The CAFE standards vs. carbon tax debate is more complicated than we imagine
One of the most frustrating aspects of the climate debate has to be the fact that just about every informed pundit, across the ideological spectrum, agrees that a carbon tax would be an outstanding way to reduce carbon emissions — and yet no one considers such a tax politically feasible. One might suggest that if pundits weren’t constantly qualifying their support for a carbon tax with lamentations about its political impossibility, political support might be more forthcoming.
In the meantime, however, the blogosphere has taken the debate over the best policy-that-can-never-be in a new direction: since we almost certainly can’t pass a carbon tax, should we support higher fuel efficiency standards for our automobiles?
In general, smart commentators have concluded that the answer is yes, and it isn’t difficult to see why. Better efficiency standards should reduce carbon emissions, so long as they don’t induce too much new driving. (Because more efficient vehicles use less fuel per mile, they make driving cheaper, and thereby encourage people to do more of it.) But our best estimates tend to show that the increase in miles driven wouldn’t overwhelm the per-mile reduction in carbon emitted, suggesting that an increase in efficiency should net us an overall decline in carbon output. Case closed, right?
Not exactly. There are a number of good reasons to think carefully before pursuing new CAFE rules.
First and foremost, legislation to raise efficiency standards will be subject to serious political pressure, and one of the primary goals of that pressure will be to delay or slowly phase in new standards. Couple that delay with the time it takes to roll over an appreciable percentage of the current automobile fleet, and it could be a decade or more before higher efficiency standards begin to have any effect on carbon emissions. A carbon tax — or an increased gas tax — would have an effect from the day it was introduced, not least of which would be to raise revenue, the better to fund other carbon reduction strategies.
Perhaps more worrisome is that fact that better fuel efficiency might make long-term strategies to reduce emissions less effective, by making consumer demand for gasoline less responsive to price shifts. Consider this: by reducing the cost of driving additional miles, more efficient engines will encourage drivers to live farther away from their places of business — efficiency, in other words, contributes to sprawl. But a sprawling population will find it much harder to substitute away from driving to public transit, bicycling, or walking. Gas prices can increase a great deal, but people still need to get to work; if sprawl limits their transportation alternatives they’ll be forced to continue driving.
What’s more, by reducing the cost of driving, more efficient engines will reduce the competitiveness of current automobile alternatives. An individual purchase of an efficient automobile could actually increase overall emissions if the money saved on gas convinces the purchaser to drive rather than take transit. Given better efficiency standards, future transit subsidies would have to be higher to attract riders. A carbon tax, by contrast, would reduce the need for transit subsidies (while providing revenue to put toward transit operation).
And at some point, we may decide that it is absolutely necessary to levy a carbon tax. A number of pundits have suggested that there’s no reason to suspect that higher efficiency standards and a carbon tax need be mutually exclusive — without realizing that more efficient engines will frustrate the goals of a tax regime. If you need less fuel to travel ten miles, then it will take a much higher fuel tax rate to discourage you from traveling that distance.
Of course, at the end of the day, we might decide that new CAFE rules are better than nothing. The New York Times reported today that the citizens of the developing nations of China and India will be in the market for hundreds of millions of new automobiles over the next decade. Transferable innovations in efficiency technology, developed here as a result of higher efficiency standards, might be crucial for mitigating the impact of such an increase in vehicles in operation. But I see no reason to accept CAFE legislation as acceptable on its own. A carbon tax or increased gasoline tax passed within the next few years is likely to do much more good than new CAFE legislation today. We should do our best to make the politically difficult possible.