Raising fuel economy

In Tuesday's State of the Union Speech, the president made a surprising proposal:

Tonight, I ask Congress to join me in pursuing a great goal. Let us build on the work we've done and reduce gasoline usage in the United States by 20 percent in the next 10 years.

It is a great goal, which was greeted by immediate applause in the environmental community. The program "is a welcome, visionary proposal," said John DeCicco of Environmental Defense. "This could be the breakthrough we have been waiting for on fuel economy," said David Friedman of the Union of Concerned Scientists (both quoted in USA Today).

The following day, I attended a lunch in Washington where Bush's Secretary of Transportation, Mary Peters, described some of the details of the Bush proposal to a meeting of transportation professionals. Unfortunately, even though the goal is worthwhile and the proposal has merit, it also contains the seeds of its own destruction.

Peters indicated that the proposal would have a goal of a 5% cut in fuel consumption by gasoline-powered cars, which are subject to Corporate-Average Fuel Economy (CAFE) standards. The remaining 15% would be achieved by a changeover to alternative fuels. Automakers could achieve some flexibility in their implementation of the standards by buying and selling CAFE credits: basically, one manufacturer pays another to achieve some of the first company's required savings, so the company that can reduce fuel consumption most efficiently gets more of the business. It's a modest goal, but the right direction, and the CAFE credit idea is a good one to reduce the cost and increase the odds of compliance. Unfortunately, she then goes on to raise a barrier to compliance:

...we will replace the one-size-fits-all system with a size-based approach, as we did with light trucks.

The idea here is that the standards would vary by vehicle size, so a company that makes large SUVs would have less restrictive standards, placing more of the load on smaller vehicles. "The approach also recognizes that different consumers want different automobiles and preserves consumer choice," she said. We can recognize this as a familar ingredient of Republican policy-making, the something-for-nothing approach that seems to indicate we can reduce fuel consumption without changing our buying habits. Unfortunately, by reducing the incentive to make the fleet smaller, the proposal makes it harder to meet the fuel efficiency goal.

Then Peters made the key point of the Bush proposal:

Based on the automakers' confidential product plans, our experts can objectively measure how much fuel saving technology we can require before the cost outweighs the benefit.

In other words, automakers will secretly tell the administration how much they are willing to spend to improve fuel economy, and that will form the basis of the new standards.

Is this starting to sound familiar? Shortly after Bush took office, Vice President Dick Cheney conducted meetings with oil and gas company executives where they shared "confidential information." The Administration then formulated an energy policy that was essentially a massive giveaway to those companies, that did nothing to accomplish any improvement in energy costs, air quality, or security. The Bush administration doesn't have the credibility to make standards in secrecy. I'm not sure any administration would.

But the big question is, if the CAFE credits work as advertised, to spread the load of compliance and alleviate inefficiencies and inequities among automakers, then why do we need standards that vary by vehicle class, and what legitimate need can there be for secrecy in the setting of the standards? Peters mentions the possibility of public review and comment on the standards, but it's hard for any public interest group to affect the outcome through public comment if it lacks access to the data upon which the standards are based.

What Peters derisively calls "one-size-fits-all" and "arbitrary", I call accountable and transparent. It's high time we raise fuel economy standards, and the Congress should move ahead with it. The government should not try to engineer any particular outcome in terms of vehicle size, but should just have one simple standard based on the goals we need to achieve. This can be done in the bright sunshine of public view and doesn't require secret data.