Monday, April 12, 2010

Regarding the New CAFE Standards

Recently the new CAFE standards for motor vehicles from 2012-201 were finalized. With this approval, numerous articles have once again appeared in the popular press discussing the fuel and cost savings that will come from this new standard. Unfortunately it appears that the administration is more than likely overestimating the savings due to three factors in their analysis, which easily could make a quality program look better than it actually is. Sadly overestimation of the benefits of a program due to the used assumptions is something done by both Republican and Democrat administrations.

The three factors that should draw concern are:

1. The highlighted analysis does not count the emissions generated from electrical vehicles and hybrids generated derived from the electricity component. Due to the fact that a significant percentage of the electricity that will power these new vehicles will come from coal and natural gas sources, considering these vehicles as zero carbon emitters is not accurate.

2. The analysis does not seem to estimate any gains in fuel economy independent of those driven by the new CAFE standards. If this is true, such an estimation is also inaccurate because there is reason to believe that with decreasing oil supplies leading to higher gas prices, the free market would demand some increase by manufacturers in fuel economy even if the government did not mandate it. Assuming a 0% increase in fuel economy creates a cost and emission savings profile that is inflated versus what reality would have dictated.

3. The analysis may not realistically look at vehicle replacement. Clearly despite the new CAFE standards all of the new cars developed under that standard are not going to instantly replace the cars currently on the road. Now the assumption regarding replacement is not as critical as the previous two noted assumptions with regard to the savings calculation. However, it is still important to ensure a proper replacement rate to maximize accuracy with regards to reduction in emissions as a means to combat global warming.

Understand that these questions regarding the assumptions for the new CAFE standards do not undermine the general conclusions of the analysis (that the new standards will result in lower gasoline consumption and reduce GHG emissions from the transportation sector.) However, the estimated benefits from the program may not be as sizable as reported. It is important to have accurate information regarding emission reduction because emission reduction is such a critical issue in preventing further global warming. An inaccurate analysis for the transportation sector may lead to inefficient emission reduction strategies for other sectors. For another perspective on how the CAFE standards will influence future reductions in greenhouse gas emissions go to the below link.

Plugging the Tail Pipe – Reducing Emissions from Transportation:

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