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At the Speed of CAFE Standards

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"At the Speed of CAFE Standards"

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Brian Beutler speaks up for CAFE as opposed to a gas tax:

When gas prices go up, but not way up, people keep driving. It has, as we’ve seen, a marginal impact. If, on the other hand, you double CAFE standards, which I think most Democrats would like to see happen, then ceteris paribus you something like halve auto emissions. What actually happens is more complicated, but one it’s certainly true that you undo some of the incentives people had to drive less to save money. As we’ve seen, though, unless the price of gas is really very high, those incentives aren’t all that effetive.

I think there’s a double-standard here that you see all-too-frequently. It’s true, of course, that increases in gasoline prices don’t have much short term impact on fuel consumption. That’s because the main things one could do to reduce one’s fuel consumption are things like “buy a more fuel efficient car” or “live someplace else” that are hard to alter. But in the short-term, doubling CAFE standards doesn’t “something like halve auto emissions.” Instead it does . . . almost nothing. The new regulations don’t make the cars already on the road any more fuel efficient, and they don’t create incentives for people to buy new cars.

That’s not to say it’s a bad policy — the relevant horizon is the long run. But then that’s the standard against which taxes should be judged as well. Under either scenario, you can make the desired long-run outcome occur sooner by offering people financial incentives to trade in older, less efficient cars for newer, more efficient ones. That, though, requires revenue. And a gas tax provides revenue, which CAFE doesn’t.

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