President Obama’s State of the Union speech last night was full of good intentions, bad policy, and suspect claims. He said, for example, that “We have doubled the distance our cars will go on a gallon of gas.”
Obama has imposed a mandate that aims to basically double fuel economy by 2025, but this has not happened yet and may not happen at all. Data from the University of Michigan Research Institute shows that since he was inaugurated, fuel economy has gone up from 21.0 to 24.5 mpg. That’s good and makes some economic sense, because gasoline prices are up 86 percent since he took office, but that change is hardly doubling.
What the President has done, however, is mandate by regulation a cap-and-trade program for cars that aims to make average fuel economy reach 54.5 mpg by 2025 (around the time today’s kindergartner is driving). But mandating cars to get such fuel efficiency is easy to put into law; whether it will actually happen is doubtful.
You do not even have to leave the energy policy space to find a prime example of wishful thinking being legislated and coming to naught.
As The New York Times reported:
A federal appeals court threw out a federal rule on renewable fuels on Friday, saying that a quota set by the Environmental Protection Agency for incorporating liquids made from woody crops and wastes into car and truck fuels was based on wishful thinking rather than realistic estimates of what could be achieved…. From 2010 through 2012, the E.P.A. has required gradually higher levels of cellulosic fuel to be incorporated into motor fuel each year, for a total of 20 million gallons to date. But actual production has been near zero.
Unfortunately, many seem to believe that companies can always adapt to tighter controls with new technology. It doesn’t always work. In the case of fuel economy, such a policy is particularly suspect. Buyers and car companies alike already have incentives to improve fuel efficiency. If a car company could invent a car that gets 54.5 mpg and sell it for a profit, it would do so without regulation or subsidies. Someday they might; for now, such vehicles tend to be overpriced and unreliable.
Mandating that level of fuel economy on vehicle fleets will add an average of $3,000 to the price of a new car (using the government’s own figures). The regulation doesn’t further consumer choice; it simply punishes those who need bigger or safer or better performing vehicles at a price they can afford.
Mandating cap-and-trade on the car-buying public is a case of wishful thinking and good intentions that will, at best, cost hard-working American families dearly at the showroom.