New fuel economy standards

Keith Hennessey (former economic advisor) has some economic analysis of the costs and benefits of the fuel economy policy change, in between all his grumbling about how the EPA (US Environmental Protection Agency) is ‘in charge’ rather that the National Highway Transportation Safety Administration (NHSTA).

This last comment–about who is in charge–is designed to generate comment. He’s been around long enough to know that NHTSA and the EPA are coming out of the Bush Era positioned differently and that the EPA has some strategic agenda-setting to do early on in the new administration. That said, EPA is a cabinet-level agency and these proposed rule changes have been in circulation for a bit. For public policy, we engage both agencies because we are trying to optimize across goals here, ones that are, like many, in tension with each other. Nonetheless, environmental rationales have a lot of currency, and perhaps more than they should here. Given the dominant discourse about sustainability and green-ness–i.e., that we are not supposed to be in our cars anyway–it should not surprise us that crash safety is an undeservedly low visibility issue relative to climate change or that NHTSA is a low-visibility agency, despite the considerable public service it provides.

The tension here–between fuel economy and crash safety–has been in dispute since the original 1975 law that provided for CAFE. The late Charles Lave and his brother, Lester, really helped to clarify the issues. One of their most accessible discussions appears in:

Lave, Charles and Lester Lave, “Fuel Economy and Auto Safety Regulation: Is the Cure Worse than the Disease?” Pages 257-290 in Essays in Transportation Economics and Policy: A Handbook in Honor of John R. Meyer, edited by Jose Gomez-Ibanez, William B. Tye, and Cliffor Winston, Brookings Institution Press, Washington D.C., 1999

There’s always just raising the gas tax, which over time might induce changes in fuel economy similar to the standards, but it allows consumers some flexibility in that they can still opt simply to drive less with their bigger, safer car if that is what they prefer–and driving less would have expected crash safety gains, too. Or what about raising the driving age–something that would lower crash costs considerably–at the same time we encourage fuel efficiency through differentiated vehicle registration fees? There are options here that address both the environment/safety trades. I haven’t looked at any data, so I don’t have any real conclusions here.

One last link: NHTSA’s CAFE page .