CAFE kills?

By Eric Crampton 08/07/2013

American fuel economy standards have a bunch of offsetting effects. If you’re going to be in an accident, you’re safer in a bigger vehicle, but you’re also increasing the risk for everyone else. Tightening the fuel economy regulations then have ambiguous effects: do they save more lives by reducing deaths caused by those in SUVs, or do they kill more people by ensuring that more who are involved in accidents are in smaller vehicles?

Mark Jacobsen runs the numbers.

I estimate the fleet-wide impact of historical CAFE rules to be 149 additional annual fatalities per mile-per-gallon (MPG) increment in stringency. In this case, the shift to smaller vehicles within the car and light truck categories prescribed under CAFE causes deterioration in safety that is only partially offset by reductions in poorly matched accidents. The safety effect translates to a welfare cost of approximately 33 cents per gallon of gasoline saved.5 In the context of related environmental externalities, damages of $25 per ton CO2 amount to 22 cents per gallon of gasoline, and Parry and Small (2005) report costs from local air pollution of about 16 cents per gallon.

So tightening the regs by one mile-per-gallon costs $0.33 in lives lost for every gallon saved while providing $0.38 in reduced pollution for every gallon saved. Pretty close to a wash if we think that the regulations themselves are costly.

He estimates the effects of an alternative policy bringing all vehicles under a single unified standard and reckons that tightened fuel economy standards under that form of regulation come with approximately zero cost in terms of lives lost: drivers of light trucks substitute into safer cars.

Even better could be abolishing CAFE entirely in favour of a petrol tax. CAFE standards only make sense relative to a petrol tax where consumers are particularly myopic and ignore the future petrol costs when buying a thirsty car. They aren’t.

0 Responses to “CAFE kills?”

  • Economics, meet the real world….

    Also from Dr. Jacobsen….
    “A gasoline tax is the most flexible – and least costly – policy since it encourages gasoline to be saved through many channels at once: Consumers will drive less and also choose cars that are more efficient along all dimensions. The vehicles chosen under a gasoline tax will be smaller and lighter; contain more efficient engine technologies; and include fewer SUVs, pickups, and minivans.

    In spite of its economic efficiency, a new gasoline tax faces considerable political opposition from both parties. Current policy, therefore, focuses on car choice, directly regulating the fleet of cars that manufacturers produce and sell. …..”

    Hence the move to a system based on vehicle footprint for the new CAFE standards through 2025, to minimize the downsizing trend. Whilst appropriate for the USA ( protection of their vehicle manufacturing industry ), it’s pretty irrelevant to the NZ market with new and used imports.

    Also, there is historical research available that showed that more stringent CAFE standings caused additional deaths, which was another reason why the standards remained unchanged for a decade or more.

  • The fleetwide standard beats the segmented standard, yup.

    There’s a good case for petrol taxes for carbon reduction; there’s a good case for petrol taxes along with road user charges and congestion charging for internalising externalities and covering road maintenance costs. There’s little case for a petrol tax for “encouraging energy efficiency” though: good evidence consumers weigh that one up correctly.