Last summer's energy bill was loaded down with counterproductive
measures that would have raised energy prices. Fortunately for
consumers, that bill was never enacted. However, the Senate
resurrected that bill's approach with a somewhat scaled-back
version that includes new fuel economy standards for cars and
trucks and a greatly expanded ethanol mandate, and the House will
soon vote on its version of the legislation. This bill would still
raise prices for families and businesses, slowing the American
economy overall. The President should veto this bill if it reaches
his desk.
Fuel Economy Standards for Cars and
Trucks
The new bill contains a sharp increase in the federally mandated
corporate average fuel economy (CAFE) standards. Under this
proposal, each manufacturer's fleet of passenger vehicles would
have to average 35 miles per gallon by 2020, a roughly 40 percent
increase over current standards for cars and trucks.
In theory, consumers can save at the pump by being made to
switch to more efficient vehicles, and at the same time reduce
greenhouse gas emissions and oil imports. But doing so will raise
sticker prices, and the costs could more than negate the energy
savings.[1]
Beyond costs, in order to meet the tough new CAFE standard, cars
and trucks will need to be lighter, which makes them less safe in
collisions. A National Academy of Sciences study concluded that
vehicle downsizing costs 1,300 to 2,600 lives per year.[2] A
tougher fuel economy standard would likely add to the death toll
from vehicle crashes.
Federally mandated smaller vehicles also raise the issue of
consumer choice. Washington is acting as if fuel-efficient cars and
trucks are currently unavailable, but a variety of such models are
already on the market for those who want them, including a growing
number of hybrids. These vehicles fit the needs of some people but
not others. Does the American car-buying public-from soccer moms to
seniors-really want or need Washington stepping in and forcing
smaller vehicles on everyone?
A Greatly Expanded Ethanol Mandate
The new energy bill includes a bevy of new programs aimed at
creating a new industry based at ethanol made from sources other
than corn, such as forest and field waste, switchgrass, and
agricultural waste.
These second-generation biofuels are far from a proven
technology. According to a recent New York Times report,
"No fuel of the type in question has been produced commercially in
the United States. Even in the view of people who back the idea,
the technology to do it is immature, the economics are uncertain,
and the potential for unintended consequences is high."[3]
Nonetheless, the mandate is extensive. Analysis of the bill
shows that "[h]undreds of new factories will be required, perhaps a
billion tons of plant material will need to be hauled around every
year, and estimates of the required investment start at tens of
billions of dollars."[4]
With the industry and technology in their infancy, the future of
second-generation biofuels is very uncertain. Congress should not
make the same mistake it made with first-generation biofuels, such
as ethanol, by hastily subsidizing the industry through mandates
and other government preferences without fully measuring the costs
and benefits.
Congress is not good at picking winners in technological
development. If biofuels are to succeed as a competitive fuel
source, congressional legislation should not be necessary to
mandate its production. Congress should not force specific
technologies on Americans, especially if they are unproven
technologies. Instead, it should unleash the power of free
enterprise, letting researchers and the markets discover the best
new viable alternatives. Federal mandates limit choices and hinder
free enterprise from finding the most efficient, cost-effective
solution. The high costs of ill-conceived energy plans will simply
be passed on to the consumers.
Conclusion
What Congress is touting as an energy bill really has no new
energy in it. Rather, its main features are mandates that will
drive up costs for consumers and businesses, decrease auto safety,
and, at best, marginally benefit the environment. If
Congress wants to pass an energy bill-especially in a time of
increasing energy costs-it should start over by lifting
restrictions on existing domestic energy reserves.
Ben Lieberman is
Senior Policy Analyst for Energy and the Environment in the Thomas
A. Roe Institute for Economic Policy Studies at The Heritage
Foundation.