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Backgrounder #1458 on Energy and Environment

July 11, 2001

Why the Government's CAFE Standards for Fuel Efficiency Should BeRepealed, not Increased

By

Congress may soon decide to increase the standards for fuel economy imposed on manufacturers of vehicles sold in the United States.1 This would be a mistake.

In 1975, Congress reacted to the 1973 oil embargo imposed by the Organization of Petroleum Exporting Countries (OPEC) by establishing the Corporate Average Fuel Economy (CAFE) Program as part of the Energy Policy and Conservation Act. The goal of the program was to reduce U.S. dependence on imported oil and consumption of gasoline. Advocates also hoped it would improve air quality. But the evidence shows that it has failed to meet its goals; worse, it has had unintended consequences that increase the risk of injury to Americans. Instead of perpetuating such a program, Congress should consider repealing the CAFE standards and finding new market-based solutions to reduce high gasoline consumption and rising prices.

There is significant pressure on Members of Congress, however, not only to continue this failed program, but also to raise fuel efficiency standards even higher. The current CAFE standards require auto manufacturers selling in the United States to meet certain fuel economy levels for their fleets of new cars and light trucks (pickups, minivans, and sport utility vehicles, or SUVs). The standard for passenger cars is currently 27.5 miles per gallon; for light trucks, it is 20.7 mpg.2

Manufacturers face stiff fines for failing to meet these standards based on the total number of vehicles in each class sold, but compliance is taken out of their hands. The government measures compliance by calculating a sales-weighted mean of the fuel economies for the fleets of new cars and light trucks a manufacturer sells each year, and it measures domestically produced and imported vehicles separately.

Clearly, the CAFE program has failed to accomplish its purposes. Oil imports have not decreased. In fact, they have increased from about 35 percent of supply in the mid-1970s to 52 percent today. Likewise, consumption has not decreased. As fuel efficiency improves, consumers have generally increased their driving, offsetting nearly all the gains in fuel efficiency.3 Not only has the CAFE program failed to meet its goals; it has had tragic even if unintended consequences. As vehicles were being made lighter to achieve more miles per gallon and meet the standards, the number of fatalities from crashes rose.4

Politicians should stop distorting the marketplace with unwise policies and convoluted regulations and allow the market to respond to consumer demand for passenger vehicles. In addition to free-market considerations, there are other compelling reasons to reject the CAFE standards. For example:

  • CAFE standards endanger human lives;
  • CAFE standards fail to reduce consumption; and
  • CAFE standards do not improve the environment.

HOW CAFE INCREASES RISKS TO MOTORISTS

The evidence is overwhelming that CAFE standards result in more highway deaths. A 1999 USA TODAY analysis of crash data and estimates from the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety found that, in the years since CAFE standards were mandated under the Energy Policy and Conservation Act of 1975, about 46,000 people have died in crashes that they would have survived if they had been traveling in bigger, heavier cars.5 This translates into 7,700 deaths for every mile per gallon gained by the standards.6

While CAFE standards do not mandate that manufacturers make small cars, they have had a significant effect on the designs manufacturers adopt--generally, the weights of passenger vehicles have been falling. Producing smaller, lightweight vehicles that can perform satisfactorily using low-power, fuel-efficient engines is the most affordable way for automakers to meet the CAFE standards.

More than 25 years ago, research established that drivers of larger, heavier cars have lower risks in crashes than do drivers of smaller, lighter cars.7 A 2000 study by Leonard Evans, now the president of the Science Serving Society in Michigan, found that adding a passenger to one of two identical cars involved in a two-car frontal crash reduces the driver fatality risk by 7.5 percent.8 If the cars differ in mass by more than a passenger's weight, adding a passenger to the lighter car will reduce total risk.9

The Evans findings reinforce a 1989 study by economists Robert Crandall of the Brookings Institution and John Graham of the Harvard School of Public Health, who found that the weight of the average American automobile has been reduced 23 percent since 1974, much of this reduction a result of CAFE regulations.10 Crandall and Graham stated that "the negative relationship between weight and occupant fatality risk is one of the most secure findings in the safety literature."11

Harvard University's John Graham reiterated the safety risks of weight reduction in correspondence with then-U.S. Senator John Ashcroft (R-MO) in June 2000. Graham was responding to a May 2000 letter distributed to Members of the House from the American Council for an Energy-Efficient Economy (ACEEE) and the Center for Auto Safety.12 Graham sought to correct its misleading statements, such as its discussion of weight reduction as a compliance strategy without reference to the safety risks associated with the use of lighter steel. For example, an SUV may be more likely to roll over if it is constructed with lighter materials, and drivers of vehicles that crash into guardrails are generally safer when their vehicle contains more mass rather than less. Further, according to Graham, government studies have found that making small cars heavier has seven times the safety benefit than making light trucks lighter.

The evidence clearly shows that smaller cars have significant disadvantages in crashes. They have less space to absorb crash forces. The less the car absorbs, the more the people inside the vehicle must absorb. Consequently, the weight and size reductions resulting from the CAFE standards are linked with the 46,000 deaths through 1998 mentioned above, as well as thousands of injuries. It is time that policymakers stop defending the failed CAFE program and start valuing human lives by repealing the standards.

WHY CAFE FAILS TO REDUCE CONSUMPTION

Advocates of higher CAFE standards argue that increasing miles per gallon will reduce gas consumption. What they fail to mention is the well-known "rebound effect"--greater energy efficiency leads to greater energy consumption. A recent article in The Wall Street Journal noted that in the 19th century, British economist Stanley Jevons found that coal consumption initially decreased by one-third after James Watt's new, efficient steam engine began replacing older, more energy-hungry engines.13 But in the ensuing years (1830 to 1863), consumption increased tenfold--the engines were cheaper to run and thus were used more often than the older, less efficient models. In short, greater efficiency produced more energy use, not less.

The same principle applies to CAFE standards. A more fuel-efficient vehicle costs less to drive per mile, so vehicle mileage increases. As the author of The Wall Street Journal article notes, "[s]ince 1970, the United States has made cars almost 50% more efficient; in that period of time, the average number of miles a person drives has doubled."14 This increase certainly offsets a portion of the gains made in fuel efficiency from government mandated standards.

WHY CAFE STANDARDS DO NOT IMPROVE THE ENVIRONMENT

Proponents of higher CAFE standards contend that increasing fuel economy requirements for new cars and trucks will improve the environment by causing less pollution. This is incorrect.

Federal regulations impose emissions standards for cars and light trucks, respectively. These standards are identical for every car or light truck in those two classes regardless of their fuel economy. These limits are stated in grams per mile of acceptable pollution, not in grams per gallon of fuel burned. Accordingly, a Lincoln Town Car with a V-8 engine may not by law emit more emissions in a mile, or 10 miles, or 1,000 miles, than a Chevrolet Metro with a three-cylinder engine.

As noted by the National Research Council (NRC) in a 1992 report on automobile fuel economy, "Fuel economy improvements will not directly affect vehicle emissions."15 In fact, the NRC found that higher fuel economy standards could actually have a negative effect on the environment:

Improvements in vehicle fuel economy will have indirect environmental impacts. For example, replacing the cast iron and steel components of vehicles with lighter weight materials (e.g., aluminum, plastics, or composites) may reduce fuel consumption but would generate a different set of environmental impacts, as well as result in different kinds of indirect energy consumption.16

Nor will increasing CAFE standards halt the alleged problem of "global warming." Cars and light trucks subject to fuel economy standards make up only 1.5 percent of all global man-made greenhouse gas emissions. According to data published in 1991 by the Office of Technology Assessment,

A 40 percent increase in fuel economy standards would reduce greenhouse emissions by only about 0.5 percent, even under the most optimistic assumptions.17

The NRC additionally noted that "greenhouse gas emissions from the production of substitute materials, such as aluminum, could substantially offset decreases of those emissions achieved through improved fuel economy."18

CONCLUSION

The CAFE program has failed to achieve its goals. Since its inception, both oil imports and vehicle miles driven have increased while the standards have led to reduced consumer choice and lives lost that could have survived car crashes in heavier vehicles.

The CAFE standards should not be increased. They should be repealed and replaced with free market strategies. Consumers respond to market signals. As past experience shows, competition can lead to a market that makes gas guzzlers less attractive than safer and more fuel-efficient vehicles. That is the right way to foster energy conservation.

Charli E. Coon, J.D., is Senior Policy Analyst for Energy and the Environment in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

Endnotes

1. The Subcommittee on Energy and Air Quality of the House Committee on Energy and Commerce is scheduled to hold a mark-up session on the Energy Advancement and Conservation Act of 2001 (no bill number yet assigned) on July 11, according to the CQ Daily Monitor , July 9, 2001.

2. The original standards were 18 mpg for cars and 15.8 mpg for light trucks up to 6,000 pounds.

3. Jerry Taylor and Peter VanDoren, "The Illusion of Energy Efficiency," CATO Today's Commentary , April 24, 2001.

4. James R. Healey, "Death by the Gallon: Push for Better Mileage Raises Death Tolls," USA TODAY , Special Reprint Edition, reprinted from MONEY , July 2, 1999; based on previously unpublished fatality statistics from the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety.

5. Ibid .

6. For example, "Since 1974, domestic new car fuel economy has increased 114 percent from 13.2 mpg to 28.3 mpg, and light truck fuel economy has increased 56 percent from 13.1 mpg to 20.5 mpg." See H. Sterling Burnett and Eric Peters, "Will Minivans Become an Endangered Species," National Center for Policy Analysis Brief Analysis No. 232, June 4, 1997.

7. See Leonard Evans, D.Phil., "Causal Influence of Car Mass and Size on Driver Fatality Risk," American Journal of Public Health , Vol. 91, No. 7 (2001). The author cites three studies from 1971-1974, including a study presented at an international conference in Washington, D.C., hosted by the National Highway Traffic Safety Administration.

8. Ibid .

9. Ibid .

10. Robert W. Crandall and John D. Graham, "The Effect of Fuel Economy Standards on Automobile Safety," Journal of Law and Economics , Vol. XXXII (April 1989).

11. Ibid ., p. 110.

12. John Graham, letter to Senator John Ashcroft, Committee on Commerce, Science, and Transportation, U.S. Senate, June 13, 2000.

13. Kimberley A. Strassel, "Conservation Wastes Energy," The Wall Street Journal , May 17, 2001.

14. Ibid .

15. National Research Council, Automotive Fuel Economy: How Far Should We Go? (Washington, D.C.: National Academy Press, 1992), p. 7.

16. Ibid ., p. 84.

17. Office of Technology Assessment, U.S. Congress, Changing by Degrees: Steps to Reduce Greenhouse Gases (Washington, D.C.: U.S. Government Printing Office, 1991).

18. National Research Council, Automotive Fuel Economy, p. 84.

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