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April 30, 2005

These People Need Slapping.

Not much of a surprise here, the NYT being as it is:

Yet, as always, he completely ignored the surest way to reduce demand and thus oil dependency, which is to improve the fuel efficiency of America's cars and trucks. Indeed, everything Mr. Bush said seemed designed to divert attention from this simple and technologically feasible idea, which nevertheless seems to terrify both him and the Congress.
.....
The key question is whether, unlike Mr. Bush, he has the political courage to push for the stricter fuel economy standards that are essential to any serious effort to lower consumption.

You would think that, after all these years, people would realise that the CAFE standards are part of the problem, not part of the solution. High (as we have now) oil prices are doing exactly what everyeone wants, reducing demand for gasoline. People are buying smaller cars, SUV sales are dropping. This is the way the world works, changes in relative prices changing people’s behaviour.

What people always forget is that it is the very existence of CAFE standards that has led to the development of the hated SUV. There are different standards for vehilces built on a car frame and for those built on a truck frame.  People who want a big vehicle (for whatever reason)  cannot get a large one built on a car frame, only on a truck frame, for in this manner the manufacturers can meet the limits for the fleet they sell. But something built on a truck chassis is less efficient in its fuel consumption than one built on a car chassis.

CAFE actually decreases the fuel efficiency of the American vehicle fleet by pushing people into buying the inherently less efficient truck based machines.

There are also all the mandated pollution control technologies.....Honda has a lean burn engine that meets the emission standards without any further modification, no feeding exhaust back into the engine and so on. But because the use of such technology is mandated, that engine must have them, reducing the fuel efficiency. As, of course, such technology reduces the fuel efficiency of all American cars and trucks.

There is a very real case that fuel efficiency and pollution controls are substitutes for each other. Impose one and get less of the other.

The real answer is to scrap the CAFE standards, scrap the mandated technology solutions, allow any technology that meets emissions standards to be used and whack $1 on the federal gasoline tax.

But then that would be a market based solution, so the NY Times would never go for it. These people really do need a damn good slapping.

April 30, 2005 in Economics | Permalink

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Tracked on Apr 30, 2005 3:30:50 PM

Comments

Tim,
The amount of tax that should be levied on petrol should be the cost of removing the C02 produced by it's (total) combustion.

C02 removing businesses could then bid for this money to remove C02.

Now THIS is a market based solution. Yours is a state solution.

Unless the revenue from the tax is used DIRECTLY to fight the externality problem, it WILL be wasted by beurocrats.

Call this Robs rule (but I'm sure I am not the first)!

Posted by: Rob Read | Apr 30, 2005 1:01:53 PM

Actually, the tax should equal the marginal damage cost, not the cost of removing the stuff. That makes no sense at all.

As it happens the OECD wrote a very interesting paper some time ago on the use of tradeable permits for co2 reduction from cars. Never got any real attention though , of course.

In the US, of course, given the big gap between tax revenues and government spending there is a very good case for a higher gas tax as an efficient way to close the gap while contributing to lower pollution and reduced energy dependence.

Ain't going to happen though, I don't think. Of course - cutting spending is an alternative - but that ain't happening either.

Posted by: rjw | Apr 30, 2005 4:47:54 PM

The idea of linking a tax to CO2 is stupidity at its finest. Why would we do that ... so we can create another market distorting effect that will harm both the environment and humanity. We will come to accept in the next 5 years that the CO2 story was more fiction than fact. It is already circulating that teh models wildly overstate the effects of temperature increase caused by greenhouse gases. By the way CO2 is not the major culprit. Let's save save psuedo-science for movies and gaming ... and let's quit playing omnipotents and let the market operate.

Posted by: simon | Apr 30, 2005 8:38:13 PM

of course we could all reduce c02 emissions if we stopped breathing

Posted by: Mark T | May 3, 2005 12:43:26 PM