Standards and Markets

The EPA has decided to revisit, revise, and lower fuel efficiency standards for cars sold in the US for the model years 2022-2025.  The Obama administration EPA had mandated that overall fleet fuel efficiency—averaged across all models of cars built by a manufacturer—be raised to 54.5 miles per gallon by 2025 from 35.5 miles per gallon in 2016.  This would have represented a greater than 50% increase in fuel efficiency in just 10 short years.

Environmentalists are up in arms over the move.  Fred Krupp, Environmental Defense Fund President:

Designing and building cleaner, more cost-efficient cars is what helped automakers bounce back from the depths of the recession and will be key to America’s global competitiveness in the years ahead.

And Jon Foley, California Academy of Sciences Executive Director, tweeted

This move wastes energy, and makes more dependent on foreign oil.

Both misunderstand.  Krupp is right that building better cars helped automakers recover from the Panic of 2008, but he missed two Critical Items.  One is that American automakers, pre-Panic, were churning out junk and losing market share to better manufacturers.  When they stopped building junk, they got competitive again.

That brings me to the second Critical Item.  It was free market competitive forces—and the Panic to drive that home—that enabled the American automakers, building better cars, to get back into the game.  It was free market competition, in response to changing consumer demands, that pushed automakers to build more reliable, more fuel efficient cars (and trucks), with competition moving to hold prices down.

Neither of those had, or have, anything to do with government mandates.

Foley just seems to have not been paying attention over the last few years.  New technologies for locating oil and gas and for extracting those have lowered the cost of oil and gas for a whole host of uses, including car and truck fuel, and those technologies have led the US to be a larger producer of oil and gas than any other nation, save Russia—and we expect to surpass Russia in a couple of years.  There’s not much dependence on foreign oil here.

Oh, and one last thing.  The cost of buying a car won’t be so great now that manufacturers don’t have to waste capital on crash courses in engine development and can instead move at the pace of market competition.

Now, if only we could get rid of the ethanol mandate, too, so car maintenance and food costs could be reduced.

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