While there is at least a little to cheer about in regards to the Bush Administration's minor re-jiggering of fuel efficiency standards, the whole CAFE system represents a combination of the worst of the command economy mindset and the worst excesses of laissez-faire capitalism.
The new regulations, just like the old ones, require auto manufacturers to meet fuel mileage standards across an entire fleet of cars and trucks. Between now and 2011, the requirement will ratchet modestly upward and will include some previousy-excluded heavier models, such as the Hummer H2.
What's the problem? The rate at which fuel is consumed is only part of the formula that determines how much fuel a driver uses. With a gasoline tax, a consumer is more sensitive to distance and can make more fuel-efficient decisions with regards to commute distance and idling. With CAFE, consumers get the benefit of a more efficient car (whether they want it or not), but they fail to capture the externalities (or avoid financial detriment from a tax designed to internalize them).
From a foreign-oil-dependency standpoint, would you rather have someone with a 10 mpg car travel 15 miles per day, or someone with a 30 mpg car travel 60 miles per day? Which scenario does CAFE encourage?
This is why most economists and pundits who favor any sort of regulation prefer a market-based tax incentive approach instead of the inflexible CAFE standard. It gives the power to choose to the end-user, who makes the decision about how much to use their own car. It effects all drivers, instead of just drivers of cars released after the new standards come into effect. It very directly takes the externalities of fuel consumption (pollution, global instabilty, etc.) and imposes them on the economic actor that causes those externalities. What's not to like?
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