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


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.