Californias auto emissions plan has costs but no benefits

by William Yeatman on July 6, 2004

in Politics

The Competitive Enterprise Institute submitted comments on July 7 to the California Air Resources Board (CARB)s draft proposals to reduce greenhouse gas emissions from new automobiles in the State. Marlo Lewis, senior fellow at CEI, argues first that the proposals are fuel economy regulation by the back door:

“The main greenhouse gas emitted by motor vehicles is carbon dioxide (CO2), an inescapable byproduct of the combustion of gasoline and other carbonaceous fuels. Because commercially proven technologies to filter out or capture CO2 emissions from gasoline-powered vehicles do not exist, the most feasible way to implement AB 1493 is via regulations increasing vehicle miles traveled per unit of fuel consumedin other words, via fuel economy regulations.

“However, as CARB is surely aware, the federal Energy Policy Conservation Act of 1975 preempts state action in the field of automobile fuel economy regulation. A law that effectively and significantly requires automakers to increase fuel economy is a fuel economy mandate, however named.”

Lewis also argues that the proposals impose costs without benefits: “The “maximum feasible” greenhouse gas reductions contemplated by AB 1493 are also supposed to be “cost-effective.” However, no regulation devised by CARB can be cost-effective, because no statewide program can effectively address the alleged problem of global warming from anthropogenic greenhouse gases.

“Tom Wigley of the National Center for Atmospheric Research calculated that full implementation of the Kyoto Protocol by all industrialized countries, including the United States, would avert only 7/100ths of a degree C of global warming by 2050too small an amount for scientists reliably to detect. Any greenhouse gas reductions from a single sector within a single State would have even less effect on atmospheric CO2 concentrations and, hence, on global climate change. Therefore, a CARB-administered AB 1493 program can have no discernible benefit to people or the planet. Yet the program will have measurable costs: up to $1,047 in additional expense for category 1 passenger car/light duty trucks and $1,210 for category 2 light duty trucks, according to CARB [page iii]. A program with substantial consumer costs and no detectable benefits is not cost-effective.”

Finally, CEI points to the cost imposed by the proposals on the consumer: “To help policymakers design “climate friendly” transportation systems, the Pew Center on Global Climate Change recently published a report, by David L. Greene of Oak Ridge National Laboratory and Andreas Schafer of MIT, entitled Reducing Greenhouse Gas Emissions from U.S. Transportation. The Pew report openly calls for fuel economy measures to reduce greenhouse gas reductions. However, the authors reveal that fuel economy mandates tend to impair consumer welfare.

“Citing the NRC fuel economy report and other relevant literature, Greene and Schafer estimate that the “present value of fuel savings for a typical passenger carincreases to $1,000 at $34 mpg and $2,000 at 44 mpg” over a “14-year vehicle life cycle.” However, fuel economy improvements also increase the sticker price of new cars, so much so that the “net value to the consumer (fuel savings minus vehicle price increase) is relatively modest, increasing to a maximum of about $200 at 33 mpg and decreasing to zero at 39 mpg.” But, that modest gain occurs only over the cars full 14-year life cycle. Most people sell or trade in their cars before 14 years. The survey literature suggests that most consumers will not invest in higher fuel economy unless they expect a payback in 2.8 years. Thus, for most consumers “no net savings are available from increasing fuel economy.” Indeed, Figure B on page 15 of the Pew report indicates that, as fuel economy increases to 37 mpg, the typical consumer loses $500 in net value.”

Lewis concludes by urging CARB to “brief Governor Schwarzenegger and the California legislature on the practical and legal impossibility of carrying out its mandate.”

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