Wednesday, May 20, 2009

Emissions, Clunkers, and Global Warming

Yesterday, the Obama Administration announced new requirements for emissions standards for automobiles.

The agreement announced at the White House will lead to a 30% reduction in carbon dioxide and other emissions by 2016 from vehicles sold in the U.S.

To meet that standard, according to the White House, new vehicles sold in the U.S. seven years from now will have to average 35.5 mpg, up from 25 mpg today. The agreement, coupled with increased fuel-efficiency requirements Congress approved in 2007, would add $1,300 to the price of a new car in 2016, the administration estimated.

The plan does not spell out specific mileage requirements, but effectively would require them by capping the greenhouse gas emissions that scientists blame for global warming. The new limits are projected to reduce U.S. oil consumption by about 5% a year from 2011 to 2016. The nation currently uses about 7.1 billion barrels a year.

A couple of key things here to keep in mind. This is an EPA administrative rule, not a law passed by Congress and signed by the president. That means this could, in theory, be temporary. A new administration might change the rules. Now industry being what it is once this process gets moving forward even rule changes that favor less efficient cars aren't going to stop it completely.

More importantly, is "a 30% reduction in carbon dioxide and other emissions by 2016 from vehicles." This could be more accurately stated as "a 30% reduction in CO2 emissions per vehicle mile." Why the difference? Because an increase in the number of cars on the road and/or the number of miles being driven will offset the reduction in pollution per mile. And the increased fuel economy inherent in this change will lower the operating cost of driving a car, increasing the incentive to use a car.

We've seen the opposite before. High gas prices, equating to higher operating costs, drastically lowered the number of miles driven last year. Lower operating costs can therefore be predicted to increase the miles driven.

And as the White House admits this will increase the cost of a new car, by $1300 in their estimate. This will discourage some people from buying the cars and they will stay in their older, less efficient, more polluting cars. The administration and Congress are considering a program here as well. They have a Cash For Clunkers idea that will give money to a person trading in his/her car for a more fuel efficient new car. Germany has a similar program in place and it is the only country in the developed world to see an increase in new car sales last year.

This idea has some limits as well. First it is aimed at only new cars. Obviously this is also part of a stimulus plan to help jump start new car sales and hence employment in the U.S. However, the worst polluting cars on the road tend to be the really old cars owned by the poor. Many of those people cannot afford a new car no matter what, or if they're given a loan, are more likely to default. These people, and hence their high pollution cars, are likely not be involved.

If the ultimate goal of Cash For Clunkers is to reduce pollution, as opposed to boosting new car sales, a better idea may be to out-and-out buy these cars from the people for above market price. The former car owners could use the cash to buy newer (probably still used) cars that will pollute less.

Although I think both programs have room for improvement both should have positive effects. (Don't let the perfect be the enemy of the good) If going forward new cars are more fuel efficient then even if more cars are sold to an increasing population the gasoline consumption and pollution creation will decrease compared to doing nothing. Even if the Cash For Clunkers doesn't remove the real clunkers from the road, if financially better off people take advantage of it more, better used cars will come on the market. That should reduce used car prices and more people will be able to afford better used cars. "Better" being defined as more fuel efficient and less polluting.

Everything helps. The new car emissions standards are a good down payment. Combine these two ideas with a Cap And Trade regime that Obama has proposed and/or a carbon tax to increase the cost of polluting directly and the U.S. could be making real progress towards combating climate change.

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Blogger Miss Healthypants said...

Great analysis!--you really made me think about this!!

And I agree: "Don't let the perfect be the enemy of the good."

11:14 AM  

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