Morning Bell: Obama’s Cap-and-Trade Scheme for Cars

Rachael Slobodien /

Ever since the Senate rejected President Obama’s cap-and-trade scheme in 2009, his administration has been hard at work to find other ways to implement a radical, environmentalist agenda.

Obama made these intentions clear at a press conference in 2010 when he explained, “Cap and trade was just one way of skinning the cat. … It was a means, not an end, and I am going to be looking for other means to address this problem.” And this is a promise he’s doing his best to keep.

With the help of the Environmental Protection Agency and other departments, this administration has relied on backdoor, behind-the-scenes tactics to impose stringent mandates in order to regulate what it has been unable to legislate. This tactic empowers unelected bureaucrats in Washington to implement rules that have far-reaching, negative impacts on our nation’s economy and the way we live our lives.

The Obama Administration’s announcement of new fuel-efficiency standards is a good example of its determination to regulate through administrative fiat.

Average cost of new car will increase $3,000

Earlier this year, the Department of Transportation (DOT) and EPA released the finalized, new fuel-efficiency standards for cars and light-duty trucks, which will require 2025 model year vehicles to have an average fuel economy of 54.5 miles per gallon (mpg).  The new standard comes close to doubling the current CAFE average of 29 mpg and, combined with the administration’s fuel efficiency standards for 2011–2016, will increase the average cost of a new car by $3,000 by 2025.

Proponents of the rule argue that it will save consumers money on fuel, reduce dependence on foreign oil and reduce global warming. But as Heritage’s Nick Loris and Derrick Morgan explain in their new paper, “Fuel-efficiency mandates restrict consumer choice and completely overstep the boundaries of the role of the federal government.”

The standards are unnecessary, benefit special interests, and have numerous unintended consequences that will adversely affect American families.

Cars priced under $15,000 could vanish

The new CAFE standard requires American families to bear all the costs the regulation imposes, while allowing special interests receive all the benefits. As Loris and Morgan note in their paper, “Under this new mandate, the Energy Information Administration warns that new cars priced under $15,000 may no longer be available.” While the federal government acknowledges the regulations will drive up the sticker price of vehicles, “consumers will likely realize only a fraction of the fuel savings that the government claims.”

This is not the only way the new fuel efficiency will affect car buyers. It also limits consumer choice. Consumers have other preferences as well, including weight and engine power, for safety, enjoyment, and practical reasons. Ignoring those preferences and forcing companies to make vehicles that are lighter and thus more fuel efficient has the unintended consequence of making them less safe.

Perhaps worst of all, “Unlike previous rulemaking, manufacturers cannot pay a fine if they cannot meet the standards. Instead, they would need to buy costly credits from other manufacturers.”

Cap-and-trade is unsuitable for auto industry

Prompting a bout of déjà vu, the new CAFE standard creates a whole new form of cap-and-trade. This time around it’s a cap-and-trade for cars. Not only was cap-and-trade proposal a severely flawed solution to reduce carbon dioxide emissions, it is equally unsuitable for the auto industry.

These realities have not stopped the administration from attempting to justify the new standard. In fact, it rationalizes the additional costs and burdens consumers must bear as a result of this rule by arguing that the new standards will decrease greenhouse gas emissions. In reality, the resulting reduction in global emissions will be almost unnoticeable.

There is a way to stop the administration’s flagrant regulatory overreaching, and the solution begins with Congress stepping up to the plate. Loris and Morgan recommend that “Congress should intervene to prevent the EPA and DOT from enforcing the fuel-efficiency standards, either by withholding funds or by passing legislation that prohibits the regulation.”

The bottom line is that consumers value saving money on fuel expenses, but they also consider safety, size, performance, price, and many other factors. Auto manufacturers, not the federal government, are much better equipped to meet the demands of consumers.

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