Monday, January 26, 2009

The Wrong (and Right) Way to Fuel Efficiency

I've been thinking about fuel efficiency standards this evening. The intent is to force auto makers to make more fuel friendly cards. Every automaker essentially has to meet quotas for fuel efficient cars. Especially as the economy worsens, new CAFE standards will kill the auto makers. With fuel prices so low, there is little incentive for the average consumer to chose to buy fuel sippers. Suddenly, the already delicately positioned auto makers may be left with huge inventories of small vehicles that they will have to sell at small, if any, profit.

Environmental advocates will protest that there is a need to reduce fuel consumption and greenhouse gas emissions. But really, even if we accept those goals, CAFE standards are the wrong way to go. They are the spineless politicians' way to avoid what is the truly effective solution - raise the cost of fuel! If fuel is more expensive, there is consumer demand for smaller cars (think a few months ago), and automakers will respond. This way, the government is not forcing them to make low-demand vehicles, but achieves the same result with a lot less economic pain.

Isn't it strange that politicians were complaining about high fuel prices and global warming at the same time?


Swetha said...

I think in this kind of economy, the auto makers will be left with huge inventories no matter what! No gimmicks of ‘Assurance’ is going to make it any better! So, yes although the CAFE standards is not the best approach, on the brighter side, at least there'll be more fuel efficient cars with the new mpg goal by 2020..this will not only keep the GHG emissions in check, but also reduce the foreign oil dependency for crying out loud!

Karthik said...

Well if we take that tack, we might have less GHGs because everyone's too broke to consume carbon! As an environmental engineer, I'll be the first to say that environmental protection is important, but we can't be naive enough to ignore our economic realities!

The whole foreign oil debate is flawed! Oil is fungible, which means that prices across the world are the same as the prices in the US. In the end, we will import or export based on how much oil we have and how cheap it is from different sources.

Swetha said...

oh! I did not mean to contest you! your argument is correct...I came across the blog and as an environmental engineer myself, forced myself to see some positive in this!

If there's one thing good for all, it would be public transportation! I would like to see more of that in this country..even better if more people used it!