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Commentary By Max Schulz

The CAFE Paradox

Congress is considering major energy legislation that, among other things, would significantly raise the federal Corporate Average Fuel Economy (CAFE) standards on vehicles for the first time in decades. The Senate passed a bill last week - and the House is now considering its own legislation - that would force carmakers to produce vehicle fleets with an average fuel economy of 35 miles per gallon. Under current CAFE standards, car fleets must average 27.5 mpg, while SUVs and light trucks are required to average 22 mpg. The new legislation would make the 35-mpg target apply across the board.

Advocates of the proposed stricter standards champion this legislation as a means to address high gasoline prices, curb our consumption of oil, and lead to greater energy independence. (Indeed, House Speaker Nancy Pelosi has set next Wednesday - July 4th - as the deadline for "energy independence" legislation.) The truth is that hiking the federal CAFE standards will do none of these things.

Perhaps the greatest misconception in today's energy debate is the idea that increasing efficiency will cut down our consumption. On the contrary, we should expect that if our cars and trucks become more efficient, we actually will consume more gasoline, not less. Increasing a vehicle's mileage doesn't just mean getting more miles per gallon, it means lowering the overall cost of driving. And if you lower the cost of something, people will consume more of it. In this case, the good that would be consumed is miles on the road.

That has been our experience over the last half century with cars, airplanes, lightbulbs, dishwashers, power plants, and everything else that uses energy. Nearly every sector of the American economy has seen wonderful advances in efficiency. For each unit of energy, we produce more than twice as much GDP today than we did in 1950. Yet during that period of time our total national energy consumption tripled. Paradoxically, the more we save, the more we consume.

CAFE's boosters don't understand these basic points. They think that if cars or appliances are more efficient, we will simply use less energy to drive the same distance or do the same amount of work. In some particular instances that may hold true. But the aggregate effect over time is increased consumption, as consumers take advantage of those savings to do more - to drive more, haul more, produce more. Peter Huber and Mark Mills described this "paradox of efficiency" in The Bottomless Well: "Efficiency fails to curb demand because it lets people do more, and do it faster—and more/more/faster invariably swamps all the efficiency gains."

Those who believe raising CAFE is the key to solving our energy challenges also make the mistake of thinking something so complex can be achieved through government fiat. Simply passing a law, however, won't make cars and trucks more efficient. Automakers and engineers have to achieve those efficiencies at the expense of other features consumers generally prize. But whereas consumers factor a vehicle's size, comfort, and safety into their decision to buy, along with mpg, legislators seem to believe the only import consideration is mileage. To meet the government's mileage averages, automakers have had to make cars smaller and lighter, i.e. less crash-worthy and more dangerous to drive. Have you seen a Ford Country Squire station wagon on the roads lately? The family station wagon has all but disappeared, thanks in part to CAFE's fleet requirements. These trends can be expected to increase if the higher standards are mandated.

If Congress truly wanted to do something about the high gasoline prices we face, it would take meaningful steps to open up new sources of oil supplies in Alaska, the Gulf of Mexico, and off of the outer-continental shelf. Energy demand is expected to soar in the coming decades, and we will need all the supplies we can get. The current legislation in Congress does nothing to address the supply side of the energy equation.

Instead, the CAFE fetishists in Congress are tinkering on the demand side, and it isn't working. Turning the efficiency dial up won't solve our problems, and it won't curb consumption. If Congress truly were interested in setting policies to cut down our consumption of oil, it would lower CAFE standards, not raise them. Suppose Congress mandated vehicle fleets that got, say, 3 mpg. We'd all drive a lot less, wouldn't we? Somehow I don't think Congress is prepared to take such a step.

This piece originally appeared in Tech Central Station

This piece originally appeared in Tech Central Station