CAFE hike: The fine print


If the 30 years of experience proves anything, it is that the House’s increase in fuel economy standards (this time by 40 percent) won’t make a dent in global temperatures or oil dependence. But the fact that so-called CAFÉ is a textbook case of bad liberal public policy and unintended consequences is widely known. Once Democrats took over Congress, the question was not whether CAFÉ – but what it would look like.


Underreported is the fact that the new mandate looks quite a bit different than the old, 1970-era mandate. Specifically, it protects Detroit automakers by making the 35 mpg mandate an “industry-wide” average rather than a “manufacturer fleet” average.


As a result, automakers like GM – whose sales of less-fuel efficient trucks make up a larger part of their product than, say, Honda – will likely only have to meet a 32 mpg standard for all its vehicles (once NHTSA writes the final rules). Honda, meanwhile, will likely have to meet something like a a 37 mpg standard (leading to the potentiality perverse consequence of Honda paying federal fines even if its vehicle average exceeds 35 mpg!).


The formula, needless to say, will be extremely complex, resulting in smaller cars but a larger NHTSA bureaucracy. But the effect will be beneficial to U.S. automakers who were severely punished under the original CAFÉ standards that mandated each manufacturer achieve 25 mpg for all vehicles regardless of their product mix. As a result, the Big Three lost thousands of jobs and million of dollars as they were forced to cancel large car programs to meet the targets – even as Asian manufacturers, with a smaller car fleet mix – did not.


As usual, of course, the consumer will get screwed as vehicle choice diminishes now that every manufacturer has to conform to an industry-wide standard. Consumers will also get milked for tax dollars to sustain “alternative fuel” loopholes created in the legislation to help manufacturers meet the standards with gimmicks like “flex-fuel” vehicles (dependent on federal ethanol subsidies).


But in Democratic policy-making, the consumer rarely has a seat at the table.


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