Next Generation Fuel Economy Sticker – To Boldly Label What No Agency Has Labeled Before

by Marlo Lewis on May 25, 2011

in Blog, Features

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Today, the U.S. EPA and the National Highway Traffic Safety Administration (NHTSA) proudly unveil their new, improved, long-awaited, supah-dupah, “next generation” fuel economy sticker. All model year 2013 vehicles will have to display the redesigned stickers.

“The new labels, which are the most dramatic overhaul to fuel economy labels since the program began more than 30 years ago, will provide more comprehensive fuel efficiency information, including estimated annual fuel costs, savings, as well as information on each vehicle’s environmental impact,” EPA’s press releaseenthuses. Only in the makework world of bureaucracy central would this “overhaul” of a label be hailed as “dramatic.”

As my colleague William Yeatman joked when I told him the news: “Anyone can have a sticker, but a next generation sticker — the future is here, my friend!”

In their original August 2010 regulatory proposal, the agencies wanted the new label to include letter grades based on the car’s fuel economy and carbon dioxide (CO2) emissions. Electric vehicles and plug-in hybrids would get an A+; the biggest, heaviest, gas guzzling SUVs would get a D.

However, in December 2010, 53 House Members sent a bipartisan letter to EPA Administrator Lisa Jackson and DOT Secretary Ray LaHood protesting that letter grades would “unfairly promote certain vehicles over others.” Indeed, that was the point. Stigmatize SUVs and other politically-incorrect vehicles by giving them bad grades.

Worse, grading cars implicitly means grading the people who buy them. People who buy cars with super-low or zero emissions are caring and ahead of the curve. Those who buy gas guzzlers are yokels who voted for Bush and wear baseball caps in restaurants. The South Park spoof on the “Toyonda Pius,” Smug Alert, all-too-accurately depicts the greener-than-thou pretension of EPA and NHTSA’s proposed grading system.

Rebuked by those wielding the power of the purse, the agencies relented and the “next generation” sticker does not include letter grades. To view the current sticker, click here. To see what the scolds at EPA and NHTSA originally planned to replace it with, click here.

Clearly, these folks are into behavior modification. How potent will the redesigned label be in modifying your behavior?

Among other rationales for proposing to grade cars based on their fuel economy, the agencies claimed that adding letter grades would help consumers make smarter purchases by combating something called the “MPG Illusion.”

The MPG Illusion refers to the common mis-perception that fuel savings from mpg increases are linear. People often assume that each additional 1 mile per gallon increase in a vehicle’s fuel economy reduces fuel consumption and gasoline expenditures by the same amount. Hence, some may conclude, if they can’t afford (or simply don’t want) a Toyota Prius, Chevy Volt, or some other high-mpg vehicle, there’s no point in buying a car with only modestly better fuel economy than their current vehicle. In reality, fuel consumption avoided and dollars saved decrease as mpg increases. Which is to say, the biggest fuel savings come from modest fuel-economy improvements in the lowest mpg vehicles. Some hypothetical (indeed fanciful) examples will make this crystal clear.

Suppose that your current car gets only 1 mile per gallon, you drive 100 miles per week, and gasoline costs $3.00 per gallon. This means you consume 100 gallons and spend $300.00 per week. If you replace that car with a 2 mpg vehicle, you’ll consume 50 gallons and save $150.00 per week. At the very bottom end of the scale, even a 1 mpg increase in fuel economy yields big savings.

Suppose now that your current car gets 99 mpg, you drive 100 miles per week, and gas costs $3.00. This means you consume 1.01 gallons and spend $3.03 per week. If you replace that car with a 100 mpg vehicle, you’ll consume 1 gallon and save 3 cents per week. At the very top of the fuel economy scale, the fuel and cost savings from an extra 1 mpg are negligible.

Professors Rick Larrick and Jack Soll of Princeton University put the MPG Illusion on the map when they published an article about it in Science magazine. They explain the basic arithmetic in this Youtube video. Their illustrative case assumes a motorist who drives 100 miles per week. If the motorist has a 10 mpg vehicle and switches to a 20 mpg vehicle, he’ll cut his weekly fuel consumption from 10 gallons to 5 gallons — a savings of 5 gallons. If the motorist has a 25 mpg vehicle and switches to a 50 mpg  vehicle, he’ll cut his weekly fuel consumption from 4 gallons to 2 gallons — a savings of only 2 gallons. “The key insight,” says Larrick, “is that improving inefficient cars that have low mpgs, by even low mpg increases, saves a lot of gas.”

To counter the MPG Illusion, Larrick and Soll advise policymakers to express fuel economy in terms of the amount of fuel consumed per unit of distance traveled. Expressing fuel economy in the conventional way, as miles per gallon, leads people to “undervalue small improvements on inefficient vehicles” and “underestimate the value of removing the most fuel inefficient vehicles,” the researchers argue in Science. One could also say — they don’t — that mpg ratings lead people to overestimate the value of purchasing a hybrid.

In any event, Larrick and Soll’s paper was music to the ears of the anti-SUV crowd. Greenies would love to believe that the market for SUVs is sustained by an “illusion.” Because if that is so, then EPA and NHTSA can depress SUV sales just by making simple changes in how fuel-economy information is presented — just by redesigning the sticker!

Consistent with Larrick and Soll’s advice, the “next generation” sticker includes an estimate of how many gallons it takes to drive 100 miles.

Years of SUV-bashing, fuel-economy proselytizing, climate-change scaremongering, and high gasoline prices have failed to kill SUV sales. Could that have something to do with the attributes of the vehicles — their size, safety, and utility? Are there no physical differences between SUVs and cars greenies insist are “smart?” Or is it simply, or mainly, a faulty optic that sustains a market for SUVs?

If the MPG Illusion has anything to do with SUV sales, then you gotta ask: Who’s responsible for foisting the illusion on the public? Answer: the very people who’ve tried to brow beat us into believing that the only vehicle attribute worth considering is its mpg — the preachers and proselytizers of fuel economy! There’s no escaping the law of unintended consequences.

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