Auto Manifesto

September 9, 2009

CAFE: Who Are We Kidding? (Part 3)

There are many more issues with this regulation, but I'll leave you with these:

We were particularly encouraged that Reformed CAFE will confer no compliance advantage if vehicle makers choose to downsize some of their fleet as a CAFE compliance strategy...

Another fallacy. The agency says larger, heavier vehicles are safer vehicles (for passengers). They say lighter vehicles are more efficient. So the fuel economy regulation is now based on vehicle footprint. This is even more of an unnecessary attempt at classifying vehicles (see Part 2).

...requiring improvements in fuel economy necessarily has the effect of requiring reductions in tailpipe emissions of CO2 emissions.

This one line of thinking probably has more to do with why CAFE was initiated in the first place and demonstrates that the whole program is based on a flawed assumption.

They missed the global view, focusing on the proportional relationship between CO2 emissions and fuel consumption. Did it not occur to legislators (the agency shouldn't take all the blame - they're doing what they were directed to do) that improving fuel economy encourages people to drive more thus NOT reducing the amount of fuel used, even if fuel economy was improved?

The answer is yes because the rulemaking goes on to further contradict itself.

... the rebound effect from higher fuel economy will increase emissions of these pollutants. Thus, the net effect of stricter CAFE standards on emissions of each pollutant depends on the relative magnitudes of its reduced emissions in fuel refining and distribution, and increase in its emissions from vehicle use.

In other words, CAFE will work if people don't drive much more. But when fuel cost goes down vehicle miles go up. Hmmm....

The 2002 Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards report by the National Academy of Sciences (NAS) report cited in the rulemaking states:

While raising CAFE standards under the existing structure would reduce fuel consumption, doing so under alternative structures 'could accomplish the same end at lower cost, provide more flexibility to manufacturers, or address inequities arising from the present' structure.

Here is a report written at the behest of Congress and acknowledged by NHTSA that CAFE is not the best way to go about improving fuel economy and efficiency. So what does the government collectively do? More of the same.

What they should do is tax the fuel and cancel this complicated and ineffective program. Stop trying to make a pig fly.

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CAFE: Who Are We Kidding? (Part 2)

More thoughts about CAFE:

Limits to five the number of model years for which standards can be established in a single rulemaking.

This virtually guarantees the prevention of long term planning. The agency itself admits that its estimates are based on projected production figures by the manufacturers. Yet future regulations are constantly in the air since each rulemaking is limited to a 5 year horizon.

This is akin to looking 5 feet ahead of the car while driving. You will make constant steering inputs without looking further up the road, resulting in actions that matter little in the long run.

Distinguishing between passenger cars and light trucks is unnecessary. Why classify different types of vehicles that are intended for private use? All this has accomplished is to shift consumers from large cars to larger SUVs.

The agency could not set out the exact level of CAFE that each manufacturer would be required to meet for each model year under the passenger car or light truck standards since the levels would depend on information that would not be available until the end of each of the model years, i.e., the final actual production figures for each of those years. The agency could, however, project what the industry-wide level of average fuel economy would be for passenger and light trucks if each manufacturer produced its expected mix of automobiles and just met its obligations under the proposed "optimized" standards for each model year.

Manufacturers' compliance with the regulations depend on actual production levels and targets.

Compliance with this regulation is entirely dependent on whether a manufacturer can accurately meet its production projections (or buy compliance credits from those that do). But they are at the mercy of market demand. How much faith can we put in these projections when the industry has traditionally been cyclical (see 2009 sales)? These projections are hit or miss.

This also throws into question any cost/benefit estimate on the agency's part.

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CAFE: Who Are We Kidding? (Part 1)

It's taken a while but here's my summary of the CAFE standards for 2011.

Any rational person with a modicum of understanding of this industry, after reading several sections of this rulemaking will come to the conclusion that the U.S. government is wholly incapable of effectively regulating fuel efficiency.

The rule is complicated, unnecessary and ineffective. Instead of the government playing automotive engineer, it should establish a fuel price floor which would enable the market to address these issues faster, better and cheaper.

The end goals are to reduce oil consumption, for both national security and environmental reasons, and to improve highway safety. It's not the government's place to dictate technically specific solutions.

As I've said many times before, people (the market) will respond to higher fuel prices. Just look at what happened in 2008 when fuel prices rose dramatically. People drove less (and slower), and roads were safer for it as well.

I'm not saying tax fuel so the price is at peak 2008 levels, but implement a long-term plan to steadily increase the minimum fuel price. It's an understandably difficult political proposition. Don't call it a tax. Position it as an innovation incentive and then use the proceeds for that purpose.

People will choose more appropriate vehicles for their needs. More efficient vehicles are driven more, public transport is needed. Consumers are then directly involved with reducing fuel use. The market knows best.

The CAFE standard is based upon a number of significantly false and unknown assumptions. For instance:

1. All vehicles are driven the same amount. This is implied because the regulation only looks at fuel economy (mpg) instead of fuel consumption (gallons).

2. Manufacturers can accurately predict market demand and what the sales mix of models will be.

3. Consumers will save money. Unlikely when you consider fuel economy hasn't really improved (though cars do have a lot more power now) but the manufacturers have had to spend BILLIONS (by NHTSA's own estimate) on CAFE compliance.

4. The regulation is enforceable. Technically this is correct, but it heavily depends on assumption #2.

5. Provides stability. No can do with a 5 year planning horizon (see Part 2).

6. Mergers and alliances will not affect CAFE levels. This may be the most complicated aspect of it all (and rife with loopholes).

Full NHTSA document: [Text, PDF]

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