Congress wants to raise the average fuel economy of cars sold in America. Of all the ways to achieve this end, I suppose we should not be surprised that they picked the most regulatory alternative: have Congress simply require the auto manufacturers to make more efficient cars.
Congress makes its economy standards through the CAFE standards. I want to challenge the wisdom of Congress's action.
There are a few ways to make cars that run more efficiently on gasoline. One way is to install engines with less horsepower. Consumers generally dislike this solution because we like fast cars. Another alternative is to employ non-gasoline fuels in some hybrid technology. This plan is popular but it is not clear how soon the expensive hybrid hardware will become cheap enough to put in every car. Most hybrids are still marketed towards people who care more about the environment than about getting the best car for their money. Also, hybrids that perform as well as current non-hybrids are not substantially more efficient. Car manufacturers will likely employ a lot of hybrid technology to meet the new CAFE standards, but it is really unlikely that hybrid alone will get us there.
The third and most likely way that car makers will meet the CAFE standards is to make their cars lighter. Carbon materials weigh a lot less than metals and most plastics, so the same engine could move a carbon-fiber car easier (more efficiently). The problem is that lighter materials are substantially more expensive than current materials. Consumers should expect that cars will get more expensive, and that they will not have much choice in the matter.
I think we should think of price increases caused by CAFE standards as taxes. Any time the government acts to make us pay more, I think we should always use the lens of tax. And, when examined as a tax, higher CAFE standards don't make much sense.
Think about it: we want to pollute less and use less oil, so we tax car manufacturers in such a way that they raise the consumers' costs of buying a car. There is a much more direct way to accomplish this ends.
If we want to tax oil consumption, why not just levy a gas tax? People who drive more will pay more, and most of us will try to find a way to use less gas so as to pay less money. One way or another, we won't end up paying more for expensive materials in our cars that we really don't care about in the first place.
If lighter materials are the most efficient way to increase fuel efficiency, expect a gas tax to lead to higher demand for lighter cars. If they are not the most efficient way, why are we adopting regulations that lead to that result?
Let's not let Congress pass indirect taxes because they are afraid or unable to pass a direct one. Would you support a gas tax? If not, why would you support new CAFE standards?