-paying members, constituents) — where the American little guy is richer and healthier than 90 percent of the rest of the world — and will actively seek policies that do not allow the actual little guy the ability to improve his life.

Back to Spitzer. He is frustrated that the the United States’ alleged fall from grace has led to all sorts of problems, from the failure to succeed in bullying other countries into accepting our one-sided trade terms, to international support for China to revalue its currency, and a failure to get the G20 to “agree to anything more than vapid words about trade.” Spitzer doesn’t elaborate much on this, as the Asia introduction was nothing but another excuse for Spitzer to write an article attacking Wall Street. Read the rest if you’d like to hear Spitzer jump through hoops in order to explain how Wall Street is solely responsible for all the problems America faces today.

Don’t hold your breath on the further liberalization of trade anytime soon, recent polling data indicates that fewer and fewer people believe free trade agreements help the United States. Given the recession and the new understanding in America that some of these other countries are no longer third world watering holes, it seems that Made-in-America might make a comeback.

Photo credit: GreenDominee’s flickr photostream.

Distracted Driving Kills, But What About Dysfunctional Policy?

by Marc Scribner on September 21, 2010

in Mobility, Nanny State, Personal Liberty, Politics as Usual, Regulation, Zeitgeist

The Obama administration, having succeeded in bringing about economic recovery and having nation-built a democratic Afghanistan, has set its sights on another pressing issue: driving while distracted. Today in Washington, the Department of Transportation is holding its second annual Distracted Driving Summit. This meeting of the minds brings together finger-waving bureaucrats and activists from across the country to devise strategies on how to make another molehill into a mountain. They even have a website, Distraction.gov, which instructs lowly citizen visitors to “Become a fan of [Transportation] Secretary [Ray] LaHood [on Facebook]” (which, of course, I did).

LaHood is currently waging a war on “texting while driving,” as many cities and states continue to ban holding phones behind the wheel. But why the selective hysteria over texting and hand-held cell phones? Research suggests that drivers using hands-free devices are no safer than those using hand-held devices, yet I have heard no calls to prohibit hands-free devices — not to mention fiddling with the stereo or yelling at your kids in the backseat or listening to NPR’s awful cringe-fest “Wait Wait…Don’t Tell Me!,” which are also potentially deadly distractions.

These laws, which have little effect on actual human behavior (particularly among high-risk demographics) given that they are so difficult to enforce, have little basis in reality. Despite the fact that many drivers ignore these laws, distracted driving deaths fell this past year. LaHood and his cronies have no doubt taken credit, despite there being no evidence to support their shameless high-fiving.

The Independent Institute’s transportation guru Gabriel Roth (editor of the indispensable volume on creative, market-based transportation solutions Street Smart) suggests that focusing on distracted driving is a way for transportation officials to avoid addressing real problems because, well, they are the problem.

CEI has long noted that, as they continue to be ratcheted up, Corporate Average Fuel Economy (CAFE) standards will continue to kill thousands of drivers by putting them into smaller, lighter, less-safe cars. Yet because The Environment is spared a trivial amount of damage, that’s okay. A government monopoly over the roads preempts the market-based solution — insurance testing and certification, just like they often do in the shipping industry — with inefficient, expensive, poorly enforced government mandates. Yet this is okay because it keeps politicians and bureaucrats such as LaHood perpetually employed.

Rather than holding summits and engineering new nanny state policies, regulators and their cheerleaders should focus on rolling back deadly and perverse government mandates.

Will Grading Cars Dispell or Enhance “MPG Illusion”?

by Marlo Lewis on September 2, 2010 · 2 comments

in Global Warming, Mobility

As discussed in my recent post “Obama’s EPA: School Marms R Us,” EPA and the National Highway Traffic Safety Administration (NTSHA) are proposing to revise the mandatory fuel economy label or “sticker” affixed to new cars to include letter grades based on the car’s fuel economy and carbon dioxide (CO2) emissions. Electric vehicles and plug-in hybrids would get an A+; the biggest, heaviest, gas guzzling SUVs would get a D.

To view the current sticker, click here. To see what the tut-tutting scolds at EPA and NHTSA want to replace it with, click here.

 Among other rationales for the new sticker design, the agencies claim that adding letter grades will help consumers make smarter purchases by combating something called the “MPG Illusion.”

The MPG Illusion refers to the common misperception that fuel savings from mpg increases are linear. People often assume that each additional 1 mile per gallon increase in a vehicle’s fuel economy reduces fuel consumption and gasoline expenditures by the same amount. Hence, some may conclude, if they can’t afford (or simply don’t want) a Toyota Prius, Chevy Volt, or some other high-mpg vehicle, there’s no point in buying a car with only modestly better fuel economy than their current vehicle. In reality, fuel consumption avoided and dollars saved decrease as mpg increases. Which is to say, the biggest fuel savings come from modest fuel-economy improvements in the lowest mpg vehicles. Some hypothetical (indeed fanciful) examples will make this crystal clear.

Suppose that your current car gets only 1 mile per gallon, you drive 100 miles per week, and gasoline costs $3.00 per gallon. This means you consume 100 gallons and spend $300.00 per week. If you replace that car with a 2 mpg vehicle, you’ll consume 50 gallons and save $150.00 per week. At the very bottom end of the scale, even a 1 mpg increase in fuel economy yields big savings.

Suppose now that your current car gets 99 mpg, you drive 100 miles per week, and gas costs $3.00. This means you consume 1.01 gallons and spend $3.03 per week. If you replace that car with a 100 mpg vehicle, you’ll consume 1 gallon and save 3 cents per week. At the very top of the fuel economy scale, the fuel and cost savings from an extra 1 mpg are negligible.

Turning to more realistic examples, EPA and NTSHA calculate (p. 28) that replacing a 10 mpg vehicle with a 15 mgp vehicle saves 33 gallons of gas for every 1000 miles driven whereas replacing a 30 mpg vehicle with a 35 mpg vehicle saves only an additional 5 gallons of gas for every 1000 miles driven. The same increase in fuel economy — in this case, an extra 5 mpg – saves more than six times as much fuel if the vehicle replaced gets 10 mpg rather than 30 mpg.

Professors Rick Larrick and Jack Soll of Princeton University put the MPG Illusion on the map when they published an article about it in Science magazine. They clearly explain the basic arithmetic in this Youtube video. Their illustrative case assumes a motorist who drives 100 miles per week. If the motorist has a 10 mpg vehicle and switches to a 20 mpg vehicle, he’ll cut his weekly fuel consumption from 10 gallons to 5 gallons — a savings of 5 gallons. If the motorist has a 25 mpg vehicle and switches to a 50 mpg  vehicle, he’ll cut his weekly fuel consumption from 4 gallons to 2 gallons — a savings of only 2 gallons.

“The key insight,” says Larrick, “is that improving inefficient cars, that have low mpgs, by even low mpg increases, saves a lot of gas.” Soll elaborates: “If you’re comparing two vehicles, one that gets 12 miles per gallon and the other that gets 15 miles per gallon, if you drive 10,000 miles in a year, you’ve saved about 170 gallons of gas [in the 15 mpg vehicle], and that comes out to be about $700.00 at $4.00 a gallon. So this [savings] is a significant amount even though the jump from 12 to 15 [mpg] may look pretty small.”

To counter the MPG Illusion, Larrick and Soll advise policymakers to express fuel economy in terms of the amount of fuel consumed per unit of distance traveled. Expressing fuel economy in the conventional way, as miles per gallon, leads people to “undervalue small improvements on inefficient vehicles” and “underestimate the value of removing the most fuel inefficient vehicles,” the researchers argue in Science magazine.

This, of course, is music to the ears of the anti-SUV crowd. Greenies would love to believe that the market for SUVs is sustained by an “illusion.” Because if that is so, then EPA and NHTSA can depress SUV sales just by making simple changes in how fuel-economy information is presented — just by redesigning the sticker! 

Years of SUV-bashing, fuel-economy prosyletizing, climate-change scaremongering, and high gasoline prices have failed to kill SUV sales. Could that have something to do with the attributes of the vehicles — their size, safety, and utility? I mean, there are objective differences between SUVs and cars greenies insist are “smart.” Just have a look! Nothing illusory about that.

If the MPG Illusion has anything to do with SUV sales, then you gotta ask: Who’s responsible for foisting the illusion on the public? Answer: the very people who’ve tried to brow beat us into believing that the only vehicle attribute worth considering is its mpg — the preachers and proselytizers of fuel economy! There’s no escaping the law of unintended consequences.

EPA and NHTSA  propose to combat the MPG Illusion in two ways. First, the sticker will estimate how many gallons of fuel the car will consume per 100 miles (as per Larrick and Soll’s advice). Second, the sticker will carry a letter grade. Presumably (the agencies don’t spell it out), EPA and NHTSA expect that bad grades will stigmatize gas guzzlers and discourage people from buying them.

Although the first option may counteract the MPG Illusion, the second will enhance it. As Larrick and Soll show, there is only a small difference in fuel savings between a 25 mpg car and a 50 mpg car. However, in the proposed EPA/NHTSA ratings (p. 37), the 25 mpg car gets a B and the 50 mpg car gets an A-. As anyone knows who has ever applied to college, an A- GPA is way better than a B GPA. The grading system implies that the biggest fuel savings are achieved at the top end of the scale.

On the other hand, a 14 mpg vehicle gets a C- whereas a 17 mpg vehicle gets a C. That 3 mpg increment is a big deal in fuel savings, according to Larrick and Soll. Yet how many car buyers will be impressed because a particular vehicle is rated C rather than C-? Except in jest, I’ve never met anyone who boasted of getting solid Cs in high school or college.

In short, the proposed EPA/NHTSA grading system perpetuates the MPG Illusion, which, unfortunately for fuel-economy zealots, cuts both ways. The illusion of linearity not only under-values savings from fuel-economy improvements in low-mpg vehicles, it also over-values savings from fuel-economy improvements in high-mpg vehicles.

EPA and NHTSA, apparently, want to manipulate the MPG Illusion rather than actually dispell it. They don’t like the illusion when (as they believe) it promotes SUV sales, but they like it when (as they hope) it promotes hybrid, plug-in hybrid, and electric vehicle sales. But the attempted manipulation fails, because the grading system, like the MPG Illusion, both over-values high-end mpg improvements and under-values low-end mpg improvements.

Grading cars actually means grading the people who buy them. People who buy cars with super-low or zero emissions are A or A+ people. Those who buy gas guzzlers wear dunce caps. The South Park spoof on the “Toyonda Pius,” Smug Alert, all-too-accurately depicts the greener-than-thou pretension of EPA and NHTSA’s proposed grading system.

Obama’s EPA: School Marms R Us

by Marlo Lewis on August 30, 2010

in Global Warming, Mobility, Nanny State

The Obama Administration’s EPA and National Highway Traffic Safety Administration (NTSHA) are proposing new rules “labeling each passenger car with a  government letter grade from A to D based on its fuel efficiency and emissions,” the Wall Street Journal reports. The new rules “would be the most substantial changes in 30 years to the familiar price and mileage labels afixed to new cars on sale at dealership,” the article continues. Only in the make-work world of bureaucrats would the addition of the letters A, B, C, or D to product labels be considered “subtantial changes.”

The WSJ goes on to point out the obvious: “Currently the labels must show how many miles per gallon a car gets and its estimated annual fuel costs. Under the rules proposed Monday, new labels would carry a letter grade assigned by regulators.” Electric vehicles and hybrids would get the highest grades while big, heavy, gas-guzzling SUVs would get the lowest grades. “We think a new label is absolutely needed to help consumers make the right decision for their wallets and the environment,” explained Gina McCarthy, EPA’s assistant administrator for air and radiation.

“Absolutely needed” — as in, we’d be lost without them.

The proposed rules imply two judgments about Americans. One is that we’re too stupid to understand how miles-per-gallon and estimated annual fuel costs affect our wallets. Our math skills are so poor that quantitative information must be supplemented with letter grades labeling “this car good, that car bad.”

The second judgment, closely related to the first, is that Americans are school children and EPA/NHTSA are the Nation’s teachers. The agency folks apparently think that no matter how old we get, we still want to be teacher’s pet.

I propose an alternative rule — a “substantial” change in the titles of both agencies to ”School Marms R Us!”

Am I going to comment on the proposed rule? Maybe I’ll just submit a bumper sticker with the words: “Honk if you’ve outgrown school marms.”

Greenhouse Protection Racket

by Marlo Lewis on July 6, 2010 · 1 comment

in Odds & Ends

Climate policymaking in our Nation’s capital often resembles the heavy-handed dialogue of old-time mobster films.

“Are you gonna come along quietly, or do I have let the California Air Resources Board (CARB) muss ya up?” That was pretty much the line White House Environment Czarina Carol Browner took to obtain the auto industry’s support for the joint EPA/National Highway Traffic Safety Administration (NTSHA) greenhouse gas (GHG) emission/fuel economy standards rule. EPA is now in a position both to determine the stringency of fuel economy standards for the auto industry and to set climate policy for the nation. Yet the Clean Air Act provides no authority to regulate fuel economy and says nothing about greenhouse gases or global climate change. ”Badges? We don’t need no stinking badges.”  

Modus Operandi: Threaten in Order to Remove the Threat — for a Price

Here’s how the regulatory mugging went down. 

In February 2009, EPA Administrator Lisa Jackson commenced a rulemaking to reconsider Bush EPA Administrator Stephen Johnson’s denial of California’s request for a waiver to establish its own greenhouse gas emission standards program. Because the waiver would also allow other states to adopt the California program, because GHG emission standards are mainly fuel economy standards by another name, and because automakers would have to reshuffle the mix of vehicles delivered for sale in each “California” state to achieve the same average fuel economy in those states, Jackson’s proceeding threatened to subject automakers to inefficient, consumer-thwarting, regulatory patchwork.

In May 2009, Czarina Browner conducted secret negotiations with automakers, CARB Chairman Mary Nichols, and major environmental groups. Browner required participants to take a vow of silence and forbade anyone to take notes, violating the Presidential Records Act. The closed-door negotiations produced an “historic agreement” whereby automakers would support the EPA/NHTSA GHG/fuel economy standards rule and California and other states would deem compliance with the federal standards as compliance with their own.

In addition, observes Rep. Darrel Issa (R-Calif.), at the same time the Browner-led negotiations were taking place, ”the government was also engaged in bailout talks with General Motors (GM) and Chrysler,” resulting in “an ownership stake for the federal government of 61% of GM and 8% of Chrysler, respectively.” Whether Browner literally made the auto industry an offer it could not refuse, with the sweetener of financial assistance also contingent on the industry’s embrace of GHG regulation, we may never know.

This much is clear. By granting California’s request for a waiver, EPA created the threat of a regulatory patchwork, enabling the White  House to offer ”protection” in the form of the joint GHG/fuel economy standards rule. The protection “fee” was the auto industry’s unquestioning support for the joint rule and its prerequisite, EPA’s endangerment rule.

Thus, the Auto Alliance became the key industry lobby opposing Sen. Lisa Murkowski’s resolution to overturn EPA’s endangerment rule. The Alliance warned that if the endangerment finding were overturned, the “historic agreement” would unravel, confronting automakers with “the alarming possibility of having to comply with multiple sets of conflicting fuel economy standards.” 

That is correct, but only because EPA Administrator Jackson, reversing her predecessor’s decision, granted California a waiver to establish GHG emission standards for new motor vehicles. An obvious solution would be to overturn the waiver. After all, the Energy Policy and Conservation Act clearly prohibits states from adopting laws or regulations ”related to fuel economy,” and the California motor vehicle emissions program is basically a de facto fuel economy program. The waiver effectively repeals federal law, violating the separation of powers. Not that you’ll ever hear about that from Government Motors. Mum’s da woid.

Mirage of Regulatory Certainty

The auto industry is not the only target of the greenhouse protection racket. For years, the greenhouse gang has been saying that only cap-and-trade can end the intolerable ”regulatory uncertainty” facing the electric power sector, energy-intensive manufacture, and other CO2 emitters. But who created the uncertainty in first place if not the self-same advocates of cap-and-trade? If they were serious about relieving uncertainty, they would disavow the regulatory schemes for which they have been campaigning.

Businesses lobbying for cap-and-trade in the name of certainty should read the fine print. The Waxman-Markey and Kerry-Boxer bills, for example, have multiple escalater clauses setting the stage for dramatic increases in regulatory stringency well beyond the bills’ explicit emission reduction targets.  Similarly, the bills’ “findings” presenting the “scientific” rationale for cap-and-trade are not mere rhetorical fluff but precedents for litigation targeting emission sources considerably smaller than those explicitly identified as “covered entities.” Enact such legislation, and the only certainty is that regulatory burdens will grow unpredictably.

Too Clever by Half

Last but not least, cap-and-taxers sell their policy as protection from litigation-driven greenhouse gas regulation under the Clean Air Act.  The sales pitch goes something like this: “Pretty nice company you got deah, shame if sumpin’ bad waz to happen to it. Everybody needs protection. You need protection. It’s called Kerry-Lieberman.” Note the familiar pattern. The gang pushing cap-and-trade as protection from EPA are the same folks who sued EPA to regulate greenhouse gases and who vilified Sen. Murkowski and others for attempting to stop EPA.

This is all too clever by half. If cap-and-trade dies in the 111th Congress, which seems increasingly likely, the Obama administration and its allies on the Hill will take sole ownership of the compliance costs, job and GDP losses, and “absurd results“ arising from EPA regulation of greenhouse gases under the Clean Air Act. 

Democratic leaders may not recognize it yet, but they have painted themselves into a corner. They have become the Party of Endangerment — the party endangering the U.S. economy by championing the endangerment rule, with all its cascading regulatory effects.

An Oldie But A Goodie: John Christy’s Letter to Lisa Jackson on Fuel Economy Regulation

by Marlo Lewis on April 28, 2010

in Global Warming

Well, it’s not really so old. I’m referring to a March 10, 2009 letter by atmospheric scientist John Christy to EPA Administrator Lisa Jackson. I post it on Open Market and GlobalWarming.Org because it is hard to find on the Internet, and Dr. Christy makes a key point that will need to be made again and again in the upcoming Senate battle over the Murkowski resolution of disapproval to veto EPA’s endangerment finding.

The endangerment finding is the  statutory prerequisite for the joint greenhouse gas/fuel economy standards rule that EPA and the National Highway Traffic Safety Administration (NHTSA) finalized on April 1, 2010. Veto the endangerment finding, Murkowski foes warn, and NHTSA will have to ”de-couple” its portion of the joint GHG/fuel economy rule, which could delay by a year implementation of model year 2012 fuel economy standards.

Well, boo-hoo! Keeping the model year 2011 standards in place for an extra year would make no perceptible difference in atmospheric CO2 concentrations, average global temperature, weather patterns, or public health, even if one assumes that climate change is a big problem.

Christy’s letter puts this in perspective. For the sake of argument, Christy adopts the IPCC’s warming projections for its mid-range (A1B) emissions scenario. Even if the United States were to adopt immediately a 43 mpg fuel-economy standard, the net reduction in average global temperature would be 0.01°C in 2100. Such a change would be too small to detect. Even more microscopic would be the impact of the 34.1 mpg standard that NHTSA and EPA want to phase in by model year 2016. Whether that standard is delayed for a year or implemented on schedule is climatologically irrelevant.

In contrast, the economic and safety benefits of a one-year delay could be substantial. The distressed auto industry would not have to spend an estimated $5.9 billion in incremental technology investments (Table 4A.5-6) in model year 2012.

In addition, slower implementation of economy standards would slow the pace at which automakers decrease average vehicle size and weight. Reducing vehicle weight and size is a vintage method of improving fuel economy — but it also negatively affects vehicle safety. NHTSA’s 2002 fuel economy report concluded that regulatory-induced vehicle downsizing contributed to 1,300-2,600 fatalities and 13,000 to 26,000 serious injuries in 1993, a typical year. 

EPA and NHTSA struggle to belittle the size-safety tradeoff in their joint rule. However, they do include a “worst-case” scenario in which the new standards cause an additional 493 deaths in model year 2016 (see p. 144). Slowing the pace of fuel economy regulation would save lives.

Policy Peril Segment 7: Fuel economy standards

by Marlo Lewis on August 11, 2009 · 1 comment

in Global Warming, Mobility

Today’s excerpt from CEI’s film, Policy Peril: Why Global Warming Policies Are More Dangerous Than Global Warming Itself, is on two global warming policies Congress has adopted: fuel economy standards and biofuel mandates.

Here are my previous posts in this series:

To watch today’s film excerpt, click here. To watch the entire film, click here.

The text of today’s film clip immediately follows. It includes footnotes to additional commentary and supporting information.

Narrator: If stopping new coal is the global warming movement’s top priority, a close second is jump-starting a ‘beyond petroleum’ transport system. They propose to do this by tightening new-car fuel economy standards. Why?

A car that gets more miles to the gallon emits less CO2 per mile [1]. But the federal fuel economy program, also known as CAFE, has serious downsides.

Sam Kazman (General Counsel, Competitive Enterprise Institute): Now there are lots of problems with fuel economy mandates. One thing, they raise new car prices. [2] Secondly, they restrict consumer choice. [3] But the worst thing is an effect you never hear their advocates talking about. Namely, fuel economy mandates kill people. [4]

Narrator: Here’s why. Heavier cars provide more mass to absorb collision forces, and bigger cars provide more space between the occupant and the point of impact. [5] Make a car smaller and lighter, and it will go farther on a gallon of gas.

Kazman: But you also make it less safe. According to the National Academy of Sciences, the current CAFE standard by downsizing cars, contributes to about 2,000 fatalities per year. [6]

Narrator: Legislation Congress passed in December 2007  requires a 40% increase in fuel economy by 2020. [7] In 2007, only two out 1,153 vehicle models met the new standards. [8] So expect more downsizing in the years ahead.

Another ‘beyond petroleum’ policy is to require the sale of alternative fuels. In December 2007 Congress also mandated that motor fuel producers sell 36 billion gallons of ethanol a year by 2022, with 15 billion gallons coming from corn kernals. [9] The result, we’re diverting massive quantities of grain from food to auto fuel. This contributes to the surge in global grain prices that is pushing millions of the world’s poorest people to the brink of starvation. [10]

But at least ethanol cuts down on CO2 emissions, right? Actually, no.

Dr. Dennis Avery (Hudson Institute): As we expand the cropland, then we get into the real trouble, because we release the greenhouse gas that’s stored in the soil as carbon. And with corn, we release twice as much gas as we would have released if we burned gasoline in the first place. [11]

[1] A gallon of gasoline (which weighs about 6.3 lbs.) produces 20 lbs. of CO2 when burned. If a car gets more miles to the gallon, it will emit fewer lbs. of CO2 per mile driven. The relationship between fuel economy (mpg) and lbs. CO2/mile is so strict that EPA bases its fuel economy ratings of vehicle models on tests that measure the carbon content of the emissions, principally CO2.

Unsurprisingly, virtually all CO2-reduction options for new motor vehicles are fuel-economy-increasing options. See p. 10 of the National Automobile Dealer Association’s comment on EPA’s reconsideration of California’s request for a waiver to establish greenhouse gas emission standards for new motor vehicles. 

[2] There are basically two ways to increase fuel economy–downsizing (making cars smaller and lighter) and new technology. Typically, advanced technology costs more than conventional technology. The Energy Information Administration, for example, estimates that California’s greenhouse gas/fuel economy standards, which President Obama recently adopted, will increase the average price of a new car by $1,860 in 2016. [Obama's program will also impose heavy burdens on the nearly prostrate U.S. auto industry, as economist Keith Hennessey explains.]

[3] The CAFE program all but killed the market for large station wagons, because automakers could not produce millions of these once popular “family cars” and meet the CAFE standard for their vehicle fleets.

In addition, as a general matter, because fuel economy mandates increase vehicle cost, they inevitably price some consumers out of the market for certain vehicle models, restricting their choices.

Ironically, the federal fuel economy program boost the production and sale of gas-guzzling SUVs. Consumers who might otherwise have purchased big station wagons instead bought large SUVs. Congress regulated SUV fuel economy less stringently because (1) SUVs are built on a light-truck chassis and thus are classified as trucks rather than as passenger cars, and (2) most SUVs traditionally were used for farming and business rather than commuting. Fuel economy standards helped create the boom market for low-mpg SUVs–a classic case of the law of unintended consequences.

[4] Sam debates the issue of whether CAFE kills with an analyst from Natural Resources Defense Council (NRDC) here.

[5] I am always amazed when people with scientific credentials deny the safey implications of regulatory-induced vehicle downsizing. How can they claim that size and weight don’t matter? That’s denying the laws of physics. There’s a reason why boxing matches don’t pit lightweights against heavyweights, or why marathon runners don’t play professional football.

Yes, new technology can improve the crashworthiness of small cars. But, as Sam explains elsewhere, a large car with new technology will still be safer than a small car with new technology. To the extent that CAFE constrains the production and sale of larger, heavier vehicles, it limits auto safety.

[6] Sam refers to a National Academy of Sciences/National Research Council (NRC) study, Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards. See pp. 25-29, especially p. 27. The NRC estimates that in 1993, a typical year, downweighting and downsizing of cars contributed to 1,300 to 2,600 auto fatalities, 13,000 to 26,000 incapacitating injuries, and 97,000 to 195,000 total injuries.  

[7] The so-called Energy Independence and Security Act (EISA). Click here to read the Congressional Research Service’s summary of the EISA provisions.

[8] Prior to investigating, I had assumed there must be at least 30-50 models on the road that met the fuel economy standards mandated by the 2007 Energy Independence and Security Act. But EPA’s fuel economy ratings for model year 2008 reveals that only two out of 1,153 models, the Toyota Prius and Honda Civic Hybrid, met or exceeded the standard (35 mpg for both city and highway driving conditions).

[9] Click here to read the Congressional Research Service’s summary of the EISA provisions.

[10] I provide references here on biofuel policy and world hunger. In May 2008, the International Food Policy Research Institute estimated that biofuel demand accounted for 30% of the increase in world cereal prices during 2007-2008. For further discussion, see Dennis Avery’s October 2008 paper for the Competitive Enterprise Institute. 

[11] Dennis’s CEI paper recaps the literature on CO2 increases from biofuel policy-induced land-use changes, including Searchinger et. al. (2008) and Fargione et al. (2008). Additional reviews of these studies are available on World Climate Report and CO2Science.Org.

Obama Panders to the UAW: $30 Billion More for Wasteful Auto Bailout

by Hans Bader on June 2, 2009

in Bailout Watch, Economy, Employment, Energy, Global Warming, International, Politics as Usual, Stimulus to Nowhere, Trade

The federal government is giving another $30 billion in taxpayer money to General Motors to allow it to operate without having to cut excessive union wages. The Obama Administration is “gambling” on its ability to turn around the company under government control.

The Obama Administration has said it will now interfere not just with the “selection of the company’s board of directors,” but also in “fundamental corporate decisions,” and “major corporate events and transactions.” For example, Obama recently pressured GM to keep its headquarters in crime-ridden, economically-collapsing Detroit.

The $30 billion is excessive even if the Administration’s wildest hopes come true. Even if federal money were the only way to keep GM afloat (which it isn’t — GM could be made competitive simply by cutting its excessively high employee wages to lower levels that still exceed average American wages), and even if the bailout saved not only GM jobs but also the jobs of “related suppliers and dealers,” “the price of the U.S. government bailout comes to about $125,000 per employee, including those working for related suppliers and dealers,” according to the Washington Post.

If GM had rejected a federal bailout and takeover, and simply filed for bankruptcy in December, it would be recovering on its own right now, since it could have used bankruptcy proceedings to tear up the collective bargaining agreements with the United Auto Workers that saddle it with excessive wage and benefits and rigid work rules, and it would also be benefiting from the recent collapse of oil prices. It was record-high gas prices that forced consumers to buy smaller cars last year, battering GM’s finances, which were based around selling big cars. But gas prices have fallen from over $4 a gallon last year to $2.50 now. So the bailout is saving no jobs, it’s just allowing GM to keep union wages high at taxpayer expense, while keeping it from becoming competitive in the long run. (The recent drop in gas prices will also mask the effects of incompetent management of GM by the Obama Administration. On the other hand, the Administration’s CAFE and global warming regulations, which GM opposed before it was taken over by the Administration, will destroy tens of thousands of autoworker jobs).

The bailout is neither necessary nor likely to be successful in the long run. In its failed auto bailout in the 1970s, Britain did the same things that Obama is doing, like propping up high union wages and promoting the production of little “green” cars consumers may not want. Its bailout failed miserably, destroying the British auto industry’s chance of survival.

“‘Countries . . . protect ailing auto companies on the theory that they need to protect jobs,’ said Maryann N. Keller, an independent auto analyst. ‘But it’s not clear that protecting companies leads to the revival of those companies.’ As for the jobs, Keller said ‘a lot of that is bunk’ because Americans would buy the same number of cars no matter who the maker is. ‘Somebody would still make the parts,’ she said. ‘They would just be made for a different customer.’”

Why is the Obama Administration doing something so wasteful? Politics. The UAW is one of the biggest sources of money and manpower for the Democratic Party and Obama, and the UAW is now calling the shots. (The UAW spent millions electing Obama).

While taxpayers have spent tens of billions of dollars bailing out the Detroit automakers, the UAW has made little in the way of sacrifices, refusing to accept cuts in pay that could keep the automakers able to compete with lower-cost competitors. As even the liberal Washington Post lamented, “the union can boast that it has been promised no loss in ‘base hourly pay, no reduction in . . . health care, and no reduction in pensions,’” even though excessive union wages and benefits helped sink the company. Meanwhile, the government has ripped off pension funds and bondholders who loaned the car companies money.

The bailouts aren’t the only outrageous waste of taxpayer money taking place right now. Even bigger is the wasteful $800 billion stimulus package, which is harming the economy, both by triggering foolish trade wars that have backfired and cost at least 40,000 jobs, and by driving up interest rates for businesses that need to borrow money to expand or create jobs. (The government is keeping down interest rates on its own debt by printing vast sums of money to buy its own bonds, in order to finance the exploding national debt, which will result in massively higher taxes).

Insightful commentary by Keith Hennessey on Obama’s fuel economy rules

by Marlo Lewis on May 20, 2009 · 1 comment

in Global Warming

 

In this insightful, informative post, Keith Hennessey, formerly the senior economic advisor to President G.W. Bush, cautions that Obama’s new fuel economy rules could destroy 50,000 auto industry jobs. Yet the rules would have no detectable impact on projected global temperatures or sea level rise–all pain for no gain.

In addition, Hennessey notes that Obama’s action “will accelerate EPA’s regulation of greenhouse gas emissions from stationary sources.” He continues: “While Congress is futzing around on a climate change bill, EPA is getting ready to bring their “PSD” monster to your community soon.” He concludes:

In effect, EPA could insert itself (or your State environmental agency) into most local planning and zoning processes.  I will write more about this in the future.  It terrifies me.

Well, it worries me too. Politically, however, there may be a silver lining in this dark cloud. Concerning which, I posted the following comment on Keith’s blog. [click to continue…]

New fuel economy rules will make cars more costly, less safe, trigger regulatory cascade

by Marlo Lewis on May 19, 2009 · 4 comments

in Global Warming, Odds & Ends

 

At some point today, the EPA and the Department of Transportation (DOT) will propose a first-ever joint regulation to establish first-ever greenhouse gas (GHG) emission standards for new motor vehicles. The new standards, covering model years 2012-2016, will raise federal fuel economy standards to 35.5 mpg in 2016.

This is considerably more stringent than the standard Congress adopted in the December 2007 Energy Independence and Security Act (EISA), which would boost average fuel economy to 35 mpg by 2020.

This is bad news for three reasons.

New cars will be less safe. The proposed standards will require the average car and light truck to be 40% more fuel efficient by 2016. That’s a very aggressive schedule. To meet it, automakers will have to deploy advanced technologies (such as hybrid engines), but that won’t be enough. They’ll also have to reduce average vehicle size and weight. That, in turn, will at a minimum make the average car less safe than it would otherwise be.

Why? It’s a matter of physics. Heavier cars provide more mass to absorb collision forces, and larger cars provide more space between the occupant and the point of impact. Make a car smaller and lighter, and it will go farther on a gallon of gas (and emit fewer pounds of carbon dioxide per mile), but it will also provide less protection in collisions. The National Research Council estimates that the pre-EISA (27.5 mpg) fuel economy standard contributed to about 2,000 additional fatalities per year.

New cars will be more costly. As an unnamed senior administration official said yesterday in an embargoed press briefing, the EISA fuel economy standard will add $700 to the cost of a new car in 2016. The revised standards will add another $600 to the average sticker price. Yet the anonymous official claimed the new rules will help revive the prostrate auto industry. Yep, increase the average cost of a new car by $1,300, and more people will buy them! 

As my colleague Sam Kazman comments, the federal fuel economy program “kills consumers by reducing vehicle size, and now it may well kill car companies by forcing them to produce cars that consumers don’t want.” 

The GHG standards will start a regulatory chain reaction with potentially devastating economic impacts. The new standards are the regulatory complement to the endangerment proposal EPA issued on April 17. As explained here and here, once EPA and DOT finalize the Fuel economy/GHG emission standards, an estimated 1.2 million previously unregulated buildings and facilities will qualify as ”major stationary sources” of carbon dioxide under the Clean Air Act’s Prevention of Significant Deterioration (PSD) pre-construction permitting program. Thousands of small- to mid-size firms could be compelled to obtain PSD permits in order to build or modify such “major stationary sources” as office buildings, enclosed malls, big box stores, and commercial restaurants.

The PSD  permitting process is costly and time consuming. In 2003, the average permit cost $125,120 and 866 hours  for regulated entities to obtain (not included any technology investments regulated entities had to make). No small business could operate under the PSD administrative burden. A more potent Anti-Stimulus would be hard to imagine.

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