New CAFE Standards: Undercutting Consumer Choice AND the American Car Industry

August 02, 2011 J

On Friday, President Obama announced new fuel economy standards for the automobile industry. The new regulations require cars and light trucks to get 54.5 mpg by 2025. This announcement marks the EPA’s continued efforts to expand its authority and control over specific industries by issuing new laws disguised as new regulations. The EPA seems to think they have the authority to usurp the legislative power that the people delegated to Congress in the Constitution, pushing the same disastrous policies Congress and the American people have already rejected. This time, the implications could be devastating for the economy, the car industry, and the American people.

Last week 14 out of the 15 representatives from Michigan, including Republican Representative Fred Upton and Democrat Senator Carl Levin, sent a bipartisan letter to President Obama expressing their deep concerns over the impact of these new regulations. The letter warns that the car industry simply does not have the technology to keep up with the ever-moving, arbitrary miles per gallon goalposts, and that the new rules would benefit foreign competitors since they cater more to consumers who purchase smaller cars. U.S. car manufacturers already have to rely on government subsidies just to meet the previous CAFE standards of 34.2 mpg by 2016, and there is little doubt this move is intended to make the car industry more dependent on the federal government for its survival.

Since these extreme standards stretch the limits of basic physics, the only way for car companies to possibly meet them (with the likely help of subsidies at the taxpayers’ expense) is to decrease the size of automobiles and change their composition to lighter materials. This will eventually lead to the elimination of larger automobiles that rely on strength and payload, and limit the choices available to consumers who would rather buy SUV’s and vans because of their safety and size. More significantly, there will be literally thousands more deaths as a result. A 2002 study by the National Academy of Sciences calculated that 1,300 – 2,600 have died in a given year as a result of previous CAFE standards. In fact, the National Highway Traffic Safety Administration found that if a car weighing less than 3000 pounds reduces its weight by 100 pounds, the rate of fatalities increases by 5%.

The administration argues these new standards will actually save consumers money, reduce greenhouse gas emissions and decrease our dependence on foreign oil, but these claims couldn’t be further from the truth. The bipartisan Michigan delegation letter cited a newly published report from the Center for Automotive Research (CAR) which projected emissions would only be reduced by a mere 5% while the average cost per vehicle would increase $6,714, causing huge burdens on consumer’s wallets.

In practice, that means many Americans will be priced out of buying a new car, and will either continue to drive old, less-efficient vehicles or decide to buy used cars that are also less energy efficient, undercutting any potential goals of the new standards. There would also be a “rebound effect” whereby higher efficiency actually spurs people to drive more and consume more energy. In fact as cars have become more efficient over the years, the average number of miles driven per person has doubled.

The CAR study further found that there is a direct correlation between higher fuel economy standards and higher unemployment. CAR predicts more than 220,000 jobs could be lost in an industry that supplies roughly 8 million jobs to the American people and in a state that has been stuck with an unemployment rate over 10% for the past three years.

Congress needs to take responsibility as the legitimate legislative branch of government and step in and overturn these disastrous regulations. Moreover, they should go further and stop the rest of the EPA’s sweeping anti-energy agenda, making clear that we should allow the free market to drive improvements in efficiency through competition and consumer demand.

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