Stricter Cafe Standards For Light Trucks Are Inefficient

Check out this new AEI-Brookings Joint Center study on light truck fuel efficiency. Punch line: more stringent fuel efficiency standards for light trucks are an inefficient way to reduce gasoline use. From the abstract:

The National Highway Transportation Safety Administration (NHTSA) recently proposed increasing the fuel economy of new light trucks by 1.5 miles per gallon for vehicles produced in model year 2007. NHTSA’s analysis of its proposal implausibly concludes that the benefits to consumers are more than twice the costs to manufacturers, ignoring effects on the environment or dependence on foreign oil.

NHTSA’s proposal has several serious flaws. It wrongly presumes that manufacturers cannot produce items that consumers are willing to buy, even though they could make money by doing so. Its analysis uses overly optimistic measures of net benefits. In addition, NHTSA neglects the adverse effects from the increased driving induced by the proposal. By lowering the cost of driving, NHTSA’s proposal increases vehicle miles traveled, thereby boosting traffic accidents and congestion. The increase in the costs of accidents and congestion fully offsets and probably outweighs the social benefits resulting from greater fuel economy.

If NHTSA is interested in a cost-effective way of reducing gasoline use, it should consider giving consumers better information about fuel economy of new vehicles, or suggest a modest gasoline tax. A penny per gallon levy would conserve more fuel in 2007 than NHTSA’s proposal, while lowering, rather than increasing, traffic congestion and accidents.

This recommendation parallels one that I made in this February post, building on Virginia Postrel’s Economic Scene column on CAFE standards from December 2001.