To complicate matters further, not everyone agrees that fuel-economy standards or carbon-emission requirements for new vehicles will actually reduce gasoline consumption and carbon emissions. One of the arguments against such regulations is that they will cause a “rebound effect.” In other words, if automakers make cars that use less gas or emit less carbon dioxide per mile, drivers will see their gas bills go down and then start driving more, so total gasoline consumption may stay the same. By contrast, a gasoline tax would more directly reduce gasoline consumption by increasing gas bills and encouraging people to drive less.
Some experts counter that the rebound effect is small. For one thing, there is a limit to how much more people will drive, regardless of how little they pay for gas. (Several estimates, based on data from past fuel-economy standards, suggest that for every 10 percent improvement in fuel economy, about 20 percent of the improvement, or two percentage points, is lost because people drive more.)
Corporate Average Fuel Economy (CAFE) standards have also been criticized because their wording has had unintended side effects. The rules inadvertently pushed some automakers to sell more trucks (including SUVs), since trucks had lower fuel-economy standards. What’s more, automakers with cars that were already very efficient had little incentive to keep improving. The 2007 legislation has been crafted to counter these objections, Sweeney says.
Greene says that the best policy would include both requirements that improve fuel economy and market-based incentives, such as a gas tax to limit driving. A system of fees and rebates could also be used to encourage people to buy more efficient cars, following a model that has proved successful in France. Under this system, the government gives rebates to those who buy efficient cars, and it pays for these rebates by charging fees to those who purchase inefficient cars. Heywood says that this could make it easier for automakers to meet the new fuel-economy standards.
If the automakers can meet the standards, the reductions in greenhouse-gas emissions could be significant. The new federal rules could reduce greenhouse-gas emissions in California alone by 20 million metric tons by 2020, Sweeney says. The new California standard would reduce emissions by a further 14 million metric tons in the state. He adds that states with higher standards could be a sort of laboratory for proving that better fuel economy is possible, which could eventually lead to even higher federal standards.
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