Steve Chapman on Energy Efficiency

Lynne Kiesling

From Reason, a good read from Steve Chapman on energy efficiency, particularly stricter fuel efficiency mandates. He does a good job of doing something that not enough people think about: people object to policies that will increase the price of gasoline (such as a gas tax, a carbon tax, or carbon trading), but they ignore how stricter fuel efficiency standards will raise the price of vehicles:

Economists almost unanimously agree that if you want to cut greenhouse gas emissions by curbing gasoline consumption, the sensible way to do it is not by dictating the design of cars but by influencing the behavior of drivers. If you want less of something, such as pollution from cars, the surest way is to charge people more for it.

A carbon tax or a higher gasoline tax would encourage every motorist, not just those with new vehicles, to burn less fuel—by taking the bus, carpooling, telecommuting, resorting to that free mode of transit known as walking, or buying a Prius.

Many people are inclined to resist a higher gas tax because it would cost them money. What they overlook is that a law requiring cars and trucks to be more fuel-efficient would not come free, either. You wouldn’t pay more for each visit to the pump. But you would pay more for a car. The Congressional Budget Office estimates that over time, a gas tax would cost 27 percent less than a higher fuel-economy mandate.

This is yet another example of Bastiat’s “the seen and the unseen”; too often, policy decisions are based on costs and benefits that are easily seen, without considering that the unseen costs may be higher and benefits lower.

3 thoughts on “Steve Chapman on Energy Efficiency

  1. A carbon tax or a higher gasoline tax would encourage every motorist, not just those with new vehicles, to burn less fuel—by taking the bus, …

    Where does one find this evidence that buses burn less fuel (save energy)?

  2. The problem with CAFE standards is that they caused the death of the American automobile industry. They forced American carmakers to make cars that they didn’t know how to build (otherwise known as “S***boxes”).

    The Japanese and Europeans already made cars that met the CAFE standards, and they just took over the market.

    Now, CAFE standards can’t be blamed for all the US auto industries woes. At the same time as the CAFE standards were implemented, emissions controls were being imposed, inflation was out of control, etc. The US auto industry also had a certain attitude that wasn’t conducive to change.

    But the fact is that the US automakers were forced to make cars that they simply did not know how to make. It is no coincidence that over time they shifted their production to trucks and SUVs. Trucks and SUVs are a lot more similar to the cars they made pre-CAFE than the s***boxes that the Japanese traditionally made, and that CAFE standards demanded.

    If now CAFE standards are applied to trucks and SUVs, or if higher energy prices kill that market, the American automakers will go out of business.

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