Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards (2002) / Chapter Skim
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Pages 83-110
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From page 83... ...
83 5 Potential Modifications of and Alternatives to CAFE WHY GOVERNMENTAL INTERVENTION? Why should the government intervene in the fuel economy decisions of consumers and manufacturers?
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From page 84... ...
84 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS fuel savings over the entire life of the vehicle are considered.
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From page 85... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 85 hicles corresponding to the 3-year case, most consumers would be made economically worse off by the government's failure to intervene to increase fuel economy. Other Issues Not Considered The committee has explicitly not relied on rationales other than environmental and international oil market impacts.
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From page 86... ...
86 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS The committee used an estimate of a $0.02/gal for the total of these external costs in its calculations.5 The Organization of Petroleum Exporting Countries (OPEC)
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From page 87... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 87 The Two-Fleet Rule Differentiating Between Domestic and Imported Cars Currently, each manufacturer must meet the CAFE standard separately for its domestically produced fleet of new passenger cars and for its imported fleet. Averaging8 is allowed within each of these two fleets but is not allowed across the two fleets.
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From page 88... ...
88 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS Gasoline Tax The current federal excise tax on gasoline could be increased.
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From page 89... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 89 ential between truck and car CAFE standards would eliminate all CAFE-derived incentives for manufacturers to have vehicles classified as trucks.12 This is the approach EPA will use for emission standards: beginning in 2009, it will treat light-duty trucks the same as it treats cars under the Tier 2 emission regulations.13 In addition, the gas guzzler tax, discussed in Chapter 2, imposes a large tax on passenger cars but not on trucks. For example, a passenger car with a fuel economy of 20 mpg would face a gas guzzler tax of $1,000, while a truck with similar fuel economy would face no tax.
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From page 90... ...
90 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS The United Auto Workers (UAW)
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From page 91... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 91 The tradable credits system would have another advantage, especially if the sales price of tradable credits were made public.19 Debates about environmental standards usually involve disputes about implementation cost: Those favoring regulation contend that the standards will be cheap to implement, while manufacturers contend that the standards will be too expensive. The sales price of credits will reflect the marginal costs of fuel economy improvements, since manufacturers can be expected to increase fuel economy to the point at which the marginal cost of fuel savings equals the sum of gasoline price plus the market price of tradable credits.
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From page 92... ...
92 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS consideration should be given to developing a new system of fuel economy targets that responds to differences in vehicle attributes.
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From page 93... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 93 was exceeding the current standard at, say, 33 mpg would have to improve its performance to 36.3 mpg. The UPI system would impose higher burdens on those manufacturers who had already done the most to help reduce energy consumption.
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From page 94... ...
94 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS taxed, with the tax in proportion to the amount of carbon (or CO2)
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From page 95... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 95 Alternative Policies and Incentives for Fuel Use Responses The various policy measures encourage at least seven quite different fuel use responses. The measures differ in terms of which possible responses they will motivate: those related to the fuel economy of new vehicles, to the usage of vehicles, or to fleet turnover.
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From page 96... ...
96 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS and speed of the intervention -- and on the choices the manufacturers and the consumers make in responding to the implementation.
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From page 97... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 97 knowledge about all costs and no one can predict with confidence changes in technology or economic conditions. Therefore, the discussion focuses on whether various policy instruments allow manufacturers, consumers, and policy makers to respond to uncertainty in future conditions.
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From page 98... ...
98 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS Analysis of the Costs of Various Policy Instruments With that framework in place, the policy instruments can be analyzed in terms of cost minimization for a given fuel economy increase and balancing of marginal costs of fuel economy increases with marginal benefits.
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From page 99... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 99 none can directly control total vehicle miles, the second column of Table 5-3, "How certain will be the magnitude of new car fuel economy increases? ", summarizes the degree of certainty in the magnitude of new vehicle fuel economy increases not in the magnitude of total fuel use reductions.
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From page 100... ...
100 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS even if the fuel economy of their cars or trucks exceeded the fuel economy targets.
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From page 101... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 101 All other policy instruments could be expected to reduce vehicle weights and thus, all else equal, could be expected to have unintended safety impact. Any policy instrument that encourages the sale of small cars beyond the level of normal consumer demand may have adverse safety consequences.
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From page 102... ...
102 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS line taxes and carbon trading/taxes -- can lead to additional environmental benefits.
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POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 103 use of this information for further rule making. Reporting on the names of the other companies involved in transactions would allow cross-checking to assure that every reported purchase of credits had a corresponding reported sale.
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From page 104... ...
104 This attachment develops the Enhanced-CAFE (E-CAFE) standard, an alternative to the current fuel economy regulations.
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From page 105... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 105 cars, which may lead to an increase in traffic fatalities. In addition, there are equity problems: Those manufacturers who specialize in making large, heavy cars have a harder task meeting CAFE targets than those who specialize in making small, light cars.
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From page 106... ...
106 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS 2.0 3.0 4.0 5.0 6.0 7.0 1500 2500 3500 4500 5500 Curb Weight (pounds)
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From page 107... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 107 0 1 2 3 4 2000 2500 3000 3500 4000 4500 5000 5500 Curb Weight, lb W ei gh tS pe ci fic F ue l C on su m pt io n Premium Small Comp VAN Entry Small Comp PU Midsize STD PU Near Luxury Midsize Small SUV Luxury Midsize Comp SUV Large Luxury Comp SUV Luxury Large Large SUV Weight Specific Fuel Consumption FIGURE 5A-5 Weight-specific fuel consumption (gal/100 miles/ton)
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From page 108... ...
108 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS but the actual targets would be determined by the legislative and regulatory process.
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From page 109... ...
POTENTIAL MODIFICATIONS OF AND ALTERNATIVES TO CAFE 109 2.0 3.0 4.0 5.0 6.0 1500 2000 2500 3000 3500 4000 4500 5000 5500 Curb Weight G al lo ns p er 1 00 m ile s Trucks Cars Targets 0 1 2 3 4 2000 2500 3000 3500 4000 4500 5000 5500 Weight, lb W S F C , G al lo ns /T on o f V eh ic le W ei gh t 1 00 M ile s Premium Small Comp VAN Entry Small Comp PU Midsize STD PU Near Luxury Midsize Small SUV Luxury Midsize Comp SUV Large Luxury Comp SUV Luxury Large Large SUV Average Cars Trucks More Stringent Standard For Vehicles Greater Than 4000 lb. FIGURE 5A-6 Enhanced CAFE targets.
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From page 110... ...
110 EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS the determination of slopes and cutoffs under a GVW standard.
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