Wednesday, September 16, 2009

New fuel economy standards coming in 2016

The basics from the Raleigh News and Observer.

More quotes and such from the N.Y. Times

More detail on the economics from Business Week.

What is novel here is that for the first time national automobile standards include a provision for CO2 emissions (California has done this for a while).

Notice the consideration of demand and supply in the Business Week article.

(Side note: I must mention that I get a little irritated when journalists say "The law of supply and demand"... because of course, there is no law of supply and demand. There is a law of demand, and a law of supply. Econ prof pet peeve I guess.)

Anyway, the article also points out a need for the true price of gasoline to be reflected in the price we pay at the pump, otherwise, the new regs may only serve to create a glut of tiny cars that no one wants.

These standards in question are called C.A.F.E. standards (Corporate Average Fuel Economy), and raising them may have an unintended consequence. Can anyone see it?

There is some good basics on C.A.F.E. standards here from NPR. Notice that we have not raised the standards in a long time.


Anonymous said...

I need to have a few questions answered before I can make sense of all this. First, doesn't the government subsidize petroleum? Couldn't the gov't use this opportunity to wean us off of this policy of dumping of tax dollars into a dirty, outdated industry and begin to redirect those tax dollars into more positive avenues?

Also, I don't fully understand the implications of having a cap and trade system on emissions. Who is getting the credits to pollute, drivers?

I think that to stabilize the market prices, a tax on gas should be in place, and it should be spent on developing renewable alternatives and repairing environmental damages caused by the mining, transportation and burning of fossil fuels.

Anonymous said...

While I hated paying $3.50 at the pump last fall when Ike ran through the gulf, I did like the fact that everyone was willing to carpool, ride bikes, and generally drive a lot less. I have been a proponent for years of placing a tax on gas so that it is 1) a constant price and 2) decrease demand and make people want to drive smaller cars.
It would really be ideal if the government took the tax revenue placed on gas, and used it for developing renewable power.
-Kyle Dexheimer

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