Monday, February 25, 2013

CAFE standards for cars and other not-so-smart ideas

I usually like what Tyler links to, because his entries are divers and interesting throughout. This link, however, falls short in my opinion. The idea behind the CAFE standard was to push costs for fuel reduction and thus reduction in energy consumption on the automobile companies rather than on the consumer.

Of course, this is bullsh*t and didn't work out as the study at the link clearly points out. They compare the reductions due to the CAFE standard to a tax on gas. They find that a similar reduction as with the CAFE could have been achieved with a lot less money and some forgone gas consumption.

Instead of punishing automobile companies for producing cars with low MPG ratios, the study proposes taxes on the gallon-sold. This has already been done in Germany. We have a huge tax on gasoline. The tax was imposed on us as a means to pay for the road system.
There are multiple problems with that alone, but I don't want to get into them here. You can find some thoughts about it here  (Attn: All In German).
Just to summarize it, here it is:

The blue and red part of the diagram are actually taxes. These are the means to reduce consumption of gas and it partially works. However, the forgone consumption has its problems. Germans spend less and are less mobile. Most gas consumption is practically inelastic (daily drive to work) and thus we spend more gas than before. This means that although consumption decreased, prices rose:

Durchschnittspreis für Superbenzin 1972-2012
Mehr Statistiken finden Sie bei Statista

This of course means that other kinds of consumptions have to take a back seat. It is true that punishing consumers is more effective (even cost-effective), but is it actually worth doing. This is one of the problems that I have with a lot of studies, they never actually talk about NOT doing it and what that means for the economy in general.

Fuel prices and energy prices in general, are key indicators for a lot of players in the global economy. They determine basic production costs, they determine the wealth and distribution of monthly incomes. Energy costs and fuel costs influence logistic and retail supply chains on all levels. They can make us better off or less well off.

Low fuel prices are essential for future well-being, because the less transportation costs, the more we can achieve and the more money we have for other activities. The low energy costs are partially responsible for the way Europe is today. The chance young Europeans have to visit other countries and thus to have connections to other cultures preventing future intra-european wars, is something that is related to energy costs. Without cheap travel, a German would probably still dislike a French deeply and a Spaniard would have rarely visited the capital of the former Austrian Empire.

Do you want to live in such a world?

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