Cites costs, but skips benefits ‚Äì Reuters responds
In a curious column, New York Times business writer Eduardo Porter claims that “many economists”, without citing any by name, think the cost of new federal fuel economy and emissions standards “actually outweigh the benefits.”
“A gas tax that goads drivers to choose gas-sippers,” he argues, is a more cost-effective way to achieve the environmental and social benefits of reduced petroleum consumption.
To build his case, Porter suggests the Obama administration was less than forthright in disclosing the full costs of new vehicle standards, which are projected to reduce oil usage by 12 billion barrels and significantly cut carbon emissions.
“The government didn’t mention, Porter writes, “that these improvements come at a high cost for drivers.”
Er, no. In fact, documents issued by the U.S. Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) in support of the new regs contain detailed estimates on the cost of implementing new fuel-saving and emissions reduction technology, as Porter himself admits a few paragraphs down.
According to the government’s analysis the additional production and maintenance costs made necessary by the mileage rules will rise gradually to about $31.7 billion, which will add about $1,900 to the average price of cars and trucks.
It’s actually Porter who fails to mention significant facts, namely, that the increased cost to consumers for buying vehicles that comply with new fuel rules is far outweighed by the savings that come with buying less gas, because vehicles will go farther on each gallon
Net savings, after the cost of new technology is factored in, is about $8,000 over the life of a typical vehicle, according to EPA/NHTSA estimates. Put another way, the cost of driving goes down a lot more than the cost of buying a vehicle goes up. And the payback period begins the day you buy a new, more fuel- efficient car or truck. The purchase price of a new vehicle is typically stretched out over a multi-year lease or loan, lessening the sting of any higher vehicle costs. But the gas you don’t buy next week leaves more money in your pocket immediately.
Porter is on even shakier ground when claiming that other countries, such as the United Kingdom, achieve higher mileage for their vehicle fleet solely because they impose higher gas taxes. But the UK, along with other European and Asian countries, have never relied on gas taxes alone to improve fuel economy.
Reuters finance blogger Felix Salmon fills in the blanks:
Porter is also right that in countries with higher gas taxes, fuel economy tends to be much higher. But he’s not necessarily right that the higher gas taxes alone are responsible. Porter implies that the US only has fuel-economy standards just because “a tax on gasoline doesn’t stand a chance” of being passed. But the fact is that even countries with very high gas taxes have fuel-economy standards as well. And, guess what, they’re significantly tougher than ours, and they always have been.
[T]he US still has pretty much the lowest fuel economy standards in the developed world and it still will in 2025, even after the new standards are fully phased in. If US carmakers want to be internationally competitive, they’re going to need to develop more fuel efficient cars, no matter what happens in the US.
Salmon’s last point is precisely right. Absent new fuel standards, if automakers continued to build 20-something mpg cars in the U.S., while 30 and 40 and 50 mpg vehicles were being made in Europe and Asia, which plants do you suppose would attract new investment, new product, and new engineering and design talent?
As Salmon notes, Porter concedes that this entire discussion is mostly academic, because “a tax on gasoline doesn’t stand a chance.”
Fuel economy standards, meanwhile, are supported by a three-to-one margin in public polls. How to go about replacing a politically popular policy with an unpopular one might be an interesting exercise in a seminar room somewhere. But in the real world, drivers need a break from high gas costs, U.S. manufacturing needs a boost, and our parched landscape requires relief from global warming.
The new fuel economy and emissions standard delivers on all counts, at a reasonable cost, and with broad public support.
Tiffany Ingram is the Natural Resources Defense Council’s Midwest Advocacy Director.