Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
Last Friday night, after months of wrangling, House Democratic leaders agreed to support legislation requiring the average car and light truck to achieve 35 miles per gallon by 2020.
House Speaker Nancy Pelosi (D., Calif.) hailed the measure  as the "cornerstone" of the energy package the House will debate this week.
Current average fuel economy standards are 27.5 miles per gallon for passenger cars and 22.5 miles per gallon for light trucks (vans, mini-vans, pickups, and SUVs weighing up to 8,500 pounds). The House leaders’ plan would increase the overall stringency of these standards by 40 percent.
Now, many people might think this is a fine idea. After all, nobody likes paying a small fortune for gasoline. Most people wish their current vehicles got better gas mileage.
But if fuel-economy mandates improve consumer welfare, why stop at 35 mpg? Why not decree that the average car must achieve 100 mpg?
The answer, in part, is that few people could afford to buy a 100-mpg vehicle. No hybrid today gets anywhere close to 100 miles per gallon, yet hybrids can cost several thousand dollars  more than comparable non-hybrids. Also, just as the current 27.5-mpg standard eliminated the large station wagon, a 100-mpg standard would eliminate many other vehicle types (probably anything larger than a go-cart). Our pain at the dealership would vastly exceed our pain at the pump. The U.S. auto industry would implode.
The question then arises: How do House leaders know that a 35-mpg standard will not put Detroit at a competitive disadvantage, increase vehicle cost, or restrict consumer choice?
Maybe they believe that lots of vehicles on the road already get 35 miles per gallon, so what they’re demanding can’t be very onerous.
This is a natural assumption to make, because government and industry have invested considerable resources over many years to improve fuel economy, and much hoopla surrounds those efforts.
The Clinton administration’s Partnership for a New Generation of Vehicles  aimed to build a sedan that could get 80 miles per gallon without sacrificing “the level of performance, utility, and cost of ownership that today’s consumers demand.” Industry contributed $980 million  to the PNGV during 1993 to 2001. Various federal agencies also funded the program, spending $234 million on R&D in 2001 alone. Similarly, President Bush has requested more than $850 million  since FY 2003 for his Freedom Car and Fuels program to develop fuel-cell vehicles and other advanced technologies.
In Speaker Pelosi’s home state, the California Air Resources Board in 1990 issued a zero-emission vehicle (ZEV) mandate requiring that 10 percent of all new cars sold  in the state to be battery-powered by 2003.
The ZEV and PNGV programs did not come anywhere close to accomplishing their missions, and Freedom Car and Fuels may similarly fail. Nonetheless, the websites of these programs take credit for important technological advances, such as hybrid engines. From all the self-congratulation, you might suppose that at least 25 or maybe even 50 vehicles today get 35 mpg or better.
Let’s check this against the Environmental Protection Agency’s fuel-economy ratings  for 2008 model-year passenger cars and light trucks.
EPA rates the city/highway fuel economy of 1,153 vehicles in all classes. Guess how many vehicles achieve 35 mpg for city and highway driving combined? Exactly two: the Toyota Prius (48 city/45 highway) and the Honda Civic Hybrid (40 city/45 highway).
Nine other vehicles get 35 mpg in city or highway driving conditions but not both—and all of those vehicles are either subcompacts or compacts. The Prius and Civic Hybrid are classified as mid-size cars. However, no other mid-size car and no large car, station wagon, SUV, van, or minivan gets 35 mpg under any driving conditions.
Someone who is not a congressman might see a pretty clear “market signal” in the fact that, out of 1,153 models rated by EPA, only two fully meet the House energy bill’s proposed standard, and a mere nine meet it partially. Yet House leaders assure us their proposed standard is realistic and practical.
What are the likely consequences of mandating that all new cars and trucks on average achieve 35 mpg by 2020?
First and foremost, there will be a reduction in vehicle safety compared to what would otherwise be achieved.
The easiest way to improve fuel economy is to make the average vehicle smaller and lighter. However, smaller, lighter vehicles are less safe in collisions. They have less mass to absorb collision forces and provide less space between the occupant and the point of impact. Historically, to comply with federal fuel economy standards, automakers reduced average vehicle size and weight. In 2002, the National Research Council estimated that, in 1993, vehicle downsizing contributed to an additional 1,300 to 2,600 fatalities; 13,000 to 26,000 incapacitating injuries; and 97,000 to 195,000 total injuries (see pp. 25-26 of this report ).
To increase gas mileage without relying solely on vehicle downsizing, automakers can incorporate innovations in design, engineering, and technology. But here too, there is often a tradeoff. Advanced technology (a hybrid engine, for instance) typically costs more than conventional technology.
So, if Congress mandates increases in fuel economy, vehicles on average will be less safe and/or less affordable  than they would otherwise be. Consumers will have fewer choices, and more motorists will die on the highways. U.S. automakers will be forced increasingly to compete in the compact and subcompact markets, where Europe and Japan dominate. Not a pretty picture.
Proponents’ rhetorical trump card is the alleged “planetary emergency of global warming.” Increase a car’s fuel economy, and you decrease the amount of carbon dioxide (CO2) it emits per mile. However, as fuel economy increases, the per-mile cost of driving decreases, encouraging people to drive more frequently and take longer trips. Some motorists may actually end up emitting more CO2.
Tough new fuel economy standards could backfire in a more fundamental way. With oil selling at close to $100 a barrel, a bonanza awaits the first automaker to develop affordable, high-performance vehicles that run on rechargeable batteries, fuel cells, or some other low-emitting or non-emitting propulsion system. But only prosperous companies can afford to plow billions into R&D. Capital spent complying with arbitrary fuel economy mandates is capital unavailable for investment in breakthrough technologies.
But assume for the sake of argument that the 35-mpg standard reduces emissions. Would the potential reduction in global warming compensate for the lost lives, lost jobs, and higher sticker prices? Not by a mile. Atmospheric scientist John Christy  calculates that even if the entire world were to adopt a 43-mpg fuel economy standard over the next decade, “the net effect would reduce projected warming by about 0.05 degrees Fahrenheit by 2100, an amount so minuscule as to be undetectable.”
Fuel economy mandates simply have no redeeming social value. Today’s high oil prices give automakers all the incentive they need to develop "beyond petroleum" vehicles and improve fuel economy in every way consistent with consumer preferences. To believe that automakers will not do so unless coerced is to assume that they do not want to make money!
If the federal fuel-economy program were a product manufactured in Detroit, it would have been recalled long ago. Adopting more stringent mpg standards will make a bad program even worse.