Thursday, April 1, 2010

New Motor Vehicle Fuel-Efficiency Standards

The EPA and the NHTSA announced a joint rule that will raise average fuel economy standards by approximately 40% by 2016, up to 35.5 miles per gallon. The new regulation is expected to add approximately $1000 to the price of the average car, but yield $3,000 in fuel cost savings over the average car's lifetime. The New York Times has complete details here. The new rule is, in part, a response to the EPA's endangerment finding with respect to greenhouse gases, and thus constitutes the very first national climate change regulation.

The timing of this announcement is interesting, coming just one day after President Obama announced the opening of vasts areas of the Atlantic coast to oil and gas drilling. Perhaps it's just a coincidence; more likely  it reflects an Obama Administration strategy to offset pro-environmental policies (e.g., new fuel-efficiency standards) with some kind of sop to the energy industry (e.g., promises of new off-shore drilling opportunities). I still don't think the later is justified on economic or environmental grounds.

Nor do I think, by the way, that fleet fuel-economy standards are necessarily the best way of achieving energy conservation in transportation. Certainly, many economists would prefer the use of direct economic incentives, rather than quantitative limits. On the other hand, there is no denying that fuel economy standards have been successfully implemented in the past, which is not something one could say about energy taxes, or environmental taxes more generally.

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