Wednesday, August 31, 2005

Cleaning Up the CAFE

Just a few final comments on CAFE, before moving on to other topics. Kevin Drum argues, in a rebuttal to Matthew Yglesias, that the CAFE standards do what they were designed to do.

His evidence is a National Academy of Sciences study that tracks an increase in the average fuel economy of cars in the wake of CAFE. I cannot point out the weakness in this argument any better than a commenter on his site did (here and here)—it appears to ignore the CAFE-induced shift to light trucks with lower fuel economy requirements.

Drum’s article also points out that the NAS study also suggested the use of a tradable credit system, as I suggested in my earlier post. Good to know that this is concept is now accepted by a broad range of the policy community.

I still prefer the gas tax, but I am not as resolute as I was a few posts ago. If we are going to stick with CAFE, I'd recommend that it have the following elements:
  1. One standard, covering every passenger vehicle
  2. Tradable credits, to enhance efficiency
  3. Stiff penalties for failing to meet the standards
  4. A very agressive schedule of increases, legislated today for future years

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